Setting precedents in IP law

In April this year, the Supreme People's Court released the highly anticipated Top 10 IP Cases of 2011 (2011年知识产权保护十大案件发布) alongside the Annual Report (See page 41 for translation and 60 for Opinion). First released in 2008, the Report and List have become one of the most valuable resources for IP owners and practioners. The List includes 10 cases selected by the SPC and heard by courts nationwide, while the Annual Report selects 34 cases retired by the Supreme Court. Five different law firms provide their comments on five of the top 10 cases. They consider why the SPC chose this case and what precedent it sets.

3Q Unfair Competition Dispute / 3Q之争引发的不正当竞争纠纷案

The Supreme Court dubbed this case the 3Q dispute as the names of the software all include the letter Q. Antivirus company Qihoo 360 sued Tencent's QQ messaging service for its bundled privacy protection software, arguing that it constituted unfair competition. The dispute aroused much public attention and debate as it involved two of the largest online companies and reflects online market competition trends. The industry hopes the outcome will set a precedent for future cases, guiding market players towards enhancing competition on a lawful and orderly basis.

The Court noted that Qihoo 360 and Tencent have mutually competitive relationships in the online service, user and advertising markets. This is despite different focuses with Qihoo 360 engaged in online protection and Tencent in online messaging. Before the 3Q dispute, defending parties argued their non-competitive relationship with the plaintiff in the online market, because their products are not competitive in nature. However, considering the statement from the Court, competitive relationships in the future will be held in a more general perspective.

The court also upheld that QQ's privacy protection software is legal, if its evaluation or statement is true and correct. According to the Court, on the one hand the law allows market players to operate software, which interacts with other software operated by its competitor. On the other hand, the law only prohibits operations that violate the rights or interests of the competitor.

It is interesting that among the listed Top 10 IP Cases, including the 3Q dispute, there are four cases relating to online activities. Since the online industry is one of the most advanced sections of the economy, and will continue its rapid growth, cases and disputes arising from online businesses will play a big role in future IP cases.

Jihong Chen, Zhong Lun Law Firm, Beijing

Taobao Trademark Infringement Dispute/淘宝网商标侵权纠纷案

Korean fashion company E-land owns the trademark Tennie Weenie. E-land filed seven complaints to taobao.com regarding distribution of fake clothing by an online shop owned by Du Guofa. The court found that Taobao failed to take sufficient measures to stop infringement. In its decision, the court stated that taobao.com should bear civil liability, including compensation of Rmb10,000 ($1,580) for joint infringement with Du.

The case has attracted much attention since the Court released its judgment. This is the first time a Chinese court has held a commercial platform provider like Taobao liable for online transactions of infringing products. Before the case, multiple attempts from international brands to pursue legal liability of commercial platform providers (CPP) ended in failure, including Puma v Taobao in 2006 at Guangzhou Intermediate Court.

E-land v Taobao creates a series of standards to increase the accountability of commercial platform providers. While CPPs have no general responsibility to monitor or control online IP infringement, they are liable to remove content quickly upon receiving complaints from trademark owners with evidence. Otherwise, they are not exempt from joint liability. CPPs can ask individual online shop owners to remove infringing goods. However, if the goods are not removed, CPPs must take sufficient measures to stop infringement, like closing accounts, otherwise they are still liable.

Listing the case as one of the Top 10 represents a new trend in applying greater responsibility to CPPs. It underlines that providers have to take action as soon as trademark owners complain and if necessary close online shops run by repeat infringers. Providers have the technical capabilities to shut down online shops and monitor repeat infringers. Failure to comply may result in joint legal liability between the CPP and shop owner.

The SPC chose this case from almost 10,000 court decisions issued by various levels of courts in 2011. They are conveying a strong signal to commercial platform providers over their liability during the complaint and settlement procedures. The case also encourages brand owners to protect their marks by negotiating with providers or taking legal action when providers fail.

Charles Feng, Wan Hui Da Law Firm and Intellectual Property Agency, Beijing