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China’s First False Product Placement Advertising Case

Issued: September 01 2012
A Chinese court has recently handed down a decision concerning the country’s first-ever false advertising case caused by an implanted product placement TV commercial.
The case started when Beijing Kela Diamond Internet and Technology Co sued Shanghai Zhuomei Jewelry and Shanghai Film syndicate for copyright infringement, unfair competition and false advertising regarding a necklace featured in a recently-aired TV series.
During the second episode of TV series Three Xia Daughters, produced by Shanghai Film, the actor was featured shopping in CRD diamond store owned by Zhuomei Jewelry. Later in this episode, a CRD jewelry box was showed in a close-up shot when the actor gave the necklace to the actress as a gift. But the necklace itself, shown inside the CRD box, is subject to a design copyright owned by Kela Diamond.
Kela Diamond said the necklace was designed in February 2008 and a copyright registration was granted by the National Copyright Administration in September 2009, nine months prior to the shooting of Three Xia Daughters taking place in June 2010.
Zhuomei Jewelry was accused to have falsely used Kela’s product to advertise its own brand. Shanghai syndicate was accused to deliver the infringing commercial that misleads and confuses consumers. Kela filed the claims, demanding total damages of Rmb157,000 (US$24,500) as well as an official apology in the Legal Daily newspaper, on the homepage and on Zhuomei’s website.
After examining the blueprint and copyright certificate, the Shanghai Pudong New Area People’s Court held the two defendants liable for false advertising. The court found that although no official contract of advertising was signed between Zhuomei Jewelry and Shanghai Film, the former had allowed the latter to use the store venue and items for free and in exchange, the latter had featured the former’s brand logo on screen. The two parties had formed a de facto contract of advertising and were liable of delivering true nature of the product through advertisements.
Article Nine of China’s Anti Unfair Competition Law provides that companies shall not use advertisements or the other methods to make a false propaganda for the quality, composition, function, usage, producer, time of efficacy and place of production of commodities.
The court found the fact that the implanted advertisement featured the necklace together with a CRD jewelry box bought from a CRD shop would naturally lead consumers to believe that the necklace belongs to CRD (Zhuomei), an untrue fact in this case. In addition, as a major rival of Kela Diamond, Zhuomei’s behaviour to associate competitor’s product with its own brand image could hurt Kela’s brand image as it indicates the possibility of Kela might commit counterfeiting.
The court also found that as producer of the TV series, Shanghai syndicate allowed the advertisement to be implanted knowing that the necklace has nothing to do with CRD or Zhuomei. It is liable for the misleading consequences.
Kela Diamond was rewarded damages of Rmb27,000 (US$4,000). Other requests were dismissed. 


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