Online gaming company sues Apple

On December 23, the Shanghai No 1 Intermediate People's Court accepted Shanda Interactive Entertainment's case. Shanda sued Apple's App Store and its Shanghai trading arm as well as the alleged owner of China's game portal 91.com – the Hong Kong listed (Fujian) NetDragon Websoft Inc – for unfair competition, asking for combined damages of Rmb10 million (US$1.6 million).

In November, Shanda found a new mobile game app called Nuzhanxuanyuan that it believed had copied the content of the game Legend of Mir II. Shanda bought the copyright for Legend of Mir II in 2001 from South Korea's WeMade Entertainment. The allegedly infringing app is a paid app and has been widely downloaded in the App Store and the portal. Shanda is claiming that the portal providers are subject to joint infringement.

“According to Article 36 of the PRC Tort Liability Law effective 2010, an online service provider involved in infringing civil rights and interests is subject to joint tort liability,” said Fu Gang, partner of Shanghai Co-effort Law Firm, which is representing Shanda in the case. “The App Store takes 30% commission on each paid app sold, therefore, we consider it is sharing the profits of this alleged infringement and has not taken enough responsibility to review the game content,” he added.

Defining subjective fault

Under China's IP laws, a direct infringer is subject to tort liability and indemnity, even when no proof of bad intent can be provided. But for an indirect infringer, if there is no proof of his subjective fault, bad intent and knowledge of the infringing matter, the law is not clear.

In the case of Encyclopedia of China Publishing House v Apple Inc, the Beijing No 2 Intermediate People's Court held in September 2012 that Apple failed to provide the evidence (such as the electronic agreement or online registration information) to prove its claims that the infringing app was developed by a third party person. Apple was found to be a direct infringer and ordered to pay Rmb520,000 in damages.

In the case of E-land v Taobao.com, which was decided in April 2011, the Shanghai Pudong Court explained in detail that even though Taobao had deleted, every time, the infringing goods of a seller from its website quickly and in response to the brand owner's complaints, Taobao should also have shut down the infringing seller's account after the seventh removal. The court found Taobao was at fault for not suspending the seller. This marked the first case in which Taobao lost in court for counterfeiting matters. A fine against the seller and Taobao totalling Rmb10,000 was ordered.

In several other cases, the courts have found in favour of the copyright owners of popular TV shows and movies against China's video host Tudou.com, ruling that given the website has a content censorship team to prevent anti-government, pornographic or violent content, it should be aware of copyright violation if the content of a current movie or TV show is uploaded by anonymous individuals.

Clarity needed

China's law on indirect infringement is not clear. Article 36 of the PRC Tort Liability Law states: “Online service providers involved in infringing civil rights and interests are subject to joint tort liability. The party wronged has the right to inform the network service provider to delete or block the link with infringing content. If the platform is notified but does not take removal actions in a timely manner, it shall bear the joint tort liability and monetary damage on the additional harm.”

“We expect a rational ruling which online platforms can really apply,” said Joe Simone, the founder of Simone IP Services, who has advised Apple in previous trademark cases. “It is not realistic for Apple to check and detect the potential infringement behind each app they sell. It is as well not possible for online shopping sites like Taobao.com not to post the goods if they are not obviously infringing.“

As of March, the app is still available on the App Store but is free for download. Shanda did not send a legal letter before starting the lawsuit, on the grounds that Apple is not entitled to the safe harbour protection that would enable it to avoid monetary damages after removing content once being notified, according to a lawyer from Shanghai Co-effort Law Firm.

Shanda has started a series of campaigns to protect its IP rights since November, suing 16 alleged infringers, including Baidu and Apple, for a total damage claim of Rmb146 million.


By Eve Yao