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China: Guiding Case on Liability of Online Shopping Platforms in Tort Cases

(Apr. 20, 2017) On March 6, 2017, the Supreme People’s Court (SPC) of the People’s Republic of China (PRC) released the sixteenth batch of guiding cases. (Zuigao Renmin Fayuan Fabu Di Shiliu Pi Zhidaoxing Anli [The Supreme People’s Court Released the Sixteenth Batch of Guiding Cases], SPC website (Mar. 16, 2017); see also Laney Zhang, China: Supreme People’s Court Issues Ten More Guiding Cases, GLOBAL LEGAL MONITOR (Apr. 5, 2017).)  Among these cases, Guiding Case No. 83 provides guidance in identifying the joint liability of Internet service providers (ISPs) in tort cases; in the case in question, the ISP is an online shopping platform.  (Zhidao Anli 83 Hao: Weihai Jiayikao Shenghuo Jiadian Youxian Gongsi Su Yongkangshi Jinshide Gongmao Youxian Gongsi, Zhejiang Tianmao Wangluo Youxian Gongsi Qinhai Faming Zhuanliquan Jiufen An [Guiding Case No. 83: Weihai Jiayikao Home Appliances Limited Company v. Yongkangshi Jinshide Industry and Trade Limited Company and Zhejiang Tmall Network Limited Company] (Guiding Case No. 83), SPC website (Mar. 16, 2017).)

In Guiding Case No. 83, the online seller, Jinshide, was held liable for infringing the patent right of the plaintiff, Jiayikao, by selling products on Tmall, a business-to-consumer retail platform of the Alibaba group that was spun off from Taobao. The Jinhua Intermediate People’s Court awarded the plaintiff a remedy of RMB150,000 (about US$24,550).  Tmall was held jointly liable for RMB50,000 (about US$8,183) of the total damages, due to the extended harm caused by its failure to take necessary measures to stop the online retailer from infringing intellectual property rights.  The Higher People’s Court of Zhejiang upheld the decision.  (Id.)

Joint Liability of Internet Service Provider Under the PRC Tort Liability Law

The applicable law on this issue is article 36(2) of the PRC Tort Liability Law. Article 36(2) provides that after being notified by the victim of infringement, an ISP (in this case, Tmall) must take the necessary measures, such as deleting, blocking, or disconnecting the infringing links, to stop the infringement in a timely manner.  If the ISP fails to take such necessary measures, it will be held jointly and severally liable for any extended harm resulting from that failure.  (Zhonghua Renmin Gongheguo Qinquan Zeren Fa [PRC Tort Liability Law] (adopted and promulgated on Dec. 26, 2009, effective on July 1, 2010), art. 36(2), NPC website; unofficial English translation,WIPO website.)

Validity of Notification

Previously, in a 2014 judicial interpretation, the SPC provided guidance on the application of article 36(2) of the PRC Tort Liability Law with regard to the validity of the notification from the victim and whether or not an ISP has taken the necessary measures in a timely manner. (Zuigao Renmin Fayuan Guanyu Shenli Liyong Xinxi Wangluo Qinhai Renshen Quanyi Minshi Jiufen Anjian Shiyong Falü Ruogan Wenti de Guiding (2014 SPC Interpretation) (Fa Shi [2014] No. 11, Aug. 21, 2014, effective Oct. 1, 2014), arts. 5&6, CHINACOURT.ORG; unofficial English translation, COPYRIGHT CHINA AND MEDIA.) The 2014 SPC Interpretation provides that a valid notice must include: (1) the name and contact information of the notifying party; (2) the website address at which the rectifying actions should be taken or other relevant information sufficient to accurately locate the infringing content; and (3) the reasons for requesting deletion of the content.   (Id.)

According to Guiding Case No. 83, before filing the lawsuit the plaintiff had filed a complaint with Tmall. However, Tmall claimed that the complaint was not valid and did not notify the seller about the complaint. Holding that the complaint was a valid notice under article 36(2) of the Tort Liability Law, the court opined that a valid notice could be either oral or in writing, and that as long as the notice includes information on the identity of the victim, proof of ownership of rights, the website address of the alleged infringer, and preliminary evidence of the infringement, it is a valid notice. Furthermore, the court ruled, a notice is legally valid as long as it satisfies the prescribed standard, even if it does not comply with the notice rules set by the online shopping platform.  (Guiding Case No. 83.)

Necessary Measures and Extended Damages

According to the SPC, in deciding whether an online shopping platform has taken the necessary measures in a timely manner for the purpose of article 36(2) of the Tort Liability Law, the nature of the network service, the form and degree of accuracy of the notification, and the type and extent of the infringement should be considered. (2014 SPC Interpretation, art. 6.)

In Guiding Case No. 83, the court held that for the purpose of article 36 of the Tort Liability Law, “necessary measures” are not limited to deleting, blocking, or disconnecting the infringing links; an online shopping platform should consider the nature of the infringement, the circumstances of the infringement, and available techniques to decide whether a measure is “necessary.” An online shopping platform need not necessarily delete every link to an alleged infringing product as soon as it receives a notice of infringement; rather, it should reasonably and carefully evaluate the notice before deleting and blocking a link.

In this case, Tmall should have at least notified the seller and provided the seller means to respond to the plaintiff’s complaint, the court held. Although Tmall deleted the link to the infringing product after being sued, its failure to inform the seller after receiving the original notice from the plaintiff contributed to the seller’s additional selling of the infringing product. Therefore, the platform is jointly liable for the additional damages caused by its failure to take the necessary measure, i.e., informing the seller of the infringement.  (Id.)

Prepared by Emma Wei, Law Library Intern, under the supervision of Laney Zhang, Senior Foreign Law Specialist.