*AI-generated translation, for reference only.

[Keywords]

Civil, ownership of new plant variety rights, infringement, infringement of new plant variety rights, licensing fee, cost of supplying packaging bags

[Case Facts]

The plaintiff, Anhui Wan [REDACTED] Seed Co., Ltd. (hereinafter referred to as Wan [REDACTED] Company), alleged that it had been granted the right to exploit the "Huaimai 44" wheat new plant variety (hereinafter referred to as the variety in question) in Anhui Province by the holder of the right in that variety. Lixin County Guang [REDACTED] Seed Co., Ltd. (hereinafter referred to as Guang [REDACTED] Company) and Hu [REDACTED] produced and sold seeds of "Huaimai 44" without authorization, thereby infringing the right in the variety in question. Therefore, a lawsuit was filed requesting the court to order: Guang [REDACTED] Company and Hu [REDACTED] to immediately cease the acts infringing the right in the new plant variety "Huaimai 44", and to jointly and severally compensate Wan [REDACTED] Company for its economic losses and reasonable expenses incurred in stopping the alleged infringement, totaling RMB 3,000,000 (currency unit same below), specifically applying triple punitive damages on the basis of RMB 1 million in compensation.

The defendant, Guang [REDACTED] Company, argued that the allegedly infringing "Huaimai 44" wheat seeds were produced with the authorization of Wan [REDACTED] Company and were only repackaged for sale due to damaged packaging bags. Guang [REDACTED] Company contended that it had not engaged in any infringing acts of producing or selling "Huaimai 44" wheat seeds without authorization and should not bear infringement liability.

The defendant, Hu [REDACTED], argued that his alleged infringing acts were performed in the course of his employment and he should not bear infringement liability.

The court ascertained through trial: Wan [REDACTED] Company, authorized by the holder of the right in the variety in question, enjoyed the right to exploit the variety in question in Anhui Province. Wan [REDACTED] Company commissioned Guang [REDACTED] Company for seed production from September 20, 2019, to June 30, 2020, and subsequently commissioned Guang [REDACTED] Company for sales. During the period of commissioned seed production, Wan [REDACTED] Company collected a variety licensing fee from Guang [REDACTED] Company and packaging bag fees, among others, with the variety right licensing fee being RMB 0.2/kg and the fee for a 15kg packaging bag being RMB 1 per bag. Based on the evidence on record, it could be determined that Guang [REDACTED] Company used "white bags" to package and sell "Huaimai 44" seeds within Anhui Province.

The Hefei Intermediate People's Court of Anhui Province rendered the (2021) Wan 01 Min Chu No. 2555 Civil Judgment on March 2, 2022, ordering: 1. Guang [REDACTED] Company to immediately cease the acts infringing the right in the new plant variety "Huaimai 44" as of the effective date of the judgment; 2. Guang [REDACTED] Company to compensate Wan [REDACTED] Company for economic losses and reasonable expenses totaling RMB 150,000 within ten days from the effective date of the judgment; 3. Rejection of Wan [REDACTED] Company's other claims. Wan [REDACTED] Company appealed, arguing that the first-instance judgment failed to apply punitive damages, the awarded compensation was too low, and Hu [REDACTED] was not held jointly and severally liable. Guang [REDACTED] Company appealed, arguing that it had not committed the alleged infringing acts and that the compensation amount determined by the first-instance judgment was excessively high. The Supreme People's Court rendered the (2022) SPC IP Civil Final 1742 civil judgment on July 12, 2024, ordering: 1. Affirmation of the first and third items of the first-instance judgment; 2. Revocation of the second item of the first-instance judgment; 3. Guang [REDACTED] Company to compensate Wan [REDACTED] Company for economic losses of RMB 424,000 and reasonable expenses for rights protection of RMB 10,000 within ten days from the effective date of the judgment; 4. Hu [REDACTED] to bear joint and several liability for the payment obligation specified in item three above; 5. Rejection of Guang [REDACTED] Company's appeal.

[Reasons for Judgment]

The points of contention in this case are: 1. Whether the acts of Guang [REDACTED] Company in producing and selling "Huaimai 44" seeds constituted infringement; 2. Whether the amount of compensation determined by the first-instance judgment for Guang [REDACTED] Company to bear was appropriate.

Regarding the first point of contention. There was a commissioned seed production relationship between Wan [REDACTED] Company and Guang [REDACTED] Company from 2018 until June 30, 2020, followed by a commissioned sales relationship. During the cooperative business period, the seeds produced by Guang [REDACTED] Company under commission were packaged using bags provided by Wan [REDACTED] Company, and Guang [REDACTED] Company paid the corresponding amount based on the number of bags. The seeds supplied by Wan [REDACTED] Company to Guang [REDACTED] Company for sale were, according to the agreement, provided as finished packaged seeds by Wan [REDACTED] Company. In none of the above scenarios was Guang [REDACTED] Company required to use additional packaging bags. Guang [REDACTED] Company's use of "white bags" to package and sell seeds clearly violated China's regulations on the use of seed labels, and it failed to provide any evidence supporting that the packaged seeds were produced under lawful authorization. Even if the allegedly infringing seeds were indeed produced by Guang [REDACTED] Company during the commissioned production period, its sale of the allegedly infringing seeds packaged in "white bags" also clearly exceeded the scope agreed upon in the contract between the parties, and Wan [REDACTED] Company had the right to pursue Guang [REDACTED] Company's infringement liability.

Regarding the second point of contention. According to Article 17 of the "Several Provisions of the Supreme People's Court on Issues Concerning the Specific Application of Law in the Trial of Disputes over Infringement of Rights in New Plant Varieties (II)", Guang [REDACTED] Company's use of "white bags" to package and sell seeds, specifically its act of "selling an authorized variety in packaging without identification or labeling," constituted a serious infringing act subject to punitive damages. Article 5 of the "Interpretation of the Supreme People's Court on the Application of Punitive Damages in the Trial of Intellectual Property Civil Cases" stipulates: "When determining the amount of punitive damages, a people's court shall, in accordance with the relevant laws, separately determine the calculation base based on the amount of the plaintiff's actual loss, the defendant's illegal gains, or the benefits derived from the infringement. This base shall not include the plaintiff's reasonable expenses incurred in stopping the infringement; if the law provides otherwise, such provisions shall prevail." "If the amount of actual loss, illegal gains, or benefits derived from the infringement as mentioned in the preceding paragraph is difficult to calculate, the people's court shall reasonably determine it by reference to a multiple of the licensing fee for the right in accordance with the law, and shall use this as the calculation base for the punitive damages amount." Based on the actual circumstances of this case, the court of second instance determined the compensation base by referring to a reasonable multiple of the licensing fee. However, there are various methods for collecting licensing fees for new plant variety rights, such as a fixed per-unit licensing fee or a royalty based on promotion revenue. In the licensing of variety rights, packaging bags bearing the variety name are often provided by the licensor. Because the packaging bag relates to the seed label, and the variety name used on it is closely related to the variety right license, charging a fee for the packaging bag bearing the variety name is also an important way to realize the economic benefits of the variety right. When determining the licensing fee for a variety right, the fee collected by the variety right holder for the packaging bag may be considered an important factor in the licensing fee.

The variety right licensing fee and packaging bag fees agreed upon by the parties during the commissioned seed production period were both benefits obtained by Wan [REDACTED] Company from licensing Guang [REDACTED] Company to produce "Huaimai 44," and could be converted into an overall licensing fee. The licensing fee in this case was agreed upon by the parties and charged based on the weight of the seeds, which relatively objectively reflects the economic benefits of the variety right and can serve as a reference for determining the compensation amount in this case. Based on the ascertained facts of a planting area of 400 mu and a yield of 500 kg per mu, Guang [REDACTED] Company could have produced a total of 200,000 kg of "Huaimai 44" seeds in the year when the alleged infringement occurred. It should have paid Wan [REDACTED] Company a variety right licensing fee of RMB 40,000 (RMB 0.2/kg × 200,000 kg) and packaging bag fees of approximately RMB 13,000 (200,000 kg ÷ 15 kg/bag × RMB 1/bag), totaling RMB 53,000. Considering that the alleged infringing acts were unauthorized production and sales, differing from licensing negotiated under normal market conditions, the licensing fee should be appropriately increased. The effective judgment set the compensation base at RMB 106,000 by referencing twice the aforementioned licensing fee. Considering that Guang [REDACTED] Company refused to truthfully state the scale of its alleged infringing acts during the litigation, persistently arguing that it merely engaged in repackaging, and demonstrated a lack of good faith in the litigation, treble punitive damages were applied according to law. Consequently, Guang [REDACTED] Company was ordered to compensate Wan [REDACTED] Company for economic losses in the amount of RMB 424,000 [RMB 106,000 × (3+1)].

[Judgment Digest]

The variety name on a seed label is closely related to the variety right license. Charging a fee for the packaging bag bearing the variety name is one of the ways for the variety right holder to realize its economic benefits. When trying a dispute over infringement of a new plant variety right, if the people's court determines the amount of damages for infringement by reference to the licensing fee for the right in accordance with the law, it may consider the fees payable for the packaging bags as part of the licensing fee.

[Corresponding Index]

Article 28, Article 73(3) and (4) of the Seed Law of the People's Republic of China (the applicable version in this case is Article 28, Article 73(3) and (4) of the Seed Law of the People's Republic of China effective January 1, 2016)

Interpretation of the Supreme People's Court on the Application of Punitive Damages in the Trial of Intellectual Property Civil Cases (Fa Shi (2021) No. 4), Article 1(1), Article 3(1) and (2)(3), Article 5

Several Provisions of the Supreme People's Court on Issues Concerning the Specific Application of Law in the Trial of Disputes over Infringement of Rights in New Plant Varieties (II) (Fa Shi (2021) No. 14), Article 17(1)(4) and (2)

First Instance: Hefei Intermediate People's Court of Anhui Province (2021) Wan 01 Min Chu No. 2555 Civil Judgment (March 2, 2022)

Second Instance: Supreme People's Court (2022) SPC IP Civil Final No. 1742 Civil Judgment (July 12, 2024)