Model Cases Involving China (Shanghai) Pilot Free Trade Zone Tried by the People's Court of Pudong New Area, Shanghai

 2018-07-25  13


· Area of Law: Release of Judicial Cases

· Level of Authority: Local Judicial Documents

· Date issued:10-31-2016

· Effective Date:10-31-2016

· Issuing Authority: Other Institutions of Shanghai Municipality

· Status: Effective

 

Model Cases Involving China (Shanghai) Pilot Free Trade Zone Tried by the People's Court of Pudong New Area, Shanghai Municipality (2013-2016)
(October 31, 2016)
Case No. 1
Suzhou Branch of China Pacific Life Insurance Co., Ltd. v. Kuehne & Nagel Logistics Company (Case about dispute over subrogation)
--In a case about subrogation involving foreign-related insurer, if there is no specific legal provision or agreement by and between the parties, when the principle of the closest connection is applied to identify rules of conflict, it is appropriate to treat the place where the insurance incident takes place as the connection point for application of the governing law by taking into full account of all factors.
(1) Basic Facts
On December 31, 2011, as the insured, Suzhou BOSCH Company concluded a cargo carriage insurance contract with Suzhou Branch of China Pacific Life Insurance Co., Ltd. (hereinafter referred to as “Suzhou Branch”). On June 29, 2012, according to the long-term cargo carriage contract concluded by and between it and Suzhou BOSCH Company, Kuehne & Nagel Logistics Company accepted for carriage of a batch of steering column system motors for Suzhou BOSCH Company, with the carriage route from Germany to Suzhou City, China. In the transit, due to a single vehicle accident, a total of 2,736 pieces of cargos were damaged in varying degrees, causing Suzhou BOSCH Company's losses of CNY709,831.39. According to the stipulations of the insurance contract and the assessment report on cargo damage issued by the assessment company, Suzhou Branch compensated Suzhou BOSCH Company CNY704,831.39. Therefore, Suzhou Branch filed a lawsuit with the People's Court of Pudong New Area and requested the Court to order that Kuehne & Nagel Logistics Company should compensate it CNY704,831.39 and the interest thereof.
(2) Adjudication
In the view of the Court, the insurance incident in the carriage of the cargoes involved took place within the territory of China, and the destination in the cargo carriage contract based on which the insurer in the cargo carriage insurance contract, Suzhou Branch exercised the subrogation for claim for compensation against the carrier of the cargos, Kuehne & Nagel Logistics Company was also within the territory of China. Therefore, the law with the closest connection with the legal relationship of foreign-related insurance subrogation should be the law of the People's Republic of China. The cargoes involved were damaged in the insurance incident. As the insurer, Suzhou Branch should assume the insurance liability. After paying Suzhou BOSCH Company the corresponding insurance compensation, Suzhou Branch may legally obtain the subrogation. Since the carriage of the cargos involved was international air transportation, the exporting country Germany and the destination country China were contracting countries to the Convention for the Unification of Certain Rules for International Carriage by Air (concluded in Montreal on May 28, 1999, generally referred to as the “Montreal Convention”) and the Convention has taken effect in both countries. In accordance with the relevant provisions of the Montreal Convention, where there was any ruin, loss, damage, or delay in the carriage, the liability of the carrier should not exceed 17 Special Drawing Right (“SDR”) per kilogram. In 2009, the International Civil Aviation Organization modified the amount of liability limit in the Montreal Convention and the modified compensation limit was increased to 19 SDR per kilogram. According to the weight of the damaged cargos, the People's Court of Pudong New Area verified that the statutory compensation limit for the damaged cargos involved was CNY2,126,106.66, which did not exceed the aforesaid limit. Therefore, the Court upheld Suzhou Branch's claim for Kuehne & Nagel Logistics Company's compensation.
(3) Significance
Under the general background where Shanghai Municipality proactively promotes the building of the “international shipping center” and the “international finance center,” with the support of the relevant national policies, the international trade, international financial insurance, and other industries within China (Shanghai) Pilot Free Trade Zone have experienced great development and the foreign-related commercial disputes arising therefrom are on the rise. In the trial of a foreign-related case, under the circumstance where there is no specific legal provision or agreement by and between the parties, the principle of the closest connection is often applied in the identification of rules of conflict. How to determine the connection point for the closest connection often becomes the difficulty of trial due to the close correlation between the determination of the nature of dispute and the connection point. This is a model case about subrogation involving foreign-related insurer. In such dispute, when the principle of the closest connection is applied to identify rules of conflict, it is reasonable to treat the place where the insurance incident takes place as the connection point for application of the governing law by taking into full account of the relevant factors. This case has provided a beneficial reference sample for the trial of foreign-related cases in future and it has great reference significance.
Case No. 2
Sales Department of China Continent Insurance Co., Ltd. v. Chen and Shanghai Master An Auto Services Co., Ltd. (Case about dispute over the insurer's exercise of subrogation)
--The insurer has the right to exercise subrogation for vehicle loss insurance against the paid designated driver.
(1) Basic Facts
Tao covered the family car loss insurance for the vehicle he owned at China Continent Insurance Co., Ltd. (hereinafter referred to as “CCIC”). According to the insurance contract, during the period of insurance, the insurer should be responsible for compensating losses to the insured vehicle caused by the insured or the legal driver he permitted in the use of the insured vehicle. When Tao's father surnamed Qian drove the insured vehicle to dine out, due to alcohol drinking, he needed a designated driver. Shanghai Master An Auto Services Co., Ltd. (hereinafter referred to as “Master An Company”) designated a driver surnamed Chen to drive the vehicle home for him. On the way, the insured vehicle had a traffic accident, which caused the vehicle loss of CNY26,500 and other losses, and Chen was fully responsible for the traffic accident. CCIC paid Tao CNY26,500 for the vehicle loss insurance compensation. CCIC held that it has paid the insured the vehicle loss insurance compensation and legally obtained the insurer's subrogation. Therefore, it required that Chen and Master An Company should jointly and severally pay the aforesaid insurance compensation. Chen and Master An Company held that the designated driver surnamed Chen was a legal driver permitted by the insured and Chen had the legal status of the insured, and thus CCIC had no right to file a claim for recovery against Chen.
(2) Adjudication
In the view of the Court, although the paid designated driver was a “legal driver permitted by the insured” as prescribed in the contract, the insurer still had the right to exercise subrogation against the paid designated driver. First, the insured (namely, the owner of the vehicle) had the right to claim compensation from the paid designated driver and the insurance company had the basic right to exercise subrogation. Second, if an accident took place, the “legal driver permitted by the insured” may be compensated, which was the definition of the scope of insurance liability. It may not be inferred conversely that such “legal driver permitted by the insured” was the “insured.” Third, the paid designated driver did not enjoy the vehicle loss insurance interest of the insured vehicle and he did not have the status of the insured; the paid designated driver was not a member of the insured and should not be incorporated into the scope of statutory limited recovery; the paid designated driver drove the vehicle for his own interest other than purely for the interest of the insured, and the interest of the paid designated driver was not consistent with that of the insured. Therefore, the paid designated driver had no right against the recovery of the insurer. Different from the uncompensated use or uncompensated designated driving by a relative or friend of the insured, the paid designated driving aimed at seeking profits. The business operator of the designated driving company should take operation risks on its own, which was more suitable for fair allocation of social responsibility. The Court finally rendered a judgment that Master An Company should compensate CCIC CNY26,500 for the insurance compensation loss.
(3) Significance
This is the first case about an insurance company's recovery against a designated driver company within China (Shanghai) Pilot Free Trade Zone and even in Shanghai Municipality. As the “legal driver permitted by the insured,” a paid designated driver drives an insured vehicle and causes vehicle losses. The vehicle loss insurance incorporates such vehicle losses into the scope of insurance liability. After the insurance company pays the insured the insurance compensation based thereon, can such insurance company exercise subrogation against the paid designated driver? This issue is rarely involved in the existing judicial practice and there are different judgments. In this case, the scope of liabilities of the insurance company and the designated driver company in the vehicle loss insurance has been clarified. First, it helps promote designated driving companies to conduct strict examination of qualifications of designated drivers and constraint on designated driving activities, promote the sound and orderly development of the designated driving industry, remind the designated driving companies to voluntarily cover designated driving liability insurance and other commercial insurance to disperse operation risks; second, it promotes insurance companies to make innovations on insurance business in light of practice, research and develop comprehensive insurance products related to designated driving, disperse risks of designated driving, and provide guarantee for the development of the designated driving industry; third, as the first case, through elaborate and strong legal and factual analysis, it has provided references and thoughts for the handling of this type of cases in future.
Case No. 3
Wanfeng Financial Leasing Co., Ltd. v. Yichang Jintaiyuan Industry & Trade Group Co., Ltd. (Case about dispute over a financial leasing contract)
--Where, according to the contract, the financial leasing lessor requires both the recession of the contract and the lessee's payment of full unpaid rent for repurchase of the leased property, it is not contrary to the provision of Article 248 of the Contract Law that “the lessor may either require payment of the full rent or terminate the contract and recover the leased property.”
(1) Basic Facts
On April 9, 2013, Wanfeng Financial Leasing Co., Ltd. (hereinafter referred to as “Wanfeng Company”) and Yichang Jintaiyuan Industry & Trade Group Co., Ltd. (hereinafter referred to as “Jintaiyuan Company”) concluded a Financial Leasing Contract. At the price of CNY50 million, Wanfeng Company purchased medium-density board preparation sections and other equipment from Jintaiyuan Company and then it leased such equipment to Jintaiyuan Company, with the lease term of three years and the total rent of CNY56,973,198.51 to be paid in 36 installments. After having paid the down payment of CNY7.5 million and the rent of first to five installments, from September 20, 2013, Jintaiyuan Company no longer paid the corresponding rent as stipulated. Upon receipt of the Letter of Demand for Overdue Payment of Wanfeng Company on December 2, 2013, Jintaiyuan Company still failed to pay the rent. Wanfeng Company held that the act of Jintaiyuan Company constituted breach of contract and requested the People's Court of Pudong New Area to render a judgment that the contract should be rescinded and Jintaiyuan Company should make the payment for repurchasing the leased property, which included full rent payable upon deduction of the down payment, the interest of the overdue unpaid rent, and the nominal price of the leased property. Jintaiyuan Company held that Wanfeng Company could claim either the termination of the contract or the recovery of the leased property and payment of the full rent.
(2) Adjudication
In the view of the Court, Jintaiyuan Company failed to pay the rent within the time limit and in the amount as stipulated in the contract. Upon demand by Wanfeng Company, it still refused to make the payment, which satisfied the conditions for termination as stipulated in the Financial Leasing Contract involved. Wanfeng Company may thereby exercise the right to terminate the contract and require Jintaiyuan Company to assume the liability for breach of contract as agreed by both parties. While claiming for termination of the contract, Wanfeng Company also claimed that Jintaiyuan Company should repurchase the leased property at the agreed price. They were claims of Wanfeng Company raised according to the stipulations of the contract. The full rent payable claimed by Wanfeng Company was part of Jintaiyuan Company's price payable for repurchase of the leased property after the termination of the contract. In nature, it was different from the rent payable for continuing to perform the Financing Leasing Contract and it was not contrary to the provision of Article 248 of the Contract Law of the People's Republic of China that “Where the lessee fails to pay the rent within a reasonable time limit after receiving the demand for payment from the lessor, the lessor may require payment of the full rent; or it may terminate the contract and recover the leased property.” Therefore, the Court rendered a judgment that the contract should be terminated, Jintaiyuan Company should make the payment for repurchasing the leased property to Wanfeng Company, and after the payment, the leased property was owned by Jintaiyuan Company.
(3) Significance
Financial leasing is one of the three industries included in the first batch of industries for further opening-up of the financial service field within China (Shanghai) Pilot Free Trade Zone (“SHFTZ”). Institutional innovations have stimulated the market vitality in this field. Up to the end of September 2015, the number of financial leasing enterprises has been increased from 181 before the foundation of SHFTZ to 1,449. From January to October 2015, the People's Court of Pudong New Area has accepted 948 cases about financial leasing, increased by 3.7 times over the same period of 2014. Besides conventional financial leasing modes, as a new business pattern, leaseback is gradually adopted widely and there is such provision that when exercising the right to terminate a contract, the lessor may require the lessee to pay all rent to repurchase the leased property without return of such leased property. There is divergence on whether the aforesaid provision is contrary to the provision of Article 248 of the Contract Law and this case is a model one. The judgment of this case follows the legal thinking that “what is not prohibited by the law is permitted” and the commercial adjudication idea of “respecting the autonomy of the parties,” specifies that the aforesaid provision is not contrary to law, provides evaluation and guidelines for business operations of financial leasing market player within SHFTZ, and promotes the mediation and settlement of similar disputes accepted by the People's Court of Pudong New Area.
Case No. 4
Praxair (Shanghai) Industrial Gas Co., Ltd. v. Changxing Kaihong New Wall Materials Co., Ltd. (Case about dispute over a sales contract)
--In the sales of industrial gas, the “take-or-pay” contract is a common contract form. However, there is often unequal rights and obligations in such type of contracts. Therefore, from the perspective of fairness and reasonableness, the people's court shall respect the commercial practice, not mechanically apply the “take-or-pay” contract, and balance the rights and obligations of all parties by taking into full account of various factors.
(1) Basic Facts
On January 27, 2011, Praxair (Shanghai) Industrial Gas Co., Ltd. (hereinafter referred to as “Praxair Company”) and Changxing Kaihong New Wall Materials Co., Ltd. (hereinafter referred to as “Changxing Kaihong Company”) concluded an Agreement on Product Supply. Both parties stipulated that Praxair Company sold Changxing Kaihong Company oxygen it demanded. The minimum purchased/paid volume per month was 80 tons at the unit price of CNY726.50 per ton; except for force majeure, Changxing Kaihong Company should ensure the minimum purchased/paid volume per month as stipulated in the purchase agreement. If the volume of product actually used by Changxing Kaihong Company in any month was lower than the minimum purchased/paid volume per month, Changxing Kaihong Company should still pay the price for such month according to the minimum purchased/paid volume per month; the agreement was effective for five years. After the conclusion of the agreement, Praxair Company supplied the product to Changxing Kaihong Company; however, the volume of product ordered by Changxing Kaihong Company from Praxair Company never reached the minimum purchase volume per month. Therefore, in April 2014, Praxair Company took back the gas-supply device in advance, filed a lawsuit with the People's Court of Pudong New Area, and requested the Court to render a judgment that Changxing Kaihong Company should pay the product price in arrears and the corresponding fine for overdue payment and compensate the liquidated damages of CNY1,336,760 incurred from the advance termination of the agreement caused by Changxing Kaihong Company's fundamental breach of contract.
(2) Adjudication
In the view of the Court, according to the agreement involved, although Changxing Kaihong Company did not reach the minimum purchased/paid volume, it should pay Praxair Company the corresponding price by multiplying the minimum purchased/paid volume per month by the unit product price. However, from the perspective of fairness and by taking into full account of such factors as performance of the agreement and the costs and industrial profits of Praxair Company, it was determined that Changxing Kaihong Company should pay Praxair Company the price of CNY419,359 and the corresponding fine for overdue payment depending on the actual circumstances. Besides, after September 2013, Changxing Kaihong Company no longer purchased oxygen from Praxair Company and it did not make the payment in arrears, which was an obvious breach of contract and caused the failure of continuous performance of the agreement. Praxair Company's taking back of the gas-supply device on April 30, 2014 was actually its exercise of the right to terminate the agreement. Therefore, by considering the performance of the agreement, the commercial costs, the industrial profits, and other factors, the Court determined that Changxing Kaihong Company should compensate Praxair Company the liquidated damages of CNY307,455 incurred from the termination of the agreement.
(3) Significance
The Agreement on Product Supply concluded by and between both parties in this case is a typical “take-or-pay” contract. The contract form of “take-or-pay” is widely adopted in contracts on the supply of natural gas and other energy. In nature, it bundles the developer and transmission party of the product with market users to jointly overcome risks in production, transmission and distribution, and usage. However, the payment for goods, the liquidated damages, and other core clauses of such type of contracts are mainly related to the “stipulated volume of gas consumed.” Due to such factors as unequal information of the purchaser and the seller and great disparity in forces, the purchaser's “take-or-pay” obligation is easily highlighted and such circumstances as unequal rights and obligations are caused. Therefore, in the trial of this case, from the perspective of fairness and reasonableness, the Court respected commercial practice and did not mechanically apply the “take-or-pay” contract; instead, it took into full account of such factors as performance of the agreement, commercial costs, and industrial profits, properly balanced the rights and obligations of both parties, and provided a helpful reference sample for the future trial of similar cases. This case has typical significance.
Case No. 5
Hefei Wuwuyi Network Science & Technology Service Co., Ltd. v. Shanghai PPDAI Financial Information Service Co., Ltd. (Case about dispute over infringement upon trademark right)
--Where, before a trademark registrant applies for trademark registration, another party has used an identical or similar trademark with certain reputation on identical or similar goods prior to the trademark registrant, the holder of the right to exclusively use the registered trademark shall have no right to preclude such other party from continuing to use the trademark for original purposes.
(1) Basic Facts
The website of PPDAI (with the domain name of ppadi.com) was registered on April 6, 2007. As the first P2P (peer-to-peer) online lending platform in China, it was originally operated by an affiliated company of Shanghai PPDAI Financial Information Service Co., Ltd. (hereinafter referred to as “PPDAI Company”). After the establishment of PPDAI Company on January 18, 2011, it was operated by PPDAI Company. Since ppdai.com was launched, it has attracted extensive attention of media. In the media coverage, “PPDAI” or “ppdai.com” was generally referred to as www.ppdai.com. In the illustrating picture of the article Borrow Money from the Internet to Solve the Urgent Need published on Zhezhong News on July 18, 2008, the logo used on ppdai.com at that time was “拍拍贷PPDAI.” On February 5, 2009, an affiliated company of Hefei Wuwuyi Network Science & Technology Service Co., Ltd. (hereinafter referred to as “Wuwuyi Company”) registered the trademark “拍拍贷PPDAI.” After the establishment of Wuwuyi Company on August 14, 2012, with the approval of the trademark office, the affiliated company of Wuwuyi Company transferred the trademark right to Wuwuyi Company. Wuwuyi Company held that without its licensing, PPDAI Company used a logo identical with or similar to Wuwuyi Company's registered trademark “拍拍贷PPDAI” on financial services and such act of PPDAI Company constituted trademark infringement. Therefore, Wuwuyi Company filed a lawsuit with the People's Court of Pudong New Area and requested the Court to order that PPDAI Company should cease the use of such characters and words as “拍拍贷 or PPDAI” in its website or company name.
(2) Adjudication
In the view of the Court, “PPDAI” was both the name of the website operated by PPDAI Company and the trade name of PPDAI Company. Before Wuwuyi Company applied for registration of the trademark “拍拍贷PPDAI,” many newspapers and magazines have made plenty of coverage on the business pattern of ppdai.com operated by the affiliated company of PPDAI Company and the logo used on ppadai.com was exactly “拍拍贷PPDAI.” “拍拍贷” and “PPDAI” were coined characters and words, whose literal meanings agreed with the business pattern of ppadai.com and the logo has strong distinctiveness. Afterwards, with the expansion of operation scale of ppdai.com, the popularity of the aforesaid logo was continuously raised. After the establishment of PPDAI Company, ppdai.com was operated by PPDAI Company, and PPDAI Company and the affiliated company also concluded an agreement on merger. The rights and interests enjoyed by the affiliated company of PPDAI Company for its prior use of such logos as “拍拍贷” and “拍拍贷PPDAI” may be succeeded by PPDAI Company and Wuwuyi Company had no right to preclude PPDAI Company from continuing to use the aforesaid logos for original purposes.
(3) Significance
Financial openness and innovation are priorities in the reform of pilot free trade zones. “Internet + Finance” satisfies the general requirements for innovation-driven development and economic restructuring and upgrading. Online lending and other innovations on business patterns provide enterprises and consumers with complete financial solutions. In this case, ppdai.com operated by PPDAI Company was the first P2P private online lending platform in China. Due to its innovative business pattern, since its establishment, the website has attracted extensive attention; however, it faces the risk of prohibition of use of the brand “拍拍贷.” Emphasizing on technical innovations and neglecting protection of intellectual property rights are common problems of some newly-established enterprises. Loopholes in the intellectual property protection are weaknesses of such enterprises for rapid expansion, and they may even be a critical strike on such enterprises. In this case, by legally protecting the unregistered trademark under prior use of PPDAI Company and with certain influence, on the one hand, innovations are encouraged to contain preemptive trademark registration and other dishonest activities against innovative enterprises; and on the other hand, innovative enterprises are facilitated to enhance their awareness of intellectual property protection, and lay a sound foundation for their long-term development.
Case No. 6
Zhejiang Taobao Network Co., Ltd. v. Shanghai Gshopper Network Technology Co., Ltd. and iZENEsoft (Shanghai) Co., Ltd. (Case about dispute over application for pretrial prevention of infringement upon intellectual property rights)
--The embedding of the webpage plug-in “B5T” in the Taobao webpage is suspected of improper use of the popularity and user base of Taobao and it may constitute unfair competition. With a large trading volume on Taobao and the upcoming of the “Double 11 Shopping Carnival,” if the aforesaid act is not prevented in a timely manner, it may cause irreparable damage to Taobao Company's competitive advantages and market shares.
(1) Basic Facts
The applicant Zhejiang Taobao Network Co., Ltd. (hereinafter referred to as “Taobao Company”) was the operator of Taobao, the respondent Shanghai Gshopper Network Technology Co., Ltd. (hereinafter referred to as “Gshopper Company”) was the operator of www.b5m.com, and the respondent iZENEsoft (Shanghai) Co., Ltd. (hereinafter referred to as “iZENEsoft Company”) was the developer of the software “B5T.” The download of the plug-in “B5T” was provided on www.b5m.com. After a user installed the aforesaid plug-in, when he or she was shopping on Taobao by using such mainstream browsers as IE and Baidu, the plug-in would embed the advertising column and search bar of www.b5m.com on the Taobao webpage, and embed such links as “Cash Discount” close to marked prices on the shopping page. After the user clicked on such links, it would skip to www.b5m.com to close the deal. On the ground that the acts of Gshopper Company and iZENEsoft Company constituted unfair competition and if not prevented in a timely manner, such acts would cause irreparable damage to Taobao Company, Taobao Company filed an application for pretrial act preservation with the People's Court of Pudong New Area and requested the Court to order that Gshopper Company and iZENEsoft Company should cease their acts of unfair competition against the applicant by means of webpage plug-in “B5T.”
(2) Adjudication
In the view of the Court, both www.taobao.com and www.b5m.com were shopping websites and they had direct competitive relationship. The act of Gshopper Company was suspected of improper use of the popularity and user base of www.taobao.com and it may constitute unfair competition. With a large trading volume on Taobao and the upcoming of the “Double 11 Shopping Carnival,” if the aforesaid act was not prevented in a timely manner, it may cause irreparable damage to Taobao Company's competitive advantages and market shares. According to the evidentiary materials provided by the applicant Taobao Company, it may be preliminarily proved that the publisher of the plug-in “B5T” was the respondent iZENEsoft Company. Therefore, the Court rendered a ruling that Gshopper Company and iZENEsoft Company should immediately cease the acts of embedding the plug-in “B5T” in the applicant Taobao Company's Taobao webpage. Gshopper Company and iZENEsoft Company refused to accept the ruling and filed an application for reconsideration and requested the Court to set aside the aforesaid civil ruling. The Court organized both parties to hold a hearing. After fully soliciting opinions from both parties, the Court made a decision to reject the application for reconsideration and affirm the original ruling.
(3) Significance
This is the first case about preservation of pretrial act involving unfair competition on e-commerce platforms across the country. In this case, in accordance with the provisions of the Civil Procedure Law and the Intellectual Property Law, the Court strictly grasped the following essential elements in the examination of preservation of pretrial act in unfair competition disputes: (1) the applicant had the possibility of winning the lawsuit; (2) non-adoption of the preservation measure would cause irreparable damage to the applicant; and (3) the adoption of the preservation measure would not damage the public interests. Upon examination according to the aforesaid essential elements, before the “Double 11 Shopping Carnival,” the Court rendered a ruling on preservation of pretrial act, which has reflected the timeliness and effectiveness of judicial relief of intellectual property and fully demonstrated the strict protection of intellectual property rights by the people's court.
Case No. 7
Beijing iQIYI Science & Technology Co., Ltd. v. Shanghai Qianshan Network Technology Development Co., Ltd. and Yueguan Network Technology (Shanghai) Co., Ltd. (Case about dispute over unfair competition)
-- When playing videos from other video websites by clicking links, the act of a video aggregation software taking technical measures to avoid the advertising previously set by such video websites constitutes unfair competition.
(1) Basic Facts
iQIYI Company was a top-ranking video website in China. Shanghai Qianshan Network Technology Development Co., Ltd. (hereinafter referred to as “Qianshan Company”) and Yueguan Network Technology (Shanghai) Co., Ltd. (hereinafter referred to as “Yueguan Company”) were operators of the video aggregation software “MoreTV.” By using this software, users of Qianshan Company and Yueguan Company may watch videos from major video websites by clicking links. When playing videos from www.iqiyi.com of iQIYI Company by clicking links, the software “MoreTV” took technical measures to avoid the advertising previously set by iQIYI Company, which enabled users of the software “MoreTV” to directly watch advertising-free videos on www.iqiyi.com. iQIYI Company held that the acts of Qianshan Company and Yueguan Company violated the provisions of Article 2 of the Anti-Unfair Competition Law of the People's Republic of China, which constituted unfair competition. Therefore, it filed a lawsuit with the People's Court of Pudong New Area and requested that Qianshan Company and Yueguan Company should immediately cease the infringement, eliminate the adverse impacts, and compensate iQIYI Company CNY1 million for economic losses, CNY50,000 for lawyer's fee, and CNY12,500 for notary fee.
(2) Adjudication
In the view of the Court, when playing videos from www.iqiyi.com by clicking links on the software “MoreTV,” Qianshan Company and Yueguan Company took technical measures to avoid advertising previously set by iQIYI Company. Such acts made network users who were unwilling to view the advertising previously set or pay the iQIYI subscription fee switch to the software “MoreTV,” which was a malicious act. If Qianshan Company and Yueguan Company persisted in doing so, it would cause decrease in the number of network users of iQIYI Company and abnormal loss of advertising clients. The business pattern of iQIYI Company would get into trouble, the normal operations of video providers and even telecom service providers would also be affected, and the sound Internet ecosystem for entire video websites would even be endangered. Therefore, the acts of Qianshan Company and Yueguan Company violated the principle of good faith and the recognized business ethics, and constituted unfair competition. Accordingly, the Court rendered a judgment that Qianshan Company and Yueguan Company should cease the infringement, eliminate the adverse impacts, and compensate iQIYI Company CNY100,000 for economic losses and CNY50,000 for reasonable expenses.
(3) Significance
Under the support of the relevant national policies, the Internet industry within SHFTZ is developing rapidly and there are also constant innovations on business patterns. This case involved the much-discussed video aggregation software at present. The so-called “video aggregation software” refers to a business pattern in which users can watch videos from major video websites by clicking the relevant links through a single software, and it provides consumers with convenient services. However, in order to attract users, some video aggregation softwares avoid the commercial advertising originally set by video websites before the videos, in which way, such video aggregation softwares provide users with “advertising-free” versions and gains vast users. The commercial advertising set before the videos is precisely the main source of income of major video websites and it is the basic business pattern of the entire video website industry for development. According to the found facts, balancing of interests, and full reasoning, the Court determined that the act constituted unfair competition. The determination will undoubtedly escort the orderly and benign development of the video website industry and simultaneously provide some guidelines for the standardized operation and fair competition of Internet enterprises within SHFTZ.
Case No. 8
Atlas Copco (Shanghai) Trading Co., Ltd. v. Chen (Case about dispute over an labor contract)
--In the employment relationship, an employee shall obey the normal and rational management and arrangement of the employer. The exerciseof autonomy in employment by an enterprise shall be rational. If the work instructions and arrangements of the enterprise are improper and the employee fails to obey such work instructions and arrangements with justifiable reason, the termination of the labor contract by the employer on that ground is difficult to obtain legal support.
(1) Basic Facts
Chen held the post of sales manager of Atlas Copco (Shanghai) Trading Co., Ltd. (hereinafter referred to as “Atlas Company”), with the workplace in Guangzhou City. Both parties concluded an unfixed-term labor contract starting from April 1, 2008. On July 6, 2014, Chen arranged a meeting of dealers from multiple regions to be held in the morning of July 10 in Guangzhou City. From July 7 to 9, Chen was on a business trip in Xiamen City and he returned to Guangzhou City in the afternoon of July 9. From the midday of July 9, his colleagues of Atlas Company repeatedly sent emails to him and requested him to participate in another meeting to be held in 15:00 on July 10 in Shanghai Municipality. In the emails he replied, Chen inquired the reason why Atlas Company required his arrival in Shanghai Municipality on the second day and claimed that he has arranged a meeting on July 10, the meeting was urgent and important, and he could not participate in another meeting to be held in Shanghai Municipality on the second day. Atlas Company replied that it disagreed with Chen's reply. In 23:00 on July 9, the general manager of Atlas Company sent an email to Chen and insisted that Chen should participate in the meeting to be held in 15:00 on July 10 in Shanghai Municipality on time. On July 10, Chen did not arrive in Shanghai Municipality and he still worked in the workplace in Guangzhou City. The original dealers' meeting was normally held. On July 11, Atlas Company issued a notice on terminating the labor contract to Chen. Chen filed a labor arbitration and according to the arbitral award, Atlas Company should pay Chen compensation for its illegal termination of the labor contract. Atlas Company refused to accept the arbitral award and filed a lawsuit with the People's Court of Pudong New Area, Shanghai Municipality.
(2) Adjudication
In the view of the Court, the exercise of autonomy in employment by an enterprise should be rational. After a business trip, Chen returned to Guangzhou City in the afternoon of July 9. Atlas Company required him to arrive in Shanghai Municipality to participate in another meeting on July 10 without considering inconvenience in the time and travel arrangements of Chen from Guangzhou to Shanghai. The aforesaid requirement lacked rationality and in the arbitration, Atlas Company confirmed that there was no provision of the Company that disobey of any work arrangement constituted a serious violation of discipline. Therefore, the Court rendered a judgment that Atlas Company should pay Chen the compensation for illegal termination of the labor contract.
(3) Significance
Under the support of the relevant policies of the state, there is a rapid growth in the number of companies registered in China (Shanghai) Pilot Free Trade Zone and cases about labor disputes involving irregular company management are also increasing year by year. The issue of this case is the limit of an enterprise's exercise of autonomy in employment on the premise that an employee obeys the normal and rational management of the employer in the employment relationship. The judgment of this case describes how to determine that the conduct of the employee at work constitutes a “serious violation” of the employer's rules and regulations from the perspectives of legal principle and common sense. The People's Court of Pudong New Area holds that an employer's exercise of “autonomy in employment” should also be appropriate and rational, which has guiding significance for judgments of similar cases.
Case No. 9
Case about evasion of foreign exchange control by Bosi Trade (Shanghai) Co., Ltd., Ni, and Chen
--Foreign exchange receipts and payments under transit trades are regulated by China's foreign exchange control system. If the act of making a foreign exchange payment by fabricating transit trade satisfies the essential elements of the crime of evasion of foreign exchange control as prescribed in the Criminal Law of the People's Republic of China, the actor should be subject to criminal liability.
(1) Basic Facts
Bosi Trade (Shanghai) Co., Ltd. (hereinafter referred to as “Bosi Shanghai Company”) was a foreign-funded enterprise engaging in international trade business that was registered within China (Shanghai) Pilot Free Trade Zone. During the period of operation of this Company, the actual controller of Bosi Shanghai Company surnamed Ni submitted to China Construction Bank and China CITIC Bank the contracts on sales of engineering vessels and other goods concluded by and between this Company and Hong Kong International Co., Ltd. and other overseas companies, the invoices, and other materials, and collected foreign exchange funds. Afterwards, he submitted to the aforesaid banks the contracts on purchase of goods concluded by and between this Company and British Fortune Resources Co., Ltd. and other overseas companies, the invoices, false bills of lading, and other materials. Under Ni's instructions, the general manager of Bosi Shanghai Company surnamed Chen made payments of the aforesaid foreign exchange funds collected in the name of transit trades to offshore accounts of British Fortune Resources Co., Ltd. and other overseas companies and a total of USD10.82 million in 11 trades were involved.
(2) Adjudication
In the view of the Court, in accordance with the Regulation of the People's Republic of China on Foreign Exchange Administration and the Guidelines for the Foreign Exchange Administration of Trade in Goods, the foreign exchange revenues and expenditures of an enterprise in trades included foreign exchange receipts and payments under transit trades. In the name of transit trades, Bosi Shanghai Company received foreign exchange payments from overseas companies and made foreign exchange payments to overseas companies, which were within the scope of foreign exchange revenues and expenditures of China. Regardless of the foreign exchange receipts after payments or vise versa in actual operations, they were regulated by the foreign exchange control system of China and constrained by the crime of evasion of foreign exchange control as prescribed in the Criminal Law. The bills of lading based on which Bosi Shanghai Company made foreign exchange payments in the name of transit trades were false and such foreign exchange payments lacked real transit trades. Its acts satisfied such essential elements of the crime of evasion of foreign exchange control as “violation of the national provisions, illegal transfer of domestic foreign exchange to foreign countries, and a large amount of foreign exchange involved.” In addition, such acts objectively caused inflated transit trade volume of China in foreign exchange statistics and disturbed China's foreign exchange control order. Therefore, the Court rendered a judgment that the corresponding punishments should be imposed on Bosi Shanghai Company, Ni, and Chen for committing the crime of evasion of foreign exchange control.
(3) Significance
China (Shanghai) Pilot Free Trade Zone has been opening up wider to the outside world, making financial innovations, and promoting trade liberalization, but it does not mean that both foreign exchange receipts and payments are unregulated. This is a model and complicated case about evasion of foreign exchange control within a pilot free trade zone. The judgment of this case specified that the foreign exchange receipts and payments were regulated by China's foreign exchange control system, which has played an important role in cracking down on criminal activities of some criminal offenders by taking advantage of differences in foreign and domestic foreign exchange control.
Case No. 10
Luo v. SHFTZ Branch of the Shanghai Municipal Bureau of Quality and Technical Supervision (Case about SHFTZ Branch's failure to perform statutory duties and Luo's refusal to accept the administrative reconsideration decision of the Shanghai Municipal People's Government)
--When a merchant settled in an online sales platform was reported that its commodity metering was erroneous, after receiving the report, the quality and technical supervision department at the place where the provider of the online sales platform was located transferred such report to the quality and technical supervision department at the place where the settled merchant was located for investigation. It should be determined that the quality and technical supervision department at the place where the online sales platform was located has performed its statutory duties.
(1) Basic Facts
On December 24, 2014, through the online complaint hotline 12365, Luo reported that the red dates (200g per bag) he purchased from the store “Loulan Meview” on the website “YHD.com” were short-weighted and he claimed that SHFTZ Branch of the Shanghai Municipal Bureau of Quality and Technical Supervision (hereinafter referred to as the “SHFTZ Branch”) should make investigation and impose an administrative penalty on the merchant. On January 20, 2015, the SHFTZ Branch transferred this complaint to the Quality and Technical Supervision Bureau of Wuhan City where the operator of the online store “Loulan Meview” (namely, the seller of the commodities involved, Wuhan Jinlvguo Network Technology Co., Ltd. (hereinafter referred to as “Jinlvguo Company”)) was located for handling, and on February 9 of the same year, the Quality and Technical Supervision Bureau of Wuhan City notified Luo of the relevant transfer information. Luo refused to accept the notification and filed an application for administrative reconsideration with the Shanghai Municipal People's Government and the administrative reconsideration decision affirmed the original specific administrative act. Luo filed an administrative lawsuit and requested the People's Court of Pudong New Area to render a judgment that the SHFTZ Branch's failure to perform its statutory duties and the administrative reconsideration decision of the Shanghai Municipal People's Government were illegal, and he also raised an attached claim of administrative compensation.
(2) Adjudication
In the view of the Court, Luo's complaint and report involved the merchant's violation of the metrology laws and regulations. The quantitatively packed commodities involved were not self-operated merchandises of the provider of the online sales platform. They were directly shipped and delivered from Wuhan City by the settled merchant Jinlvguo Company and the invoice was issued. Therefore, the suspected actor of the metrological violation was Jinlvguo Company and the place where the violation took place was Wuhan City. In accordance with the provisions of the Metrology Law of the People's Republic of China and the Measures for the Metrological Supervision and Administration of Quantitatively Packed Commodities, the local quality and technical supervision department at or above the county level should conduct the metrological supervision and administration of quantitatively packed commodities within their respective administrative regions; and in accordance with the provisions of the Law of the People's Republic of China on Administrative Penalty and the Provisions on the Administrative Penalty Procedures for Quality and Technical Supervision, a case about administrative penalty should be under the jurisdiction of the authority where the violation took place. Accordingly, the SHFTZ Branch notified the Quality and Technical Supervision Bureau of Wuhan City of Jinlvguo Company's suspected metrological violation for handling under its jurisdiction, it has performed its statutory duties, and the administrative reconsideration decision made by the Shanghai Municipal People's Government was legitimate. Therefore, the Court rendered a judgment to dismiss Luo's claim.
(3) Significance
With the rapid development of e-commerce, complaints involving online shopping consumers are on the increase and strengthening administrative regulation in this field has become a frontier of administrative law enforcement. However, under the business pattern of “Internet Plus,” the territorial jurisdiction of administrative regulation has become more and more complicated. In particular, there are divergences on the comprehension of the “place where a violation takes place” based on which the jurisdiction of the administrative authority for a case about administrative penalty is defined. Based on the principle of convenient jurisdiction, administrative efficiency, and law enforcement effectiveness, the judgment of this case specified how to determine the “place where the violation took place” and the subject of law enforcement when the provider of the online sales platform and the seller were inconsistent and their domiciles were not within the jurisdiction of the same administrative regulatory authority. It has provided guidelines for legally and scientifically determining the regulatory duties of the administrative authority and promoting consumers' effective maintenance of their rights in online shopping.