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A Quick Guide for Network-related IP Lawsuits in China

Chinese courts have witnessed an increasing number of network-related IP cases over the past years. According to the latest statistics, in Beijing, the capital and hub of the IP practice of China, network-related cases – consisting of three categories, namely copyright (51%), trademark (35%) and unfair competition (14%) – comprise about 40% of first-instance IP-related civil lawsuits.

 

In this article, we provide the ground knowledge for the relevant proceedings.

 

Network-related Copyright Lawsuits


Plaintiff: A copyright owner.

Defendant: A network service provider on whose platform the infringed copyright work is found.

 

Jurisdiction: Disputes over network-related copyright should be under the jurisdiction of the court of the place where the infringing act is committed or where the defendant has his or its domicile.

 

    The places where infringing acts are committed also include places where equipment used to carry out accused infringing acts, such as network servers or terminals, etc. is located. Sometimes, the place where the plaintiff has found the contents of infringement may also be deemed the place where the infringing act is committed.

 

    The courts of first instance hearing the copyright infringement cases are intermediate courts or courts at higher levels or selected primary courts. For cases in the Beijing municipality, Shanghai municipality and Guangdong province (excluding the city of Shenzhen), the courts of first instance are the local IP courts.

 

Effective notification: On most occasions, the copyright owner (as the plaintiff in later court proceedings) should take the initiative to notify the network service provider (the defendant in later court proceedings) to take necessary measures to remove, block, and disconnect the link to prevent the others from infringing his copyright; the copyright owner shall deliver to the network service provider such notification in writing. Please note that the copyright owner would bear the legal consequence of incorrect notification where it caused damages to the network service provider and/or network service user(s) because of the necessary measures which the network service provider has taken owing to the incorrect notification.

 

    After taking necessary measures, the network service provider should, within a reasonable time period, clearly inform the service user(s) of the measures taken. Where a reasonable time period has expired, and the network service provider is at fault for causing damages to the service user(s), the network service provider should be held liable for such damages.

 

Burden of proof: The plaintiff has the burden of proving his claims against the infringer and to support his claim for damages. For example, he needs to submit evidence indicating that the defendant has conducted, individually or jointly with others, an act of providing works, performances, or audio or video recordings at issue.

 

    To defend against the plaintiff’s claims and not to take the liability for tort, the defendant could have the burden of proving that it merely provides network technical services, such as information storage space, searching and linking, and is the provider of the content at issue or his relationship with that provider. 

 

    Regarding “merely providing information storage space,” for example, evidence provided by the defendant can include that its website clearly indicates it provides the information storage space to a service recipient; or evidence such as user IDs of uploaders, IP addresses of registrations, time of registrations, IP addresses of uploading, contact information, time of uploading and the information uploaded, etc.

 

    Regarding “merely providing linking services,” for example, evidence provided by the defendant can include that the works, performances, or audio or video recordings at issue are played on a third-party website, redirected from the defendant’s website; or the works, performances, or audio or video recordings at issue are played on the defendant’s website, but there is sufficient evidence proving that the works, performances, or audio or video recordings at issue are stored on a third-party website, etc.

 

    With respect to the establishment of the division of labour in an infringement case, an intention liaison among the defendants or between the defendant and others, and acts accordingly conducted for that purpose, should be proven. Courts will consider evidence on the affirmative side such as an agreement showing the willingness to cooperate among the defendants or between the defendant and others, or evidence on record proving that the parties are closely associated with each other in content cooperation and benefit sharing; or, on the dissenting side, evidence proving that the defendant merely provides technical services as required by the technical or business model.

 

Court’s consideration: Where the plaintiff, at the time of filing a lawsuit, fails to clarify his claim as to whether the defendant has conducted an act of communication through an information network, or an act of abetting or assisting others to communicate through an information network, and still leaves his claim ambiguous before the end of the court debate, a comprehensive examination on the nature of the act conducted by the defendant would be made based on the opinion presented as well as the evidence on record.

 

    The nature of the act conducted by the defendant will be determined by making an overall judgment by way of inspecting the scene, taking into consideration the evidence provided by both sides, following the provisions of law and applying logical reasoning and empirical rules.

 

Network-related Trademark Lawsuits


Plaintiff: A trademark owner.

Defendant: A platform service provider who provides network platform services for transactions involving the infringed product.

 

Jurisdiction: Same to that explained in the copyright section.

 

Effective notification: Similar rules to those for copyright are adopted in practice.

 

    Burden of proof: The plaintiff has the burden of proving his claims against the infringer and to support his claim for damages. Proof is important regarding the defendant’s abetting or assistance to the online seller to commit an act of trademark infringement in the course of providing network service. 

 

    Regarding the “act of abetting,” it should be proven that the defendant has the intention to induce and encourage the online seller to commit an act of trademark infringement, for example, by means of language, technical support for recommendation and introduction, bonus points, preferential service, etc.

 

    Regarding the “act of assistance,” it should be proven that the defendant knows that the online seller infringes another’s trademark by using the network services, but does not take necessary measures.

 

    The defendant, to defend against the plaintiff’s claims and not to be held liable for the tort, could provide evidence to identify the identity, contact information, network address, etc. of the online seller in order to support that the transaction information is provided or the transaction act is conducted by an online seller and not the platform service provider itself; or to indicate that it has taken necessary, reasonable, and appropriate measures to prevent trademark infringement.

 

Court’s consideration: In determining whether goods or services provided by application software and through information network are identical with or similar to goods or services designated under a registered trademark, the court will consider the purposes, contents, manners and objects of the services specifically provided by the application software.

 

    In determining whether the defendant has taken necessary measures in a timely, reasonable and appropriate manner, the court will consider the factors such as the nature of the network service, form and contents of the notification, circumstances of the trademark infringement, and technical conditions.

 

    In determining whether the defendant knows that an online seller is infringing the trademark by utilizing the network service, the court will consider the factors such as:

• whether the alleged infringing transaction information is placed on the homepage of the website, the homepage of a column or other noticeable locations; 
• whether the defendant has taken the initiative in editing, selecting, sorting out, ranking, recommending, or revising the alleged infringing transaction information; 
• whether the notification of the right holder is sufficient to enable the platform service provider to know that the alleged infringing transaction information is disseminated or the alleged infringing transaction act is committed using the network service provided by the platform service provider;
• whether the defendant fails to take reasonable measures accordingly against the repeated acts of infringement upon the same right committed by the same online seller;
• whether the alleged infringing transaction information contains admission of infringement by the online seller;
• whether well-known goods or services are sold or offered at an obviously unreasonable price; and
• whether the defendant has directly gained economic benefits from the network dissemination of the alleged infringing transaction information or the alleged infringing transaction act.

 

    In determining whether the defendant should be held liable for trademark infringement, the court will give comprehensive consideration and balance on the interests of the right holder, the platform service provider, the online seller, and the general public.

 

Network-related Unfair Competition Lawsuits

Plaintiff: A business owner or operator who has a competitive relationship to the defendant.

Defendant: The party who conducts an act of unfair competition against the plaintiff through an information network.

Jurisdiction: A dispute over network-related unfair competition should be under the jurisdiction of the court of the place where the unfair competition act occurs or where the defendant has his or its domicile. The courts of first instance hearing the unfair competition cases are intermediate courts or courts at higher levels or selected primary courts.

Scope: Where the alleged act of the defendant merely infringes other’s rights explicitly specified in laws such as copyrights, trademarks and patents, the Anti-unfair Competition Law would not be applied.

 

    “Unfair competition” is conducted where in a competitive relationship, a business operator, in transactions in the market, contravenes the principle of voluntariness, equality, fairness, honesty and credibility, and does not observe publicly recognized business ethics, damages the lawful rights and interests of other operator, and disturbs the socio-economic order.

 

    “A competitive relationship” exists in situations where one’s legitimate rights and interests are impaired and a change in transaction opportunities and competitive advantages rise, where:

• the goods or services of the relevant parties can be replaced with each other in direct or indirect way; and

• business activities of the relevant parties may be overlapped, interdependent or associated in other ways.

 

    When determining “publicly recognized business ethics” for network-related cases, specific industry practices in the information network industry, industrial regulations or self-regulatory norms developed by industry associations or self-regulatory organizations according to the characteristics and competitive demands of the industry, and technical standards in the information network industry, are usually considered as contributors. 

 

Some of typical network-related unfair competition acts are:

• impairing the legitimate rights and interests of the plaintiff, disturbing normal market operation order, violating the principle of fair competition, and violating the principle of good faith and publicly-recognized business ethics, through an information network by, for example, using the contents of a website that can increase transactional opportunities and competitive advantages for the plaintiff to an extent that is sufficient to substitute a consumer’s visit to the plaintiff’s original website; modifying the drop-down keywords in the plaintiff’s search bar; or making use of the plaintiff’s website traffic to insert advertisements in the interface;
• false advertising through an information network which is sufficient to mislead the relevant public;
• defaming the plaintiff’s commercial reputation through an information network;
• purchasing and using paid listing services to impair the plaintiff’s transactional opportunities, legitimate rights and interests by, for example, using the plaintiff’s commercial signs or other information that can identify the quality and source of goods or services of the plaintiff as keywords for a paid listing, without authorization or justified reasons; 

 

Effective notification: Similar rules to those for copyright are adopted in practice.

 

Court’s consideration: In adjudication of network-related unfair competition disputes, courts will give consideration to the interests among business operators, customers and the general public, for the purpose of encouraging the innovation of business models, and ensuring market fairness and free competition.

 

This article first appeared in Asia IP Magazine (vol. 9, issue 2, 2017).

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