On April 13, 2016, the Beijing High People’s Court released the “Guidelines for Adjudication of Network-related IP Cases” (the “Guidelines”) in a bid to address various issues arising from the adjudication of copyright, trademark and unfair competition cases in connection with network.

Section I: Network-related copyright cases

The copyright section of the Guidelines provides approaches to the judicial trial of the disputes involving hot issues like information storage space, linking, directed searching, webpage “snapshot” services as well as online real-time broadcast.

Article 6 of the Guidelines lays out the specific scenarios in determination of the service provider of information storage space. The provisions rule out the “phony” network disc operators in the disguise of information storage space service provider, that are actually engaged in the categorization, arrangement, comments, ranking and other processing acts of the contents.

It is also advisable to clarify that when entering the plea of non-infringement, the defendant needs to provide the Court with the uploader’s information. Refusal to offer such information by citing privacy policy of the Term of Use would not be an option.

Article 7 enumerates the circumstances where the defendant’s act falls under linking services, i.e., either the works at issue are “played on a third party website, redirected from the defendant’s website” or “played on the defendant’s website, but stored on a third party website”. It is worth noting that the Court has been following rather strict standards in the determination of “redirecting” act, which requires the satisfaction of the condition that the user must actually feel the change from one webpage to another. Failure to meet such requirement will most likely lead to Court findings of “substantial replacing” and be found infringing.

Article 8 through 11 of the Guidelines is expected to provide solutions to the circumstances where the offending website, in the guise of search engine for the sake of circumventing potential infringement risk, places an automated software program (also known as “web crawler”) only on a specific third party infringing website (rather than on the whole network as a search engine would normally does), so any search run through this website would end up being directed to the third party website (“directed searching”). Given the fact that the offending website usually has agreement to import traffic to the third party infringing website, both websites should be held jointly and severally liable due to the evident cooperation intention and business objectives.

The Guidelines elaborates from Article 12 to 14 on the legal consequences for the act of providing webpage “snapshot” services. Plea of non-infringement purely based on the capacity of snapshot service provider will not be supported by Court. In previous practice, Court primarily focuses on whether the act of providing webpage “snapshot” services constitutes substantial replacing of the original webpage. Nonetheless, the focus of the Court on determination of infringement will be shifted to “whether a regular use of relevant works is affected and the right holders’ legitimate rights to the works and interests in the works are unreasonably impaired”.

Finally, Article 15 clarifies that the right of online real-time broadcast falls under the category of “other rights that are enjoyed by the copyright owner” as provided by Article 10, paragraph 1, item (17) of the “Copyright Law”. It is very welcome because it provides legal basis for the copyright owner in enforcing his right of online real-time broadcast.

Section II: Network-related trademark cases

This section deals with the possible liability of a "platform service provider", defined as an entity that provides services for "transaction information" and "transaction acts". In other words, goods bearing an infringing trademark may be offered for sale using the "platform" run by the service provider (Article 17).

The general principle (Article 18), for determining the liability of the service provider is to take into account the several interests at stake (the platform service provider, the right holder of an allegedly infringed trademark, the online seller and the general public).

Articles 20 and 21 provide that, when it is preliminarily proven that an infringing activity is taking place on a platform, the platform service provider shall not be held liable if (1) it provides all necessary evidence identifying the online seller (failing which it may be held liable for directly conducting the infringing act), and if (2) it is not "at fault". By "fault", Article 21 refers to abetting or assisting the online seller to commit the act of trademark infringement (in which case the platform service provider will be held jointly and severally liable). The words abetting and assisting are respectively defined in Article 21.2 and 21.3 as to "intentionally induce and encourage" and to be "knowing, without taking necessary measures"(to stop the activity).

Article 22 defines how a right holder needs to notify the platform service provider : in writing, with all information necessary to show that there is a "high likelihood of trademark infringement" (details of the right holder, location of the infringing content, proof of trademark ownership, declaration by the right holder of authenticity concerning the information given).

The general principle of liability for "knowing and not taking timely reasonable and appropriate measures", which is not new, is reiterated in Article 23. "Knowing" is the consequence of having received the notification by the right holder. However, "timely, reasonable and appropriate" are not defined. They are to be assessed according to the circumstances of the case.

The platform service provider must inform the online seller "within a reasonable time" (Article 24). The right owner who made an incorrect notification may be liable for the damage caused to the online seller (Article 25).

Article 26 provides a long list of 7 circumstances (plus one additional "other factors") that may be taken into consideration when determining whether a platform service provider "knows" or "ought to know" that an online seller is infringing a trademark: the link is on the home page of the website, the service provider provided some editing, selecting etc. services, the notification is deemed sufficiently precise, the acts are repeated, the online seller admits the infringement, the price is obviously unreasonably low, the platform service provider directly gains economic benefits from the transaction.

As to the "economic gains" that the platform service provider may obtain from the infringing activity, they are related to advertising, but the definition remains vague. Article 27.2 brings a precision: ordinary advertising fees and technical service fees which follow ordinary standards in the industry, are not to be considered as "economic gains" in the sense of Article 26.

Section III: Network-related unfair competition cases

This part is drafted by reference to the Anti-unfair Competition Law and Article 31 provides a definition of what constitutes a competitive relationship: (1) the goods or service of one of the operators can, directly or indirectly, replace those of the other operator and (2) the business activities of the two operators may be "overlapped, interdependent or associated in other ways".

Article 33 defines the general terms publicly recognized business ethics by reference to Article 1 of the law against unfair competition, and Article 34 provides some additional criteria (industry practices and regulations, technical standards etc.).

Article 35 gives examples of acts of unfair competition committed through an information network, by reference to the general principle laid out in Article 2 of the law against unfair competition : using the contents of a website or of a commercial sign (of another person), modifying the drop-down keywords of another person, inserting advertisement in the website traffic of another person, disrupting business activities etc… all the above being made without authorisation and justified reasons.

Article 36 focuses on behaviours that are likely to mislead the relevant public (by reference to the false advertising in Article 9 of the law against unfair competition). Article 37 does the same concerning acts deemed to be "commercial defamation", as mentioned in article 15 of the law against unfair competition.

Article 38 addresses the issue of "paid listing services" in search engines. The purchase of key words that are the trademark or "commercial sign" of another person may constitute an act of unfair competition when there are no justified reasons, or when they are contained in the title or introduction of the website, and whether the legitimate rights and interests of the plaintiff are impaired.

The search engine has no obligation to make a complete and active examination of all key words used of paid listing services, unless they are selected, classified, recommended and edited by the search engine (Article 40).

The rest of the Guidelines reproduces the same general principles mentioned above in relation to platform service providers and infringement case: notification obligation to remove, block or disconnect the website and possible liability in case of failure to do so. Likewise, the Guidelines re-affirm the method of calculation of damages (losses, illegal profit, obligation for the defendant to produce its account books if so ordered etc.) as stipulated in the Trademark Law.

Comments:

First, a question: what will be the influence of these Guidelines on other Courts in China, in particular the Courts in the jurisdictions of which the main platform service providers are located?

The main problem concerning online counterfeiting is about quantities. Right holders are not dealing with a few dozens of cases, for which the procedures described in details by the Guidelines would be a good method of action. They are dealing thousands of cases. And, obviously, it is totally impossible to handle thousands of cases as if there were only a few dozens. It cannot work.

China could seek inspiration in solutions that have been implemented in other countries, such as France, where most of the counterfeit sales on the Internet have been eradicated. There, the platform service providers accepted to sign with right holders a "chart", and in particular, accepted to use "filters" which automatically eliminate suspicious links, thus saving the need to go, each time, through the time consuming procedure of a written notice.