Courts get tough on ISPs

The PRC Tort Liability Law (中华人民共和国侵权责任法) (Tort Law), promulgated on December 26 2009 and effective July 1 2010, set out, for the first time, two circumstances in which an internet service provider (ISP) must take measures to prevent the expansion of infringement committed by its third party users. These are when the ISP receives a notice of infringement from an IP owner and when the ISP knows that infringement from the use of its services has taken place.

During the first two years following the Tort Law, several cases have established the defence of ISPs (safe harbour defence) against IP owners' infringement claims when ISPs crack down on infringing information upon receiving sufficient notice.

Recent cases have suggested, however, that the ISPs' obligation is not necessarily contingent on a sufficient notice and may entail more than just removing or disconnecting from infringing information.

Deficiency of notice and take-down procedures

Since the promulgation of the Tort Law, ISPs have largely established and followed notice and take-down procedures to mitigate their operational risks. These procedures give IP owners speedy channels to report and ask for removals of infringing information, but they are far from sufficient for a number of reasons, especially when IP owners face an onerous amount of infringing information distributed online.

Firstly, the preparation of sufficient notice imposes heavy burdens on IP owners. Generally, a sufficient notice of infringement must contain information that can establish the infringement of the content located at a specific internet address. When IP owners face a large number of infringing copies or the internet addresses of these copies change frequently, they will have difficulties preparing sufficient notices in relation to all infringing copies.

Secondly, mere removal of and disconnection from infringing copies clearly identified by IP owners may not be a sufficient remedy. Some infringers, when their infringing copies are cracked down on, simply repost the copies on other addresses, rendering the IP owners' efforts to locate the infringing copies fruitless.

Thirdly, a rigorous notice and take-down procedure may delay preventing the spread of infringing information and result in irreparable harm to IP owners. A pirated copy of a popular work may be viewed and downloaded thousands of times before being taken down according to a notice and take-down procedure.

Heavier obligations on ISPs

In light of the insufficient protections under the notice and take-down procedures, IP owners have lodged one lawsuit after another aiming for better protection. Courts have gradually been limiting the applications of the safe harbour defence, lowering the criteria for sufficient notices of infringement and imposing more obligations on ISPs.

Applying for safe harbour defence

The Tort Law provides for the safe harbour defence in recognition of ISPs' inability to examine all information distributed by using their services. Different from internet content providers (ICPs), ISPs only provide platforms, transmitting channels or searching facilities for third party information. However, with the evolution of the internet, the difference between ICPs and ISPs is no longer clearly demarcated, which was the reasoning behind the grant of all ISPs' safe harbour defences.

On December 19 2012, the Beijing High People's Court issued a milestone decision on a trademark infringement case brought by Descente against Beijing Today Metro Information Technology. The court ruled that Today Metro was not able to use the safe harbour defence despite the fact that Today Metro only operated a group-buying platform which displayed sales information uploaded by third party merchants. The grounds for denial were that Today Metro had a “direct economic interest” in the “promotion” of third party commodities and should bear responsibility corresponding to its involvement in the sales.

The decision – though the term “direct economic benefit” was not clearly defined – appeared to suggest that a collection of payments from consumers will be considered “direct economic benefit”. Today Metro tried to argue that it remitted all payments from customers to real sellers after the deduction of service charges (which is no different from other e-commerce platform operators). The court did not support this argument because it believed that Today Metro's promotion of the goods sold at its platform made it a seller in the eyes of the customers and so it had a direct interest in the sales.

Insufficient notices of infringement

Recent cases suggest that courts have begun to take a more flexible and practical view towards the requirements on notices of infringement and to give weight to those that contain insufficient information.

Firstly, IP owners do not need to give detailed reasons why they find third party information infringing if the surrounding circumstance enables ISPs to understand the infringing nature of such information. The Shanghai No 1 Intermediate People's Court discussed this issue in a decision on a trademark infringement case dated April 25 2011. In this case, E-land Shanghai Clothes Trading claimed that Zhejiang Taobao Network infringed its trademark by allowing the display of pirated commodities on Taobao's e-commerce platform. Taobao defended itself by arguing that E-land failed to explain in its notice why the commodities it identified were infringing. The court discounted Taobao's defence and ruled that the notices were sufficient to inform Taobao of the infringement because E-land had previously served seven notices on different infringing commodities posted by the same seller and the seller placed on its website a statement that “some commodities are 'imitations' but their quality is good,” which itself admitted the infringing nature. The court concluded that E-land's notices were sufficient to trigger Taobao's obligations to crack down on posts of infringing commodities.

Secondly, an insufficient notice of infringement may still have legal effect. The Supreme People's Court discussed this issue in a decision on a copyright infringement case dated May 11 2012. Zhangjiang Pan-Asia E-commerce served nine notices to Beijing Baidu Network, claiming that 1,848 links on Baidu's music platform were connected to webpages that infringed 103 of its copyrighted songs. Baidu removed only the links to infringing copies at IP addresses correctly identified by PA E-commerce but failed to do anything to the asserted infringing copies of which the IP addresses that PA E-commerce provided were inaccurate.

The court ruled that:
(i) as a professional search engine service provider, Baidu should know the existence of infringing copies on the internet and that these copies may spread through its search engine;
(ii) it should also know the challenge of correctly identifying internet addresses of all infringing copies of songs; and
(iii) PA E-commerce had proved the existence of the infringing copies of songs. As such, the court ruled that Baidu was obligated to act in good faith to coordinate with PA E-commerce to identify the internet addresses of the infringing copies when it received notices of the inaccurate addresses.

Standard of constructive knowledge

Under the Tort Law, an ISP may be liable for distributing infringing information through its services only if it actually knows or has constructive knowledge about the infringement. This means that the ISP ought to realise there is infringement if they use reasonable care.

Court decisions used to focus primarily on actual knowledge, specifically, knowledge received from notices of infringement. Two cases decided this year fleshed out the courts' view towards “constructive knowledge”.

On February 14 2014, Shanghai No 1 Intermediate People's Court issued a decision illustrating the relationship between ISPs' constructive knowledge and the popularity of the works being infringed. In this case, China Central Television Station (CCTV) claimed that Shanghai Quan Tudou Culture Broadcast assisted in the distribution of an infringing copy of the London Olympic Opening Ceremony, of which CCTV has an exclusive distribution right. Tudou argued that it had no obligations to prevent the distribution of infringing copies of the ceremony because CCTV did not send a notice of infringement. The court found that, although an ISP generally does not have the obligation to examine copies of videos uploaded by internet users, they should deal with highly suspicious content reasonably and with professional diligence. The court believed that, based on common knowledge in the media industry, Tudou should have known that individuals were unlikely to be authorised to distribute copies of the ceremony and, therefore, it should be alerted when an anonymous individual uploaded a copy of the opening ceremony to its platform. The court determined that Tudou had constructive knowledge about the infringement and Tudou's failure to take any action against the infringing copy resulted in its secondary copyright infringement.

On March 7 2014, the Beijing No 1 Intermediate People's Court issued a first instance trial decision illustrating the relationship between ISPs' constructive knowledge and their involvement in uploading, editing and recommending works. In a copyright infringement case, Beijing Zhongqingwen Cultural Media claimed that Baidu allowed infringing copies of its books to be displayed on the Baidu Library platform. Baidu denied its knowledge of the infringement. The court noticed that Baidu listed at the front page of the Baidu Library selected books as “recommended books,” which had usually been viewed several thousand times. This indicated that Baidu has the capacity to review “popular” books. Each infringing copy asserted by Zhongqinwen had been viewed more than ten thousand times, much more than most of the recommended books. The court therefore held that, taking into consideration Baidu's involvement in recommending books, Baidu ought to have paid attention to the copyright status of the copies of Zhongqingwen's books.

Preventing spread of infringement

The Tort Law requires ISPs to take proper measures to prevent the expansion of infringement, including the removal of and disconnection from infringing information upon IP owners' notice of infringement. But, while mere removal and disconnection upon notices are insufficient to protect IP owners' interests, internet services have become increasingly sophisticated and ISPs have a stronger power to manage internet usage. A revisit and rebalancing of the responsibilities between IP owners and ISPs are in order. The highlighted cases expanded the scope of measures that ISPs must take to prevent the expansion of infringement.

Firstly, ISPs are obliged to terminate services that they provide to repeated infringers. In the E-land v Taobao case, the court suggested that the removal of the seller's posts was not sufficient because the seller has a record of reposting the commodities infringing E-land's trademarks. The court ruled that Taobao should penalise the seller by means such as degrading the seller's credit rankings and suspending the seller's access to Taobao's online sales platform.

Secondly, ISPs should not ignore insufficient notices of infringement. As evident in the PA E-commerce v Baidu case, if an ISP has reasonable grounds to believe the existence of infringement committed by using its services, it must actively coordinate with the IP owner to acquire all necessary information to prevent the spread of infringement even if the notice served by the IP owner is insufficient.

Thirdly, when dealing with suspicious infringing information, as seen in the CCTV v Tudou case, while ISPs are not required to remove the suspicious infringing copies immediately, they must take reasonable measures to ascertain the legality of the copies and to prevent their distribution (if proven to be infringing).

Lastly, with respect to popular works, ISPs will bear higher responsibilities and are required to take proactive measures to protect them. The logic behind this arrangement is that popular books are more easily infringed and the authors and authorised publishers of popular works are usually known to ISPs. Although no rule has been established on what “proactive measure” ISPs should take to protect popular works, the Zhongqingwen v Baidu case suggested that such measures should depend, at least partially, on ISPs' involvement in the uploading, editing and recommendation of works.

Xun Yang, Simmons & Simmons, Shanghai


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