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01 Case Information

Trial Court

Guangzhou Intellectual Property Court

Case No.

Case No. (2022) Yue 73 Civil Final 4331

(2021) Yue 0192 Civil First Instance No. 25154

party

Hangzhou Mouyi Technology Co., Ltd. (Appellant; Plaintiff of the First Instance)

Guangzhou Aimou Information Technology Co., Ltd. (Appellant; Defendant in the First Instance)

Shenzhen Jingmou Network Technology Co., Ltd. (Appellant; Defendant of First Instance)

Youmou (Beijing) Technology Co., Ltd. (Appellant; Defendant of First Instance)

Date of Judgment

April 29, 2024

Cause of Action

Disputes over Copyright Infringement and Unfair Competition

02 Case Summary

*Onmyoji* is a 3D Japanese-style turn-based RPG mobile game launched by a certain internet company (hereinafter referred to as "Company W") in 2016. It rapidly gained popularity by virtue of its unique artistic style and Heian period setting, became a phenomenal work, and has continued to generate substantial revenue for Company W. In 2018, *Hyakki Monogatari*, a mobile game of the same theme developed by a certain peer company (hereinafter referred to as "Company Y") and operated by a certain company (hereinafter referred to as "Company J"), was launched and distributed via the platform of a certain company (hereinafter referred to as "Company A").

Wangmou Company found upon investigation that *Tales of Hundred Demons* is not only highly similar to *Onmyoji* in core elements such as art style and character images, but also directly uses 86 artworks of the latter. In addition, Jingmou Company also published articles on the platform operated by Aimou Company, so as to boost the competitiveness of *Tales of Hundred Demons* by disparaging *Onmyoji*.

In the case of *Onmyoji* v. *Hyakki Monogatari*, judgments were delivered by the Guangzhou Internet Court at first instance and the Guangzhou Intellectual Property Court at second instance. It was held that Company Jing, Company Ai and Company You had jointly infringed upon the right of communication through information network enjoyed by Company Wang, and constituted unfair competition by passing off and confusion; Company Jing also constituted unfair competition by commercial defamation. The court ruled that Company Jing shall pay RMB 1,000,000 in damages to Company Wang, Company You shall bear joint and several liability for the damages up to the amount of RMB 900,000, and Company Ai shall bear joint and several liability for the damages up to the amount of RMB 300,000. All the three aforementioned parties shall publish a clarification statement in a prominent position on the homepage of the designated website and their respective WeChat Official Accounts for ten consecutive days.

Claims

1. Render a judgment ordering Jingmou Company to remove one (1) infringing promotional poster published on the Internet (available at www.32r.com/app/77XXX.html and dl.XXXXline.com.cn/download/27XXXXX.html);

2. It is ordered that Aimou Company and Jingmou Company shall publish a clarification statement reviewed and confirmed by the people's court for ten consecutive days in a prominent position on the homepage of their respective operated websites (with URLs www.Xgame.cn and www.kingXXXXXgame.cn respectively), and Youmou Company shall publish the aforesaid clarification statement for ten consecutive days in a prominent position of its operated WeChat Official Account "XXgamer", so as to eliminate the adverse effects on Wangmou Company.

3. Order that Jing Mou Company and You Mou Company jointly pay Wang Mou Company a total of RMB 5 million as compensation for economic losses and reasonable expenses incurred in protecting its legitimate rights and interests; Ai Mou Company shall bear joint and several liability for compensation for RMB 1 million of the aforesaid amount.

4. Order that Ai Mou Company, Jing Mou Company and You Mou Company shall bear all litigation costs of the present case.

[Note] During the first instance, Wangmou Company explicitly confirmed that the involved game *Bai Gui Wu Yu* had been taken offline. In the present case, the company claims the right of communication through information network and the right of reproduction in respect of 86 art works, and asserts a claim for punitive damages with a compensation base of RMB 5 million, while the total amount of compensation remains RMB 5 million.

Judgment Result

1. Ai Mou Co., Ltd. and Jing Mou Co., Ltd. shall publish statements to eliminate adverse effects (the content of the statements shall be subject to the examination and approval of the people's court) for ten consecutive days in conspicuous positions on the homepages of their respective websites (the URLs are www.Xgame.cn and www.kingXXXXXrgame.cn respectively); You Mou Co., Ltd. shall publish the aforesaid statements for ten consecutive days in a conspicuous position on its WeChat Official Account "xxgamer".

2. Jingmou Company shall pay RMB 1,000,000 in compensation to Wangmou Company within 15 days from the date this judgment comes into force; Youmou Company shall bear joint and several liability for RMB 900,000 of the aforesaid amount, and Aimou Company shall bear joint and several liability for RMB 300,000 of the aforesaid amount.

3. Dismiss the other litigation claims of Wangmou Company.

[Note] The court of second instance dismisses the appeal and affirms the original judgment.

Appeal Claims (Mou Network Co., Ltd.)

1. Render a judgment to reverse Item 2 of the first-instance judgment, order Jingmou Company and Youmou Company to pay Wangmou Company a total of RMB 5,000,000 as compensation for economic losses and reasonable expenses incurred in rights protection, and order Aimou Company to bear joint and several compensation liability for RMB 1,000,000 of the aforesaid sum.

2. Order that Ai Mou Company, Jing Mou Company and You Mou Company shall bear all litigation costs of the present case.

Appeal Claims (Jingmou Company)

1. Revoke Item 1 and Item 2 of the first-instance judgment, and either remand the case for retrial, or amend the judgment in accordance with the law to dismiss all claims of Wangmou Company, or amend the judgment to order Youmou Company to bear the legal liability.

2. Wangmou Company shall bear all litigation costs incurred in the first and second instance proceedings.

03 Case Observation

Point 1: The right of reproduction is absorbed by the right of communication to the public via information networks In the present case, Company Wang alleged that *Hyakki Monogatari* operated by Company Ai, Company Jing and Company You constituted infringement of the right of communication to the public via information networks and the right of reproduction over the involved art works of *Onmyoji*. As the game developer, Company You, Company Jing as the game operator, and Company Ai as the platform operator, collaborated with clear division of labor and carried out joint operation, enabling the public to access the 86 involved art works of *Onmyoji* at a time individually chosen by them. Such act constitutes infringement upon the right of communication to the public via information networks, and the three parties shall bear joint and several liability accordingly. As for the claim related to the right of reproduction, the involved act refers to storing the works in digital format on media, generating a new reproduction through copying and then uploading the same to a network server. This type of act infringing the right of reproduction produces no [independent harmful consequences], and can be absorbed by the infringement act against the right of communication to the public via information networks. Therefore, under the circumstance that the relevant act has been determined to constitute infringement of the right of communication to the public via information networks, the court shall no longer uphold the claim concerning the right of reproduction.

Point 2: The platform operator shall bear joint and several liability The platform operator involved in this case, Aimou Company, is not a mere network service provider that only provides technical services such as automatic access, automatic transmission, information storage space, search and links. Instead, it has substantially participated in work including "payment collection, promotion, review and profit sharing". Therefore, it has engaged in collaborative acts with division of labor, thus jointly constituting infringement on the right of communication through information networks, and shall bear joint and several liability accordingly.

### Point 3: The image of a game protagonist may serve as a distinctive sign, performing the function of identifying the source of goods: (1) Generally speaking, the popularity of a game will be transmitted to images such as the game's protagonist. For example, the popularity of the novel *Demi-Gods and Semi-Devils* and its protagonist Qiao Feng rises in tandem, and the two complement each other. (2) In this case, Company Wangmou claims that images including the protagonist Seimei, Shikigami Jorōgumo, and Mitama Rinyūdō in the game *Onmyoji* have certain influence, and can perform the function of identifying the source of goods and services. The involved game images have been widely, continuously and persistently used by Company Wangmou, which is sufficient for the relevant public to establish a close corresponding relationship between such images and *Onmyoji*. (3) The involved game *Hyakki Monogatari* and *Onmyoji* are competing games. Where *Onmyoji* has gained certain popularity and been deeply rooted in the hearts of the public, the use of protagonist images highly similar to Seimei and other relevant characters by the developer and operator of *Hyakki Monogatari* is likely to cause confusion among the relevant public. Therefore, Companies Aimou, Jingmou and Youmou have violated the provisions of Article 6 of the Anti-Unfair Competition Law of China, constituting an unfair competition act of confusion.

### Point 4: Abuse of comparative advertising constitutes commercial defamation (1) In this case, Company Jing and Company Wang are competitors in the same industry. Company Jing published articles on platforms including Company Ai, which contained content such as: "The most criticized point of *YYS (Onmyoji)* by players has always been that the game is extremely grind-intensive, requiring players to spend a huge amount of time on it... In contrast, *Hyakki Monogatari* never requires tedious grinding. Its core gameplay features idle mode, AFK progression and casual mechanics that save players from unnecessary time input, making it a must-have for casual players. Another highly controversial point of *YYS* and its operator Company Wang is its defective gacha system with no pity mechanism: players can even unlock an achievement for pulling R-grade cards for all 10 attempts in a ten-pull draw. Although rate-up (UP) events are available now, the drop rate is still disappointingly low. In *Hyakki Monogatari*, however, the gacha system is extremely player-friendly: players get multiple free ten-pull draws at the initial stage of the game, and each ten-pull draw is guaranteed to grant a 5-star divine pet, giving players a chance to obtain top-tier cards in a single draw. No need to ask why, we are basically running a charity for players..." The aforesaid article is essentially comparative advertising. It describes *Onmyoji* with negative expressions such as "criticized" and "defective", while describing *Hyakki Monogatari* with positive expressions such as "must-have" and "charity". Such comparison will mislead game players, bring negative impacts and negative evaluations on the business reputation of Company Wang, and damage the competitive advantage of Company Wang. Therefore, the act of Company Jing publishing the involved articles violates the provisions of Article 11 of the *Anti-Unfair Competition Law of the People's Republic of China*, and constitutes the unfair competition act of commercial defamation. (2) For operators (advertisers) that publish comparative advertising, it shall be noted that they are not ordinary consumers under such circumstances, so their freedom of commercial speech is different from general freedom of speech. The "objectivity and impartiality" of comparative advertising content will also be subject to strict scrutiny. (3) In addition, it shall be clarified that commercial defamation constitutes unfair competition because the relevant statements are unfair to competitors, thereby misleading consumers to make wrong judgments on the quality of goods or services and distorting the market competition mechanism. Generally, false statements that disparage the business reputation of competitors are likely to constitute commercial defamation. However, even if a comment apparently conforms to objective facts, if it is made after distortion, tampering or one-sided interpretation and leads to the consequence of misleading consumers, it may still constitute unfair competition.