TYGlobe

01 Case Information

Trial Court

Chaoyang District People's Court of Beijing Municipality (First Instance)

Beijing Intellectual Property Court (Second Instance)

Case No.

(2019) Jing 0105 Min Chu No. 22319

(2021) Jing 73 Min Zhong No. 1265

Plaintiff (Appellee)

Perfect World (Beijing) Software Technology Development Co., Ltd.

Defendant (Appellant)

Beijing Playcrab Technology Co., Ltd.

Date of Ruling

December 30, 2020 (First Instance)

November 26, 2021 (Second Instance)

Cause of Action

Disputes over Copyright Infringement and Unfair Competition

02 Case Summary

Perfect Co., Ltd. once paid a substantial licensing fee to the renowned writer Zha Liangyong (pen name: Jin Yong) to obtain the exclusive rights (including rights to safeguard legitimate rights and interests) for the adaptation, development, distribution and operation of games based on the four works *The Legend of the Condor Heroes*, *The Return of the Condor Heroes*, *The Heaven Sword and Dragon Saber* and *The Smiling, Proud Wanderer* (hereinafter referred to as the "involved novels") as well as elements thereof. However, without authorization, Playcrab Co., Ltd. used elements including characters, martial arts skills, weapons and equipment, and storylines from the involved novels in *The Grand Master* (hereinafter referred to as the "involved game"), a game it developed and operated. It also used elements related to Jin Yong and the involved novels in game promotion to free ride on their popularity, resulting in misidentification among the relevant public. Accordingly, Perfect Co., Ltd. instituted an action against Playcrab Co., Ltd. before the court in 2019. The case went through trials of first instance and second instance, and the court finally rendered a judgment in December 2021 that Playcrab Co., Ltd. constituted copyright infringement (infringement of the right of adaptation) and unfair competition, and ordered Playcrab Co., Ltd. to pay Perfect Co., Ltd. compensation of RMB 20 million and relevant reasonable expenses.

the plaintiff's claims

1. Order that Wanxie Company cease the production, promotion and operation of the game *Dazhangmen*, as well as the act of authorizing any other entity to operate the aforesaid game.

2. Order Wanxie Company to issue a public statement on *China Intellectual Property News* and the websites of www.17173.com, www.dazhangmen.playcrab.com and www.playcrab.com to eliminate the adverse effects;

3. Order Playcrab Company to compensate our company for economic losses of RMB 60,000,000 arising from its copyright infringement acts;

4. Order Wanxie Company to compensate our company for economic losses of RMB 20,000,000 arising from its acts of unfair competition;

5. Order Wanxie Company to pay reasonable expenses of RMB 9,900 and expenses for litigation property preservation liability insurance of RMB 40,000.

Court judgment

1. Defendant Beijing Playcrab Technology Co., Ltd. shall, within ten days from the effective date of this Judgment, cease to use elements including character names, biographical introductions, martial arts, equipment, levels, inter-character relationships, relationships between characters and martial arts, relationships between characters and equipment and other elements of the four novels *The Legend of the Condor Heroes*, *The Return of the Condor Heroes*, *The Heaven Sword and Dragon Saber* and *The Smiling, Proud Wanderer* in the operation and publicity of the game *Da Zhang Men*.

2. Defendant Beijing Playcrab Technology Co., Ltd. shall, within ten days from the date this judgment takes effect, compensate Plaintiff Perfect World (Beijing) Software Technology Development Co., Ltd. RMB 20,000,000 for economic losses arising from copyright infringement and unfair competition;

3. Defendant Beijing Playcrab Technology Co., Ltd. shall pay the Plaintiff Perfect World (Beijing) Software Technology Development Co., Ltd. reasonable expenses of RMB 49,900 within 10 days from the effective date of this Judgment;

4. The defendant, Beijing Playcrab Technology Co., Ltd., shall publish a statement on *China Intellectual Property News* and the websites at www.17173.com, www.dazhangmen.playcrab.com and www.playcrab.com within 30 days from the date this judgment takes effect to eliminate adverse effects. (The publication on the aforesaid media shall last for no less than 7 days; the content of the statement shall be submitted to this Court for examination and approval within 10 days from the date this judgment takes effect. If the defendant fails to perform the aforesaid obligation within the time limit, this Court shall publish relevant contents of this judgment on relevant media, and the expenses incurred therefrom shall be borne by the defendant, Beijing Playcrab Technology Co., Ltd.)

5. Dismiss the other claims of the plaintiff, Perfect World (Beijing) Software Technology Development Co., Ltd.

[Note: The court of second instance of this case dismissed the appeal and affirmed the original judgment.]

03 Case Observation

Q1: How to distinguish between adaptation, reproduction and reference?

A1: Adaptation, reproduction and reference are confused to a certain extent in practice. Adaptation means that a new work is created on the basis of using the "original expression" of the existing work, and there is no mandatory requirement for the forms of the original work and the new work to be consistent. For example, if the original work is a novel, the adapted work may be a game, a film, or even music, but the adapted work is never completely independent of the original work. Reproduction is essentially plagiarism in the general sense. Reference, which produces a new work just like adaptation, only draws on the "idea elements" of the original work, and has its own expression independent of the original work.

Q2: What is the court's judicial reasoning in the present case for holding that the game involved constitutes infringement upon the right of adaptation?

A2: First, it is confirmed that the combination of elements in the involved novel, including character names, martial arts skills, equipment, inter-character relationships, relationships between characters and martial arts skills, and relationships between characters and equipment, constitutes an "original expression" in the sense of copyright law. Second, it is confirmed that the involved game uses the "original expression" which is substantially similar to that of the involved novel, with the characteristics of relevance and dependence. Third, it is confirmed that the involved game is not a reproduction of the involved novel, but an act of original creation. Therefore, adapting the involved novel into the involved game without permission constitutes infringement upon the right of adaptation.

Q3: What is the "original expression" in the novel involved in the case?

A3: According to the comparison sheet submitted by Perfect Company, one part thereof refers to elements such as character names (including character information), martial arts, equipment and locations in the novel involved in the case, while the other part refers to inter-personal relationships between characters, relationships between characters and martial arts, relationships between characters and equipment, as well as the correspondence of story plots of the aforesaid novel. Furthermore, the court holds that the aforementioned elements and their corresponding relationships are specific to a certain extent, which are sufficient to reflect the author's unique selection, trade-offs, arrangement and design, and can also relatively completely present the story line of the novel involved in the case.

Q4: What are the general prerequisites for the application of Article 2 of the Anti-Unfair Competition Law of China?

A4: (1) The alleged anti-unfair competition conduct is not provided for in Chapter II of the Anti-Unfair Competition Law of China. (2) The alleged conduct damages the legitimate rights and interests of other business operators or consumers. (3) The alleged conduct committed by the actor violates the principle of good faith and generally recognized business ethics, and thus is characterized by unfairness or culpability.

Q5: Can claims for copyright infringement and unfair competition be asserted concurrently?

A5: Yes. In the present case, the act of infringing the right of adaptation concerning the involved game and the act of unfair competition that uses the character images, core elements and story outline of the involved novel for publicity are mutually independent. The use methods and elements of the two acts are not identical, and the legal interests infringed by the two acts are also different. Therefore, there is no issue of double evaluation when the two claims are asserted simultaneously. Moreover, in the judgment, the court also explicitly confirmed that the defendant's acts constituted copyright infringement and unfair competition.

Q6: What is the basis for the people's court's judgment ordering the defendant to pay RMB 20 million in compensation in the present case?

A6: It is RMB 20 million of discretionary damages, and the following factors are mainly taken into account for the determination: (1) Wanxie Company has admitted that its operating revenue generated merely in part of 2018 and 2019 has already totaled around RMB 12 million; (2) Factors including the extremely high popularity of the novel, high licensing fees, malicious intent of infringement, the number of servers of the game involved in the case, as well as the contribution degree of the elements of the involved novel are considered comprehensively; (3) The defendant constitutes both copyright infringement and unfair competition concurrently.

04 Summary

In the present case, several other details also merit attention. First, Claim 1 of Perfect Company actually claimed for cessation of operation, which was not upheld by the court. Instead, proceeding from the perspective of balancing public interests and protecting the rights and interests of the numerous involved game users, the court ruled that Wanxie Company shall cease the use of relevant elements. Second, with regard to the "original expression" of the involved novel, there is still room for further in-depth analysis and discussion on the exact definition of the "various relationships" contained therein, and whether such relationships can be directly interpreted as a combination of elements including "character names", "martial arts skills", "equipment" and "locations". Third, as for the determination of infringement of the right of adaptation, the applicable standard of proof is not overly strict. As specifically applied to the present case, the involved game involves 152 characters, 82 types of martial arts skills, 85 pieces of equipment and 23 levels, among which only 71 characters, 31 types of martial arts skills, 11 pieces of equipment and 4 levels are derived from the involved novel, all accounting for less than half of the total number in their respective categories. Fourth, both the courts of first instance and second instance noted that the evidence submitted by Wanxie Company to prove that the elements it used fall into the public domain is far less sufficient than the infringement comparison evidence adduced by Perfect Company. It can be seen that this approach of claiming non-infringement does have feasible space for application, except that more efforts shall be devoted to evidence production, or proper planning and arrangement shall be made at the early stages of game R&D layout and design.