One Packaging Infringement & Implications for Foreign Enterprises in China

In March 2026, the Guangzhou Baiyun District People’s Court delivered a landmark ruling in an unfair competition lawsuit involving the packaging of 999 Cold Remedy Granules, a famous product in China.

This case has become a vital reference for understanding China’s legal protection of product trade dress and sends clear regulatory signals to domestic and overseas operators, especially foreign enterprises planning to enter the Chinese market. This article analyzes the case in depth and summarizes key compliance implications for foreign businesses.

Case Overview

Since around 2005, the plaintiff - China Resources Sanjiu has adopted a distinctive packaging design for its flagship 999 Cold Remedy Granules. Featuring a classic white-and-green color palette, a dark green inverted L-shaped waistline, light green background patterns with leaf and sphere decorations, the packaging has been widely used and promoted for nearly 20 years. With annual sales reaching billions of RMB, this trade dress has gained strong market recognition and become a core symbol distinguishing the brand among consumers.

In 2023, the plaintiff discovered that two local companies, Heng and Xiao Companies, produced and sold a cold relief granular medicine whose packaging bore striking similarities to 999 Cold Remedy Granules. The copycat product replicated almost all core visual elements, including the white-and-green color scheme, layout of trademarks and product names, OTC logo placement, and decorative patterns. The minor differences in partial patterns and text were negligible to ordinary consumers. The plaintiff subsequently filed a lawsuit on the grounds of unfair competition.

After trial, the court ruled that Heng Company, the producer, must immediately stop unfair competition acts and pay 200,000 RMB in compensation (including reasonable rights-protection expenses). Xiao Company, the seller, successfully invoked the legitimate source defense by proving its goods were sourced lawfully and it had no knowledge of the infringement. Thus, it was exempted from compensation but ordered to halt all sales of the infringing products. The ruling has now taken full legal effect.

Core Legal Analysis

The core legal dispute of this case lies in whether pharmaceutical product packaging and trade dress qualify for protection under China’s Anti-Unfair Competition Law. According to this law, any operator is prohibited from using trade dress identical or similar to that of products with proven market influence, as such conduct will mislead consumers about product origins.

The court adopted the judicial standard of overall observation and comprehensive judgment, which is widely applied in IP-related packaging disputes across China’s pharmaceutical industry. It emphasized that judges and relevant consumers should evaluate the overall visual effect rather than fixate on trivial partial differences. Although the two packages had minor discrepancies in trademark graphics and leaf patterns, their overall similarity was sufficient to cause confusion when observed in isolation by average customers.

Another critical verdict was the confirmation of the defendant’s subjective malice. As a peer pharmaceutical manufacturer, Heng Company was fully aware of the famous packaging of 999 Cold Remedy Granules. Its systematic imitation of multiple core design elements far exceeded the scope of “coincidence”, proving its intention to free-ride on the plaintiff’s brand reputation. This finding of subjective malice also reserves room for the application of punitive damages in similar future cases.

In terms of liability allocation, the court adopted refined differentiated rules consistent with China’s judicial practice: producers, as the source of infringement, bear full compensation liability; sellers can avoid compensation via legitimate source defense but cannot evade the obligation to stop selling infringing goods.

This ruling may also reflect the evolution of IP infringement in China’s pharmaceutical sector: the industry has moved from crude trademark piracy (1.0 era) and enterprise name infringement (2.0 era) to covert trade dress copycatting (3.0 era), where infringers adopt subtle “loophole tactics” to avoid direct violations.

Key Implications for Foreign Enterprises Entering the Chinese Market

This ruling demonstrates China’s strengthened judicial protection for influential product trade dress, providing critical guidance for foreign enterprises expanding into China’s market across all industries, especially pharmaceuticals, FMCG and daily necessities.

First, build a multi-layered intellectual property protection system for product packaging. Foreign companies traditionally rely solely on trademark registration for brand protection. In China, however, trade dress can be protected by multiple legal tools simultaneously. Enterprises are advised to apply for design patents for packaging’s overall appearance, register copyrights for original graphic patterns and artwork, and even apply for three-dimensional trademarks for iconic packaging shapes. Combined with the protection of the Anti-Unfair Competition Law, this multi-dimensional layout can fully shield packaging IP rights.

Second, conduct pre-market design compliance reviews and avoid copycat risks. Before launching products in China, foreign brands must conduct thorough research on existing mainstream products’ trade dress in the local market. They should refrain from using color schemes, layout styles and decorative elements that are highly similar to influential local brands. Even unintentional visual similarity may trigger unfair competition lawsuits, given China’s strict consumer confusion judgment standards.

Third, strengthen supply chain IP management and regulate downstream partners. Foreign brands usually cooperate with local manufacturers and distributors in China. They must add explicit IP protection clauses in cooperation contracts, requiring suppliers and sellers to verify the legality of packaging designs. It is vital to train distributors on IP compliance, because even legitimate sellers must stop selling infringing goods once violations are identified, which will damage brand reputation and sales channels.

Fourth, establish a timely market monitoring and rights-protection mechanism. After entering China, foreign enterprises should regularly monitor the market for counterfeit or copycat products. Once infringing trade dress is found, they can collect evidence promptly and resort to judicial remedies.