The Higher People's Court of Guangdong Province made a first-instance judgment on the unfair competition dispute between Tencent QQ and Qihoo 360 on April 25, 2013, holding that Qihoo constituted unfair competition, and ordering Qihoo to pay a compensation of RMB 5 millions to Tencent for the latter's economic losses and reasonable right-safeguarding expenses, and to apologize on Qihoo 360's official website and relevant media. This case involves the largest damages award on Internet unfair competition cases in the territory of P. R. China.

 

Brief facts:

  1. Tencent QQ, which was launched in February 1999, is a free instant messaging software having the most users in China, and ranks the first in the personal instant messaging market within China.
  2. Qihoo released "360 Safeguard" (anti-virus software) on July 27, 2006. In 2007, when Qihoo just released the beta version of its 360 anti-virus software, Tencent's game center was falsely identified as a virus.
  3. In September 2007, the "QQ Software Manager" and "QQ Doctor" attaching to Tencent QQ were automatically upgraded to "QQ Computer Manager", which was anti-virus software having similar functions to Qihoo's "360 Safeguard".
  4. Tencent QQ users suspected that QQ scans a lot of software and personal files that are irrelevant to the QQ program, and believed that QQ spied on user's private information. Moreover, there were certain security problems in QQ itself, and QQ account thefts occurred frequently. In September 2009, Qihoo released the "360 Privacy Safeguard" software, which may, as claimed on its official website, show activities of software installed on the user's computer infringing on user's private information.
  5. On October 29, 2010, Qihoo further released "360 Koukou Guard", which was alleged to provide overall protection for QQ users.
  6. On November 3, 2010, Tencent published "A Letter to QQ Users", and stated that the QQ software cannot run on computers on which Qihoo 360 software was installed, that is, their software was incompatible, and QQ was also incompatible with Qihoo's 360 safe browser. Moreover, Tencent further reported the finding that Qihoo 360 accessed QQ and modified functions of the latter by using a mode of Trojan.
  7. On November 4, 2010, Qihoo announced to recall "360 Koukou Guard". Later, Qihoo changed the default value of the User-Agent attribute of its browser from 360SE into IE by automatic update of the "360 Safe Browser", thereby bypassing the incompatibility check and enabling users to access QQ by using the browser. In response to this, Tencent held that Qihoo disguised the "360 Safe Browser" into another browser, which was a cheat.
  8. In 2010, Qihoo 360 and Tencent QQ accused each other of unfair competition, which was also referred to as the "3Q war".
  9. On April 26, 2011, Beijing Chaoyang District Court made a first-instance judgment on the Tencent v. Qihoo unfair competition case, and ordered Qizhi Software (Beijing) Co., Ltd., Beijing Qihoo Technology Co. Ltd., and Beijing Sanji Wuxian Internet Technology Co. Ltd. to stop releasing 360 privacy guard, make public announcement for 30 consecutive days, eliminate the adverse impact of the infringement acts on Tencent, make a compensation of RMB 400,000 (which was 1/10 of the original claim), and delete relevant infringement comments from 360 website.
  10. In August 2011, Tencent filed a lawsuit to Guangdong Higher People's Court, accusing Qihoo of unfair competition. On April 18, 2012, Qihoo also accused Tencent of antitrust to Guangdong Higher People's Court, alleging that Tencent stopped user services at their own discretion during the 3Q war, installed QQ Doctor under the name of updating the QQ Software Manager, misused the market dominance by forcing users to uninstall 360 software that have been installed, and deprived the users' right of choice, which constituted the act of limiting transactions and conditional sale. Qihoo claimed RMB 150 millions from Tencent on this basis.
  11. On April 25, 2013, Guangdong Higher People's Court made the judgment, holding that Qihoo was not entitled to, under the name of checking for virus or protecting users' interests, access the running process of another network service provider's legal software, modify the other's software at their own discretion, and disrupt the legal business operation of others. Additionally, Qihoo put their own products onto Tencent QQ's interface to promote their products by using the vast user resources of QQ and expand the users of 360's software and services, which not only caused serious economic losses to Tencent, but also increased the transaction opportunities of Qihoo. This was in contrast to the principles of good faith and fair competition and constituted unfair competition.
  12. Qihoo publicly announced that Guangdong Higher People's Court's judgment was unfair, and has decided to appeal to the Supreme People's Court.