Source: Jiangxi Court
The day 4.26 is the World Intellectual Property Day.
To highlight the role and contribution of intellectual property in the economic, cultural and social development of all countries, and to increase public awareness and understanding of human endeavors in this field, Jiangxi Provincial Higher People’s Court released the Top Ten Typical Intellectual Property Protection Cases of Jiangxi Court in 2022.
EHang is involved in one of the top ten cases, which is listed as Case No. 8 and is presented below.
8. Unfair Competition Dispute Case of UAV Motor Propaganda
Guangzhou EHang Intelligent Technology Co., Ltd. v. Nanchang Sanrui Intelligent Technology Co., Ltd. and Jiangxi Xintuo Industrial Co., Ltd. unfair competition dispute case
[First trial: Nanchang Intermediate People’s Court of Jiangxi Province
(2021) Gan 01 Civil Judgment No. 736;
Second trial: Jiangxi Provincial Higher People’s Court
(2022) Gan Final Civil Judgment No. 379]
Summary of the ruling
Business operators have different business scopes but are related to a certain extent, such as the upstream and downstream supply and marketing relationship in the industry. If a business operator destroys the competitive advantage of others and strives for a competitive advantage for itself or others, an indirect competitive relationship may also be formed between the business operators. When a business operator’s publicity behavior is to intentionally cling to other people’s business reputation by implying transaction information, objectively, it is easy for consumers to misunderstand that its products have higher overall performance, so as to obtain potential competitive advantages for itself, then this behavior is misleading. Commercial promotion constitutes unfair competition.
Case basic specifics
The drone produced by Guangzhou EHang Intelligent Technology Co., Ltd. (hereinafter referred to as EHang Company) was rated as one of the “Top Ten Brands of Chinese UAVs”. Nanchang Sanrui Intelligent Technology Co., Ltd. (hereinafter referred to as Sanrui Company) is responsible for the production of drone motors and other products and has launched the “tmotor.com” website. Jiangxi Xintuo Industrial Co., Ltd. (hereinafter referred to as Xintuo Company) is responsible for sales and operation “tmotor.com” website, and is the trademark owner of the “T-MOTOR” registered trademark. Without the permission of EHang, Xintuo used the picture of “EHang 184” manned drone on its website without authorization, and marked “Manned Power System” at the bottom right of the picture. In addition, EHang does not produce UAV motor products itself, and it has an upstream and downstream supply and marketing relationship with Xintuo Company in the unmanned UAV project. Later, the website picture was used by the research organization “Wolfpack Research” (hereinafter referred to as WPR) and released a short-selling report to the outside world, arguing that EHang “uses T-MOTOR, which is a hobby-grade motor and cannot be used in aerospace.” EHang believes that the report has aroused great public concern about the safety of EHang’s manned drones, resulting in a sharp drop in EHang’s stock price. Therefore, it filed a lawsuit in the court requiring Sanrui and Xintuo to jointly bear the legal responsibility for unfair competition.
The court of second trial held that EHang’s manned drones have a high reputation in this field, and Sanrui and Xintuo’s unauthorized use of drone product pictures for publicity will cause the relevant public to mistake them for the motors they produce and sell. It is used in the manned UAV of EHang Company, thus bringing a certain competitive advantage to the motors of Sanrui Company and Xintuo Company. The commercial propaganda activities of Sanrui Company and Xintuo Company attached to the business reputation of EHang Company in the field of manned drones, disrupted the normal order of competition in the industry, and harmed the rights and interests of others. It was misleading commercial propaganda and constituted unfair competition. The defense argument that Sanrui Company, Xintuo Company and EHang Company do not have a competitive relationship cannot be established. Therefore, it was decided to revoke the first-trial judgment, and Sanrui Company and Xintuo Company jointly compensated EHang Company for economic losses (including reasonable expenses for rights protection) of 150,000 yuan.
Case implication
This case is a new type of unfair competition that promotes online publicity by clinging to the business reputation of others. The publicity in this case is not a typical misleading commercial publicity. That is, the operator does not directly describe and publicize the performance, function, quality, and sales status of its own products in the form of text, but puts pictures of other people’s products on its own website for publicity. The judgment of this case indicates: in addition to clarifying that indirect competition can be formed between operators belonging to the upstream and downstream supply and marketing relationships of the industry, it is also identified as misleading commercial propaganda behaviors that ones intentionally cling to other people’s business reputation and gains potential competitive advantages for themselves by implying transaction information. This judgment better protects the legitimate rights and interests of other operators, and provides guidelines for regulating new types of false propaganda in the industry market. It helps to maintain the order of industry operations and the legalized business environment.