Second-Instance Judgment Reversed in Sino-Australian Medical Device Enterprises’ UCM Brand Unfair Competition Case

Lead

From close business partners to adversaries in court, a trans-Pacific unfair competition dispute in the life and health sector recently concluded after multiple rounds of legal battles at the Suzhou Intermediate People’s Court in Jiangsu Province. This conflict over the "UCM" brand between high-end medical equipment companies from China and Australia was not an ordinary commercial friction. It arose in the context of long-term cooperation, where one party "started anew" and comprehensively imitated the other’s commercial identifiers. Based on the special background of the parties’ prolonged collaboration, the court thoroughly considered the subjective intent and purpose of the accused infringer in determining whether the involved commercial identifiers had "certain influence" and whether unfair competition had occurred. This not only clarifies the boundaries of competitive behavior for market entities with special relationships but also unequivocally demonstrates that on the international business stage, integrity and the spirit of contracts are fundamental and inviolable principles. Chinese judiciary consistently upholds these basic values and principles with equal and robust protection. After the judgment took effect, organizations such as the China-Australia Chamber of Commerce and the Australian Trade and Investment Commission highly praised the values conveyed by this ruling—integrity in cooperation, the spirit of contracts, equal protection, and reverence for the life and health sector—which reinforced the confidence of Australian rights holders in investing in China.

In the photo, Professor Robert Phillips, founder of Uscom Limited and affiliated with the University of Queensland, Australia, presents a banner to the collegiate bench, sincerely commending the fairness and excellence of China's legal environment.

Former Shareholder Turns Competitor

Uscom Limited is an Australian cardiovascular medical device company founded in 1999. It was listed on the Australian Securities Exchange in December 2003 under the stock code "UCM." The company’s core product, the "USCOM Cardiac Output Monitor," measures cardiac blood flow non-invasively and evaluates key hemodynamic parameters such as heart rate and cardiac output. Since Uscom’s products entered the Chinese market in 2004, they have been widely used in various clinical scenarios, gaining certain market influence and academic reputation in relevant professional fields.

Starting in July 2022, Uscom discovered that Suzhou Dasheng Co., Ltd. (pseudonym) was using the "UCM" identifier in multiple contexts, including its WeChat official account, official website, and medical device registration certificates. Additionally, the product’s measurement interface used a waveform color combination closely resembling that of Uscom’s product. After failed negotiations, Uscom filed a lawsuit against Suzhou Dasheng and two former domestic distributors, Shanghai Shengyi and Shanghai Sheng’er (both pseudonyms), alleging that Shanghai Shengyi and Shanghai Sheng’er, leveraging product materials obtained during their distribution partnership, collaborated with Suzhou Dasheng to engage in commercial imitation and other unfair competition practices, severely infringing upon Uscom’s legitimate rights and interests. Uscom demanded that the three defendant companies immediately cease the unfair competition acts, including but not limited to discontinuing the use of the "UCM" identifier in product models and stopping the copying of the waveform color combination style from the "USCOM Cardiac Output Monitor" measurement interface. Additionally, they sought joint compensation for economic losses and reasonable litigation expenses totaling 1 million yuan.

An investigation revealed that the legal representatives and actual controllers of the three defendant companies were all Sun Mou. Sun Mou had deep ties with the plaintiff, Uscom: as early as 2016, Sun Mou became one of Uscom’s top five shareholders. Between 2014 and 2017, Sun Mou successively established Shanghai Shengyi and Shanghai Sheng’er, which served as authorized distributors of Uscom in the Chinese market, selling products such as the "USCOM Cardiac Output Monitor." The distribution agreements explicitly stated that all intellectual property rights related to USCOM, including trademarks, copyrights, and trade secrets, belonged to Uscom. The distributors were prohibited from arbitrarily altering product information or engaging in infringement or imitation activities. By 2022, the long-standing distribution relationship ended abruptly, and Suzhou Dasheng, established by Sun Mou, began selling its cardiac output monitors to major hospitals across China.

Second-Instance Judgment Finds Unfair Competition

Regarding Uscom’s claim that its "UCM" identifier constituted an "abbreviated enterprise name with certain influence," the first-instance court held that the "UCM" identifier was merely used as Uscom’s stock code and that Uscom failed to prove it had acquired "certain influence" as an abbreviated enterprise name in the relevant Chinese market. Thus, this claim was dismissed. As for Uscom’s claim regarding "product packaging and decoration with certain influence," the waveform color combination appeared on the device screen during operation as a Doppler flow waveform graph. This graphic did not qualify as "product packaging" under the Provisions on Prohibiting Unfair Competition Involving Imitation of Unique Names, Packaging, or Decoration of Well-Known Goods, nor did it constitute additional decoration on the product or its packaging, and thus could not serve to distinguish the source of the goods. Consequently, this claim was also dismissed. The first-instance judgment rejected all of Uscom’s claims. Dissatisfied, Uscom appealed.

The Suzhou Intermediate People’s Court of Jiangsu Province, in the second instance, held that regarding the "UCM" identifier, although it originated as Uscom’s stock code, through long-term and continuous use in annual reports, official websites, promotional materials, and coverage by third-party media, it had evolved in actual commercial activities into an identifier referring to the company. Within the specialized field of hemodynamic monitoring, the relevant public could stably associate "UCM" with Uscom, and the identifier had acquired the "certain influence" required under the Anti-Unfair Competition Law. Suzhou Dasheng’s prominent use of the "UCM" identifier on similar products was likely to cause the relevant public to mistakenly believe there was a specific connection with Uscom, constituting unfair competition. As for the blue waveform and red tracing combination in the product measurement interface, although it did not fully conform to the characteristics of traditional product decoration, this combination had gained distinctiveness through Uscom’s long-term use and promotion. Considering the special relationship between the parties, Suzhou Dasheng’s imitation of this combination demonstrated a subjective intent to unfairly appropriate the commercial achievements of another, objectively increasing the likelihood of confusion. This behavior fell under the "other acts sufficient to cause confusion about the source of goods or a specific connection with others" regulated by the Anti-Unfair Competition Law and also constituted unfair competition. The second-instance judgment ordered Suzhou Dasheng to immediately cease the涉案 unfair competition acts and compensate Uscom for economic losses. The compensation amount, determined based on Suzhou Dasheng’s subjective fault, scale and circumstances of infringement, and reasonable costs of rights protection, was set at 800,000 yuan.

Judgment Analysis

Clarifying the Boundaries of Competitive Behavior for Entities with Special Relationships

The legislative purpose of the Anti-Unfair Competition Law is to regulate unfair competition acts and maintain a market competition order based on integrity in operations. This case differs from incidental disputes between ordinary market entities; it involves a conflict between enterprises with a special relationship. Given the special background of long-term cooperation between the parties, the determination of whether the commercial identifiers had "certain influence" and whether unfair competition occurred should be comprehensively considered within the context of their historical relationship. The subjective intent and purpose of the accused infringer must be fully taken into account, with the judgment based on standards of behavioral legitimacy.

Enterprise Identifier Influence Should Not Be Negated Based on Generalized Metrics Such as Asset Scale

First, regarding the distinctiveness of the identifier, the protection of abbreviated enterprise names under the Anti-Unfair Competition Law aims to safeguard their function of identifying market entities formed through actual use. Uscom’s English name is "Uscom Limited," and it claimed that "UCM" is an abbreviation of its English enterprise name. Based on the evidence, "UCM" initially served as Uscom’s stock code on the Australian Securities Exchange, inherently possessing the function of identifying a specific entity. Since its listing in 2003, the company has consistently displayed "UCM" and similar markings in prominent positions such as its official annual reports, official website, WeChat official account, and promotional displays. Simultaneously, multiple third-party media have used various forms to juxtapose the company name "Uscom" with "UCM" in related reports. Thus, the "UCM" identifier has evolved in actual commercial activities into an external identifier referring to Uscom, fulfilling the function of identifying a specific market entity and meeting the requirements for protection as an abbreviated enterprise name under the Anti-Unfair Competition Law.

Second, regarding market reputation, the "certain influence" required by the Anti-Unfair Competition Law should be determined based on the awareness level among the relevant public in a specific field. The product involved in this case is a cardiac output monitor, a specialized medical device whose relevant public primarily consists of medical institution professionals and industry practitioners. Uscom’s USCOM product entered the Chinese market in 2004 and has been continuously sold since. Leveraging Doppler ultrasound non-invasive technology to measure cardiac output, it holds a significant market share in the domestic non-invasive hemodynamic product sector. Its clinical application value has been fully demonstrated in critical care medicine, with related products and their application principles and methods included in multiple professional publications, indicating considerable academic reputation and industry recognition. Against this backdrop, the "UCM" identifier, closely associated with Uscom and its products, has established a stable correspondence among the relevant public through long-term, extensive commercial use and industry dissemination, attaining the requisite market reputation. Suzhou Dasheng’s attempt to negate the market influence of this identifier based solely on generalized metrics such as Uscom’s asset scale and profitability lacked legal and factual basis and was not adopted by the court.

In summary, Suzhou Dasheng’s prominent use of the "UCM" identifier—identical to Uscom’s abbreviated enterprise name—in product models, promotional materials, official websites, WeChat official accounts, and exhibition promotions, while marketing products competitive with Uscom’s, was sufficient to cause confusion that it had a specific connection with Uscom, constituting an unfair competition act under Article 7(1)(2) of the Anti-Unfair Competition Law.

Waveform Color Combination, Though Not Traditional Product Decoration, Still Receives Legal Protection

Regarding whether the blue waveform and red tracing combination should be protected under the Anti-Unfair Competition Law, the Suzhou Intermediate Court provided detailed analysis in the judgment.

First, concerning whether this waveform color combination constitutes "product decoration" under the Anti-Unfair Competition Law. The court held that the waveform color combination appears on the device operation interface, belonging to the visual effects presented during device operation. Its carrier and usage context significantly differ from traditional product decoration. Additionally, considering that the waveform graph essentially provides an intuitive representation of Doppler blood flow signals, its functional characteristics are prominent. Therefore, the waveform color combination could not be directly included within the scope of protection for "product decoration" under the Anti-Unfair Competition Law. However, not being protected as product decoration does not mean the accused infringing identifier is beyond legal regulation. When an operator engages in other acts sufficient to cause confusion about the source of goods or a specific connection with others, such acts can be regulated under the Anti-Unfair Competition Law.

This case determined that Suzhou Dasheng’s use of the waveform color combination in the product measurement interface should be prohibited based on the following two reasons: On one hand, the combination design of blue waveform base with red tracing adopted by Uscom possesses a certain uniqueness in color matching and composition layout. Through Uscom’s continuous clinical application, academic promotion, and exhibition publicity, the relevant public could, to some extent, associate this waveform color combination with Uscom’s USCOM product. On the other hand, given the relationship between the parties, Suzhou Dasheng should have been aware of Uscom’s related commercial identifiers and market influence. Instead of reasonably avoiding them, it deliberately imitated Uscom’s identifiers across multiple dimensions, such as product models and graphical interfaces, subjectively highlighting its intent to unfairly appropriate the market benefits of the other party’s commercial identifiers. Objectively, such multi-faceted imitation, based on the prior relationship and involving multiple identifiers, would further increase the likelihood of confusion and misidentification among the relevant public. The above acts fall under "other acts sufficient to cause confusion about the source of goods or a specific connection with others" as stipulated in Article 7(1)(4) of the Anti-Unfair Competition Law and should be legally recognized as constituting unfair competition.

In this case, the accused infringing products were manufactured by Suzhou Dasheng, and the accused infringing identifiers were actually used by the company in its business activities. The evidence on record was insufficient to prove that Shanghai Shengyi and Shanghai Sheng’er engaged in joint infringement with Suzhou Dasheng.

Judge’s Remarks

Integrity, Contracts, Equality, Reverence

Given the typical features of this case—involving transnational commercial cooperation, the life and health professional sector, and the special prior cooperative relationship between the parties—the judgment not only resolves the individual dispute but also carries the deeper function of clarifying behavioral boundaries in commerce and promoting the market philosophy of integrity through judicial adjudication.

First, integrity in cooperation is a fundamental norm of commercial activities. All market entities should conduct their operations within the legal framework and under the constraints of business ethics, particularly those with prior cooperative relationships. They must act in good faith, respect others’ intellectual property rights and commercial achievements, and should not seek competitive advantages through unfair means such as "free-riding" or "piggybacking on established brands."

Second, the spirit of contracts is the cornerstone of international economic and trade exchanges. In international economic and trade cooperation, all parties should honor their commitments and abide by the spirit of contracts, earning the respect of partners and market recognition through integrity. Commercial acts that violate integrity not only harm the legitimate rights and interests of specific parties but also erode the trust foundation of international economic and trade cooperation, damaging the image of integrity that Chinese businesspeople have long strived to cultivate.

Third, equal protection is a fundamental principle of the rule of law. Only by granting foreign investors’ legitimate rights and interests the same legal protection as domestic market entities can we genuinely enhance and solidify the confidence of international investors, thereby fostering a market-oriented, law-based, and internationalized business environment.

Finally, the life and health sector requires particular reverence. The involved product, as a high-end medical instrument for hemodynamic monitoring, directly relates to patient life, health, and medical safety. Imitation and confusion regarding such products not only disrupt market order but may also pose potential risks to medical practice. Judicial adjudication bears the responsibility of guiding industry participants to focus their efforts on technological innovation and quality improvement, collectively safeguarding human health.