On April 13, 2016, the Beijing Higher People's Court promulgated the Guidelines for the Hearing of Network-Related Intellectual Property Cases (hereinafter referred to as the “Guidelines”), which summarizes the experiences of Beijing courts during their hearings of network intellectual property cases and touches on the difficult legal issues related to network copyrights, trademarks and unfair competition, and thus it is expected to serve as a guide for court trials in the future. In this article, we will brief and analyze the key clauses of the Guidelines.

Network Copyrights

Articles 1 through 4 of the Guidelines provide rules related to allocating the burden of proof and methods for courts to review evidence when trying network copyright cases. Thereafter, the Guidelines analyze the main defenses that a defendant may potentially claim, providing that “if the defendant merely provides internet technology services and does not infringe upon content, such activity shall not constitute an act of infringement.” The Guidelines also explain the means for a defendant to meet its burden of proof and the methods for courts to determine whether the defendant, based on the evidence, only provided internet technology services. Next, Articles 6 and 7 focus on analyzing factors to be considered in determining the defendant’s provision of information storage services and link services, with rules more detailed and practical than those in the 2013 Ordinance for the Protection of Information Network Transmission Rights (the “Ordinance”).

The Guidelines also analyze the “division of labor" that is typically associated with network copyright cases. These traditional types of “division of labor” include collaborations between video providers and video platforms (in most cases by entering into cooperative agreements) that provide infringing works, performances or audio and video recordings, and collaborations between game developers and game platforms that provide infringing games, etc. According to the Guidelines, the exemption for network service providers will not apply if the defendants (in particular the platform providers) directly infringe upon information network transmission rights. That is to say, under the “division of labor” approach, the defendant cannot defend itself by claiming that it was merely providing internet technology services. In addition, the Guidelines refine the relevant rules found in the Provisions of the Supreme People's Court on Several Issues Concerning the Application of Law in the Hearing of Civil Information Network Transmission Right Infringement Dispute Cases (hereinafter referred to as the "Provisions" ), by clarifying the definition of “division of labor," and specifying the allocation of the burden of proof and the applicable scope of exemption provisions. In sum, the Guidelines are expected to play an important role in guiding the case trials with respect to information network transmission rights.

Subsequently, Article 12 to Article 14 stipulate further details with respect to the provision of web cache as referenced in the Provisions, by stipulating that courts shall decide whether the web cache provided by the defendant constitutes infringement according to whether the web cache would adversely impact the regular use of relevant works or whether it would damage the legitimate rights of others.

Finally, Article 15 explicitly provides that the provision of internet broadcasts, which is regarded as a non-interactive communication activity, shall be protected together with other copyrights. This will put an end to the enduring debate in these cases over whether to apply the relevant provisions for information network transmission rights or broadcast rights.

Network Trademarks

The most striking aspect about the Guidelines is that they set out the rules for the application of a “safe harbor” principle for network trademark cases. It is well known that the principle was first introduced for the settlement of information network transmission right disputes with respect to copyright infringement, with the relevant rules and standards further detailed in the Ordinance. In practice, in order to settle network trademark disputes, the courts previously invoked Article 36 of the Tort Liability Law as there were no other definitive rules available.

The Guidelines first define “platform provider” and specify the basic principles for deciding platform provider liability for trademark infringement. It is notable that Article 20 is the key clause with respect to a platform provider’s burden of proof and the court’s determination of tort liabilities. According to the Guidelines, after a plaintiff provides preliminary evidence of infringement, the platform provider may present counterevidence and avoid infringement liability if the platform provider proves that it was not at fault for the online seller providing the transaction information or implementing the transaction activities. If the platform provider fails to do so, it shall be deemed to have committed infringement by directly providing the transaction information and implementing the transaction. The platform provider’s counterevidence refers to the evidence sufficient to confirm the identities, contact information and website addresses of the online sellers.

In fact, the Guidelines develop a detailed and practical “safe harbor” for network trademarks by drawing on relevant provisions with respect to information network transmission rights. Article 21 specifies two types of infringement for platform providers, aiding and abetting trademark infringement, for which the platform provider may be subject to joint and several liability with the online seller. Additionally, Article 21 through Article 25 discuss the "notice - delete" system for network trademarks disputes, which explains the content required in notices of infringement, the necessary actions for platform providers after receipt of a notice as well as providing for legal liability in the case of false notices. In particular, Article 26 states that the platform provider’s “awareness of the infringement” is a subjective requirement for infringement. Factors to be considered to determine whether the platform provider was aware of the infringement include: whether the disputed transaction was accessible from a plainly visible location on the platform website, whether the platform provider had edited, selected, sorted, ranked, recommended or amended information for the transaction, whether the plaintiff had issued a notice of infringement, whether the platform provider had taken reasonable actions against repeated violations by sellers, whether the provider sold / provided well-known goods or services at clearly unreasonable prices, and whether the provider directly obtained economic benefits from the disputed transactions, etc.

In addition to the "safe harbor" principles, the Guidelines also point out that goods or services provided through apps shall not necessarily be regarded as similar goods or services of computer software products or internet services. Instead, the nature of such goods or services shall be determined by considering a full range of factors including the purpose, content, methods, and the target customers for whom such goods or services are provided. In current practice, plaintiffs tend to file complaints for infringement against apps by invoking trademark right on class 9 computer software products or class 42 internet services. For example, an app that specializes in food ordering services may be held liable for infringement by using trademarks on class9 computer software products, although the app does no more than simply order food. As the e-commerce industry booms, apps may often serve only as a channel or method for providing certain goods or services. In this case, operating the app will not necessarily lead to a trademark infringement on class 9 computer software products or class 42 internet services.

Network Unfair Competitions

With respect to unfair competition, the Guidelines first clarify the definition of the concept and relevant principles applicable at trial. Article 31 provides an expanded interpretation of the “competitive relationship” concept by indicating that a competitive relationship exists among business operators if the goods or services of the operators are interchangeable with one another, directly or indirectly, or the operating activities thereof are overlapping, dependent, or otherwise related to one another. In fact, the provision is a summary of judicial practice since the courts had already defined the meaning of competitive relationship in trial practice.

The Guidelines further detail the rules under Article 2 of the Anti-Unfair Competition Law in two aspects. First, the Guidelines specify the definition, scale and reference content for the concept of “generally recognized business ethics.” Second, the Guidelines summarize certain actions which cannot be covered under the Anti-Unfair Competition Law regulations, but which are, nevertheless, breaches of good faith and generally accepted business ethics, by stipulating that all of those behaviors shall be deemed to be unfairly competitive behaviors as referred to in Article 2 of Anti-Unfair Competition Law. These two aspects are actually a breakthrough which will not only serve as guidance for the application of terms of principle at trial, but will also limit judges’ discretion and thereby help to maintain consistency in judicial practice. Further, Article 41 provides methods for calculating compensation as well as the manner for determining the defendant’s burden of proof if unfair competition is found to exist under Article 2 of the Anti-Unfair Competition Law.

Next, Article 36 and Article 37 list various acts of false propaganda and commercial defamation. Then, Article 38 through Article 40 focus on regulating paid listings, which are common in practice. According to the Guidelines, since the paid listings are one kind of information retrieval service, if a search engine provider does not select, organize, recommend or edit the keywords, the provider will not be obligated to voluntarily implement a prior review. However, as an internet service provider, search engine providers must still assume remedial obligations, such as removing, screening, or disconnecting web links. Factors required to be considered to determine whether purchasers or users of paid listing services have committed unfair competition include whether the trademarks of other operators are used and, if they are, whether there is reasonable cause for such use, and whether the search results and the promotion pages contain keywords, etc.

In conclusion, the Guidelines, which are a summary of judicial experiences and which mirror the economic development of the internet in China, are expected to play a significant guiding role for the courts in the trials of copyright, trademark and unfair competition-related cases. Although it is not a formal judicial interpretation and has limited legal effect, we still believe that the Guidelines will have a positive guiding effect across nationwide.