Huawei slammed TRANSSION with 20,000,000 RMB copyright litigation

Have you ever thought about the value of a default wallpaper on your mobile phone?

Well, let me tell you: the figure may rank top of the modern artworks. Last month, Huawei Technologies sued a less known mobile phone vendor for remedies of 20,000,000 RMB (≈2.8 million USD) for copyright infringement of its wallpaper.

On September 29, 2019, just one day before its IPO, TRANSSION Holdings received the notice from the Shenzhen Intermediate People's Court.

Although TRANSSION stated that the litigation would not have a material adverse impact on the company's future production and operations, the fact that a picture claims such high amount remedies is so rare that it has caused great concern in the industry.

The "Pearl Aurora Theme Wallpaper", to which Huawei claimed copyright, is presumed to be a theme wallpaper launched by Huawei in 2018.

The theme, which has been removed from the Huawei theme store, pictures a layer of aurora clusters in the pink-blue gradient background.

In the introduction page of TRANSSION's HiOS4.1 operating system, the background image of the mobile phone introduction page is a similar orange-blue gradient background with a bright color rising in the middle.  

Huawei claimed that TRANSSION had been using a modified version of the "Pearl Aurora Theme Wallpaper" in the latter's two operating systems and in publicity activities such as press conferences, web page display, and commercials, which violated Huawei's rights of authorship and modification.

While the media was still talking about whether Visual China's 20,000 RMB claim was “blatant extortion”, now everyone is astonished by the new record set by Huawei.

Indeed, what makes Huawei's picture so valuable?

The reasons may be evident. In Visual China's case, most of the defendants are ordinary business operators or individuals.

Compared with Visual China, these defendants have very little knowledge of the laws and weak economic strength.

Therefore, the court must consider the influence of its judgment on the whole society as well as the life of the accused.

Based in Shenzhen, TRANSSION is a top-seller of smartphones in Africa under its brands TECNO, ITEL and INFINIX.

According to the statics of Canalys, in the 1st quarter of 2018, the sales volume of both TECNO and ITEL has surpassed HUAWEI in the African market.

The timing of this lawsuit is also intriguing. Assuming the lawsuit is part of Huawei's attack on TRANSSION, we can imagine that Huawei would need a figure lethal enough to impact its competitor.

As far as the litigation is concerned, Huawei must prove to the court the rationality of the 20 million claims: whether it is the other party's illegal gains or its actual loss, including the scope of the infringement, the amount of commercial interests gained through the infringement, the cost of litigation and so on.

Article 49 of the PRC Copyright Law provides three methods of calculating compensation:

• actual losses,
• illegal gains,
• statutory compensation.

Among these three methods, the method of actual loss shall prevail. If the actual loss cannot be proved or cannot be determined, the illegal income comes second; only when the illegal income cannot be calculated, the statutory compensation will be applied.

In judicial practice, the courts exercise a large discretion in determining the amount of infringement compensation.

For instance, the judges often refer to reasonable royalties, license or transfer fees when determining the amount of compensation.

In addition, the judges will also take into account the goodwill of the infringer, the reputation of the infringed party, the state of the local economy and so on.

In its complaint, Huawei claimed that the picture involved was modified by TRANSSION. The latter then used the modified version as a built-in wallpaper in various mobile phones and even used it as boot screens and on the packaging boxes.

Accordingly, the 20 million RMB could be the accumulation of the amount of each infringement.

That being said, the extent to which wallpaper affects the user's decision to purchase a mobile phone is open to question.

Apparently, most people will not choose to buy a phone just because of the wallpaper it uses.

It would be difficult for Huawei to prove the existence of a direct link between the sales revenue of the mobile phones and the wallpaper involved. Therefore, the court will hardly support the 20 million claims.

Emma Qian

HFG Law&Intellectual Property