Introduction to Protection of New Varieties of Plants in China

(By You Yunting)Introduction to the Case:

Appellant (Defendant at first instance): Jiangsu Xunong Seeds Science and Technology Co., Ltd (the “Xunong”)

Respondent (Plaintiff at first instance): Tianjin Tianlong Seeds Science and Technology Co., Ltd (the “Tianlong”)

Court of first instance: Nanjing City Intermediate People’s Court  No.: (2009)宁民三初字第63号

Court of second instance: Jiangsu Province Higher People’s Court  No.: (2011)苏知民终字第0194号

On November 10, 2000, a new three-crossbreed hybrid japonica rice named “9优418”, jointly cultivated by the Liaoning Rice Research Institute (the “LRRI”) and the Xuzhou Academy of Agricultural Sciences (the “AAS”), was approved by the National Crop Variety Approval Committee of China (the “NAVAC”).

The “9优418” comes from the female parent “9201A” and the male parent “C418”. The LRRI applied for the right of a new variety of plant with the Ministry of Agriculture on December 30, 2003 and received the approval on May 1, 2007. On the same day, the LRRI authorized Tianlong to the exclusive right of using the C418.

The AAS applied the new variety right of plant for the “9201A” on September 25, 2003 and obtained the approval from the Ministry of Agriculture on January 1, 2007.

On April 3, 2013, the AAS entered a contract with Tianlong and agreed that “the 9201A has already been applied for the right of new variety of plant so that other companies could use the 9201A for test crossing, not commercial development in accordance with the requirement of intellectual property protection and promise not to spread to any third party. Without prior authorization, other companies shall not reproduce the 9201A, otherwise the AAS is entitled to claim for infringement liability. ”

On January 3, 2008, the AAS authorized Xunong with the exclusive right of using the 9201A.

Upon the hearing of the case by the court, the “9优418”, produced by both Xunong and Tianlong, were identical in using the male parent C418 and the female parent 9201A.

Both Tianlong and Xunong lodged lawsuits requesting that the other party were infringing their rights of the new varieties of plants.

Jiangsu Province Higher People’s Court heard the case and held that:

1.    Actually the “9优418” itself is not entitled to the right of the new varieties of plants. But the LRRI applied the right of a new variety of plant for the male parent C418 in 2003, meaning that the use of the male parental C418 to produce the “9优418” must be authorized from the LRRI. The AAS also applied for the right in new varieties of plant for the female parent 9201A in 2003. Furthermore, in the law suit, Xunong acknowledged that it had already sealed up all the unauthorized female parent 9201A, thus Tianlong can only use the female parent 9201A to produce the “9优418”.

2.    The LRRI, the AAS, Xunong and Tianlong are entitled to use the materials of parent propagation which the other party has received authorization for, and shall exempt the other parties from licensing fees only in producing and selling the “9优418”, not for other commercial purposes.

Jiangsu Province Higher People’s Court heard the case and judged that:

1.    Xunong has spent great commercial efforts to popularize its “9优418” and overcome the technology difficulties in planting. But, under the condition that the “9优418” has already gained wide acknowledgement from the market, Tianlong entered into the field of production in order to reduce the costs of popularizing the “9优418”. Therefore, for the purpose of reflecting fairness and reasonability, the court judged that Tianlong shall compensate 500,000 RMB to Xunong.

2.    Meanwhile, considering that both the parties respectively produced the “9优418”, market competition and conflicts of interests in reality exist. The court told the two parties by obeying the Anti unfair Competition Law, producing the “9优418” with honesty, fair competition and ensuring quality. The court also noted that the two parties shall clearly mark their business labels, preventing from new disputes, and to pursue their effortsin maintaining the quality of the “9优418”.

Lawyer’s Comment:

Pursuant to Article 27 of the Agreement on Trade-related Aspects of Intellectual Property Rights, China excludes the protection of plant varieties from patentability in the patent law but adopt an independent protection system of plant varieties. The Regulations on Protection of New Varieties of Plants is applied in China, learnt from the 1978s version of the International Convention for the Protection of New Varieties of Plants. However, there are still shortcomings and deficiencies about the legal protection on the new reproduced varieties of plants reproduced from a new variety of plant in the 1978s version of the International Convention for the Protection of New Varieties. In China, with regard to developing and selling another new variety of plant via using a new variety of plant, no authorization shall be obtained from the right holder. Thus such system will do good to protect another new variety of plant bypassing the original new variety of plant, but thus making it difficult for dispute settlement in practice.

Today’s case introduced was an example. Both the plaintiff and the defendant in this case respectively enjoyed an exclusive right of a new variety of plant and then used each other’s new variety of plant to develop another new variety of plant. According to the current laws and regulations in China, the new variety of plant shall, even though it is being developed at the foundation of the two new variety of plants, not apply for prior authorization of the right holder. This means that neither the plaintiff nor the defendant is entitled to claim for ceasing infringement against each other. Therefore, the court encountered judging troubles in solving this dispute in accordance with legislations on new varieties of plants, and finally applied the Anti-unfair Competition Law into this case, judging that one party shall compensate 500,000 RMB on the basis of the principle of fairness.

This case also revealed a deficiency in the protection system on new varieties of plants. The only way to solve this deficiency is to revise laws and regulations so as to consistent with the 1978s version of the International Convention for the Protection of New Varieties. However, there’s no such thing as a free lunch. Revising laws and regulations will make China’s enterprises pay more authorization fees for western companies. Therefore, improving a higher intellectual property protection system is undoubtedly similar of a game process.

Lawyer Contacts

You Yunting86-21-52134918  youyunting@debund.com/yytbest@gmail.com

Disclaimer of Bridge IP Law Commentary

China Laws and Regulations Update in August 2014

  1. The Shanghai Municipal People’s Government Releases the 2014 Revised Version of ‘Negative List’ Applicable in the Shanghai Free Trade Zone

On 1 July 2014, the Shanghai Municipal People’s Government released the 2014 Revised Version of ‘Negative List’ applicable in the Shanghai Free Trade Zone, containing 139 special administrative measurements, while the previous version contained 190 ones, representing a change of 26.8% contents of the Negative List.

The Revised Version of ‘Negative List’ eliminated fourteen (14) material clauses to expand business scopes, fourteen (14) material clauses to lift dual restrictions on both domestic and foreign investments and twenty three (23) clauses to readjust categories. The eliminated clauses, including those restricting foreign investment in mail orders and online sales of ordinary commodities, allowing wholly owned foreign businesses to deal in railroad transport, etc., relate to manufacturing, real estate, infrastructure, commercial trade, shipping, social service sectors, etc.

Website of the Municipal Government of Shanghai:

http://www.shanghai.gov.cn/shanghai/node2314/node2319/node12344/u26ai39501.html

  1. The Ministry of Commerce Publishes the Notice on Improving the Review and Administration of Foreign Investment            

On 25 June 2014, the Ministry of Commerce published the Notice on Improving the Review and Administration of Foreign Investment, stipulating that the amount of capital contribution subscribed, the mode of contribution and the term of capital contribution shall be determined on agreement by corporate investors (shareholders or initiators) on their own, and be specified in their joint venture (business cooperation) agreements and Articles of Associations.

In addition, as stipulated by the Notice, unless otherwise specified in laws, regulations or decisions made by the State Council on minimum registered capital in given industries, the minimum registered capital restriction on startup companies shall be lifted, without prejudice to provisions on eligible proportions of registered capital to total invested capital in the Provisional Rules on Eligible Proportions of Registered Capital to Total Invested Capital Applicable to Joint Ventures and other existing regulations.

Website of the Ministry of Commerce:

http://www.mofcom.gov.cn/article/difang/shandong/201406/20140600639244.shtml

  1. Shanghai Municipal Human Resources and Social Security Bureau Releases Measures on Record of Employment Adjustment Schemes by Labor Dispatch Units Based in the Shanghai Municipality

On 7 July 2014, Shanghai Municipal Human Resources and Social Security Bureau released Measures on Record of Employment Adjustment Schemes by Labor Dispatch Units Based in the Shanghai Municipality, stipulating that labor dispatch units shall submit for record an Employment Adjustment Scheme for excessive dispatched staff outnumbering 10% total staff, if any, to local human resources and social security bureaus of the district (or county) where their principal business offices locate.

Website of the Shanghai Municipal Human Resources and Social Security Bureau:

http://www.12333sh.gov.cn/201412333/xxgk/gsgg/201407/t20140716_1186555.shtml

  1. The State Administration of Taxation Makes the Announcement of Relevant Matters on the Reporting of Overseas Investments and Income by Resident Enterprises                                   

On 16 July 2014, the State Taxation Administration of P.R.China made the Announcement of Relevant Matters about Resident Enterprises’ Declaration of Information about overseas Investments and Income to set standards for what should be included in such information and how it should be reported.

The Announcement has specified which enterprises should complete and submit the Form for Reporting Information on Purchase of Shares in Foreign Enterprises by Resident Enterprises (the ‘Form’) and what is necessary to be submitted with the Form. A resident enterprise that can provide reasonable grounds to prove that it is genuinely unable to report information on overseas investments and incomes by the deadline prescribed in the Announcement may apply for extension to the competent taxation authorities in accordance with the law. Overseas legal provisions, commercial contracts or agreements that restrict the provision of relevant information do not constitute reasonable grounds.

Website of the State Taxation Administration:

http://www.chinatax.gov.cn/n2226/n2271/n2272/c747868/content.html

  1. The State Administration of Foreign Exchange of P.R.China Publishes New Policies on Administration of Overseas Investment and Financing and Return on Investment by Domestic Residents via Special Purpose Companies

On 14 July 2014, the State Taxation Administration of P.R.China published new New Policies on Administration of Overseas Investment and Financing and Return on Investment by Domestic Residents via Special Purpose Companies, to simplify procedures of and facilitate cross-border capital transactions in connection with and/or arising from investment and financing activities domestic residents engage in via special purpose companies.

The Policies have explicitly defined ‘domestic institutions’, ‘round-tripping investment’, etc. and listed necessary supporting materials for foreign exchange registration applications filed by individuals and enterprises respectively. Repatriation of profits and dividends obtained by domestic residents from special purpose companies shall be subject to current account foreign exchange administration rules, while repatriation of foreign exchange income obtained by taking advantage of capital volatility should be subject to capital account foreign exchange management rules.

Website of the State Administration of Foreign Exchange of P.R.China:

http://www.safe.gov.cn/wps/portal/!ut/p/c5/04_SB8K8xLLM9MSSzPy8xBz9CP0os3gPZxdnX293QwMLE09nA09Pr0BXLy8PQyNPI6B8pFm8s7ujh4m5jwFQ3t3AwNPEyd_PwznQ0MDTmIDucJB9-PWD5A1wAEcDfT-P_NxU_YLcCIMsE0dFABRy5RE!/dl3/d3/L0lDU0lKSWdra0EhIS9JTlJBQUlpQ2dBek15cUEhL1lCSlAxTkMxTktfMjd3ISEvN19IQ0RDTUtHMTA4VTVDMElBVTNDTTc3MzBTNQ!!/?PC_7_HCDCMKG108U5C0IAU3CM7730S5000000_WCM_CONTEXT=/wps/wcm/connect/safe_web_store/safe_web/zcfg/zbxmwhgl/zjtzwhgl/node_zcfg_zbxm_kjtz_store/ce30120044b919a3a5ecf71fa25ece03

Lawyer Contacts

You Yunting86-21-52134918  youyunting@debund.com/yytbest@gmail.com

Disclaimer of Bridge IP Law Commentary

Could Jewelry Design be Protected by the China’s Copyright Law?

胜利之v俏灵蛇(By Luo Yanjie) It is common in China that a jewelry of the same design would be manufactured and sold by different jewelry shops in the industry of China’s jewelry. With regard to the initial source of the jewelry design, a lot jewelry companies and even consumers are not concerned whoever firstly designs the jewelry. In reality, a well-designed jewelry that took designers a great intelligence shall be protected by the Copyright Law. In today’s post, we will introduce a case where a jewelry design is succeed to be protected by the Copyright Law, sharing with readers.

Introduction to the Case:

Plaintiff: Shenzhen Tongtaifu Jewelry Co., ltd (the “TTF”)

Defendant: Guangzhou Xideer Jewelry Co., Ltd (the “XDE”)

Court of first instance: Yuexiu District People’s Court

The TTF is renowned to be a local jewelry brand in Shenzhen with international influence power. In 2012, the TTF hosted the Zodiac Year of the Snake Jewelry Design Exhibition 2013. The “Victory’s V”, a wining works, was published through TTF’s official website and Weibo on November 4, 2012 and was authorized to enjoy the copyright of the “Victory’s V” (the “reference works”, showing at the right). On December 8, 2012, the XDE launched its new jewelry called “俏灵蛇” (the “disputed works”, showing at the left), constituting its 12 Zodiacs, through its official Weibo and Tmall shop. Afterwards, the TTF found that the disputed works was highly similar to its reference works. Therefore, the TTF thought XDE constituting copyright infringement against its reference works and then brought the DXE to the court in requiring the XDE to immediately cease the infringement and make compensation of 50,0000 RMB.

Yuexiu District People’s Court heard the case and held that the disputed works manufactured and sold by the XDE shall plagiarize and copy the copyrighted reference works. Therefore, Yuexiu District People’s Court judged that the XDE shall immediately cease manufacturing and selling the disputed works, which infringed the copyright of the reference works, and compensate 150,000 RMB to the TTF in ten days.

Lawyer’s Comment:

  1. The Jewelry itself can be protected as works of fine arts under the Copyright Law but in the Amendment of the Copyright Law (Manuscript), it is more appropriate that the jewelry can be protected as works of applied art

Pursuant to the Copyright Law and related judicial interpretations, there is no clear provision about whether the jewelry can be protected under the Copyright Law. Even so, the jewelry has such major characters as imparting appreciation and aesthetic effect, consistent with the features of the object as regulated in the Copyright Law. Pursuant to the Implementing Regulations of the Copyright Law, the “Works of fine art” refer to two-dimensional or three-dimensional works created in lines, colors or other media which, when being viewed, impart aesthetic effect, such as works of painting, calligraphy and sculpture. Thus it can be appropriate that the jewelry of certain design shall be categorized into the works of fine art. Since it is considering that the jewelry belongs to works of fine art, this is undoubtedly logical that the court decided the defendant of copyright infringement.

As though the jewelry can be protected as works of fine art in current legislation, it is still quite different between the practical products and the works of fine art. However, fortunately, the Amendment of the Copyright Law (Manuscript) has regulated an independent works, clearer putting the products similar to the jewelry into the protection scope of the Copyright Law, i.e., “Works of applied art refer to two-dimensional or three-dimensional works which impart practical functions, and aesthetic effect, such as toys, furniture and decorations”. Therefore, in the future, the jewelry with the sense of aesthetic design can be protected under the full range of clear legislations.

  1. The design drawing of the jewelry can be protected as graphic works in the Copyright Law but only an original jewelry itself can be under the protection of the Copyright Law.

It should be clear that, the afore-mentioned stating that the jewelry belongs to the works of fine art is on condition that the jewelry shall be imparted aesthetic effect and designing elements. If a jewelry has a simple design, such as the common necklace, the aesthetic effect of the jewelry comes from the materials of the jewelry itself, not the jewelry design, and thus the jewelry shall not be original far from the protection of the Copyright Law.

However, under the condition that the jewelry is not original, it does not mean that the design drawing of the jewelry is not original. Since the Graphic works refer to drawings of engineering designs and product designs for the purpose of actual construction or manufacture, and maps and sketches showing geographic phenomena and demonstrating the fundamentals or structure of a thing or an object pursuant to the Implementing Regulations of the Copyright Law, the laws do not require the graphic works imparting aesthetic effect. However, comparatively speaking, the Implementing Regulations of the Copyright Law is designed to protect the works itself from being copied by others, rather than extending the protection of the jewelry. For example, in today’s case, if the plaintiff published the design drawing of the jewelry which does not have too many design elements, copying the design drawing of the jewelry shall constitute copyright infringement but using the design drawing to manufacture the jewelry may not constitute copyright infringement.

Lawyer Contacts

You Yunting86-21-52134918  youyunting@debund.com/yytbest@gmail.com

Disclaimer of Bridge IP Law Commentary

Introduction to Ownership of the Performer’s Right in China

(By Luo Yanjie) As China recently ratified the Beijing Treaty on Audiovisual Performances, in today’s post, we will introduce the system and cases of the performers’ rights in the Copyright Law. As for who holds the performer’s right, different judgments will be found through three cases. Who holds the performer’s right? The performer, the company/organizationthat hires the performer, or the performing company/organization? These different judgments can become an obstacle for the further development of China’s performing arts.

Firstly, regulations relating to the performer’s right shall be introduced. Item 6, Article 5 of the Implementing Regulations of the Copyright Law stipulates that, performer refers to an actor, performing organization or any other person who performs literary and artistic works. Since Item 6, Article 5 made a simplified stipulation, there are quite different judgments in China’s local courts.

1st Case: The performer’s right belongs to the performing organization.

Appellant (defendant at first instance): China Record Corporation (the “CRC”)

Respondent (plaintiff at first instance): China Pingju Opera Theater

Court of first instance: Beijing No.1 Intermediate People’s Court   No.: (2005)一中民初字第687号

Court of second instance: Beijing Higher People’s Court  No.: (2005)高民终字第1258号

ThirdSister Yangsan Goes to Court was written by Cheng Zhaocai, the original author. In February 1962, China Pingju Opera Theater organized, recomposed and rehearsed the ThirdSister Yangsan Goes to Court (the “disputed opera”). In 2002, CRC produced China Pingju Opera Theater’s re-performance of the disputed opera in CD format and then published the China Opera · Third Sister Yang San Goes to Court (Selections)CD. China Pingju Opera Theater brought CRC to the Court, alleging that the conduct of the CRC infringed its copyright and the performer’s right.

Beijing No.1 Intermediate People’s Court held upon hearing the case that, China Pingju Opera Theater which recomposed and organized the disputed opera should be entitled to the copyright and, as the performing organization, will enjoy the performer’s right.

Based on the afore-mentioned facts, Beijing No.1 Intermediate People’s Court made a judgment that CRC’s actions had constituted copyright infringement and they would be responsible for compensation. CRC were bit satisfied with the judgment and appealed but did not question the afore-mentioned facts. Beijing Higher People’s Court therefore affirmed the original judgment.

Lawyer’s Comment:

In this case, by virtue of the defendant infringing multiple rights of the plaintiff, the ownership of the performer’s right is not the key issue. So that the court can direct identify the China Pingju Opera Theater, acting as the performing organization means they are the right holder of the performer’s right. Does this mean that the individual actor cannot enjoy the performer’s right? The two courts in this case did not give a clear view about this.

2nd Case: The performer’s right was solely owned by the performing organization, rather than the individual actor.

Appellant (defendant at first instance): China Federation of Literary and Art Circles (the “CFLAC”)

Appellant (defendant at first instance): Tianjin Tianbao Culture Development Co., Ltd (the “Tianbao Culture”)

Appellant (defendant at first instance): Tianjin Tianbao Optical Disk Co. Ltd (the “Tianbao Optical”)

Respondent (plaintiff at first instance): Guangdong Changjin Record Company (the “Changjin Record”)

Court of first instance: Hebei Province Higher People’s Court  No.: (2007)冀民三初字第1-1号

Court of second instance: Supreme People’s Court  No.: (2008)民三终字第5号

Changjin Record is, after obtaining authorization of the performing organization and the scriptwriter, the right holder of the copyright and the performer’s right of Double Faults leads to Grudge, Too Late to Repent (also known as “Da Jinzhuan”), Three Strikes at Tao Sanchun and the Butterfly Chalice (all referred to the “disputed operas”). Changjin Record found three defendants published the disputed operas without authorization and then brought the three defendants to court.

The Supreme People’s Court held that the preparation, organization and rehearsals of an opera were presided by the performing organization, and moreover all the needed props, costumes and capital were afforded by the performing organization. As such, a performance indicated the will of the performing organization and thus the performing organization shall be the “performer” as regulated in the Copyright Law. Since the performing organization is the “performer”, he is entitled to authorize others to make a live broadcast or audio recording. Therefore, without special agreement, an individual actor shall not be entitled to personally hold the afore-mentioned rights.

Based on the holdings, the court made a final judgment that Changjin Record is the right holder of the disputed operas and the actions of the three defendants constituted copyright infringement.

Lawyer’s Comment:

The similarity between the 1st case and the 2nd is that the performer’s right was ordered to be owned by the performing organization. However, the judgments explicitly indicated that without special agreement, the individual actor would not be entitled to own the afore-mentioned rights. In fact, there are no express provisions in laws and judicial interpretations for this, but because the judgment was handed down by the Supreme Court, it has important reference value.

3rd Case: Both the individual actor and the performing organization shall have the performer’s right.

We have searched media reports and checked out a judgment backed by Xicheng District Primary People’s Court in 1996 (No.:(1991)西民初字第887号), determining that even though Yu Tangchun was performed under the Peking Opera Theater, Mr Zhao Yanxia shall, as the leading actor, be entitled to the performer’s right and claim for his rights under the conditions of the performing organization organizing their performance.

Lawyer’s Comment:

With regard to this opinion, I think it has some rational value. Because a detailed performance shall be performed by different individual actors, therefore, the individual actor, especially the leading actors, should be entitled to their own rights. Since the performing organization costs so much inmanpower and material resources, the performing organization can no longer solely take the performer’s right for granted.

According to the above three judgments, it seems that there is no unified judgment towards the ownership of the performer’s right. Actually, I tend to agree with the judgment that both the individual actor and the performing organization shall be entitled to the legal rights and interests. However, there shall be a focus between the two legal rights and interests, in other words, the individual actor shall have rights for his own performance and the performing organization shall have the rights over the whole performance.

Of course, as for the performing organization and the individual actor, under the present legal system, the best way is to make a contract for the avoidance of doubt.

In the Beijing Treaty on Audiovisual Performances, there is an explicit stipulation about the ownership of the performer’s right. Article 12 of the Beijing Treaty on Audiovisual Performances stipulates that, “A Contracting Party may provide in its national law that once a performer has consented to fixation of his or her performance in an audiovisual fixation, the exclusive rights of authorization provided for in Articles 7 to 11 of this Treaty shall be owned or exercised by or transferred to the producer of such audiovisual fixation subject to any contract to the contrary between the performer and the producer of the audiovisual fixation as determined by the national law.” Article 33 of the 1st amendment draft of the Copyright Law’s Exposure Draft regulated that, “the performer’s right shall be enjoyed by the producer in the audiovisual works, unless the parties have agreed otherwise”.As seen from these provisions, our legal tendency is to vest the performer’s right in the producer. As such, in the 1st case, the performer’s right in the audiovisual works does not necessarily go to the China Pingju Opera Theater.

The above is a brief analysis to the ownership of the performer’s right in our legal system and judicial practices. Seen from our analysis, the ownership of the performer’s right is still in a relatively grey area. We hope that, with the updated Copyright Law, legislative branches can pass laws and regulations to make the ownership of performers’ rights more clear.

Lawyer Contacts

You Yunting86-21-52134918  youyunting@debund.com/yytbest@gmail.com

Disclaimer of Bridge IP Law Commentary

Why Did NCA Officials Attend Sohu.com’s Press Conference against Toutiao.com?

(By You Yunting) Recently, Sohu vs Toutiao has attracted attention from the media. Sohu sued Toutiao for copyright infringement and unfair competition, whilst Toutiao filed lawsuits against Sohu for defamation. It is quite normal for two enterprises in competition to take legal proceedings against each other. However, what really surprised us was, in their dispute, that governmental officials attended Sohu’s press conference, in favor of Sohu. In today’s post, we will discuss the reason for theimproper governmental interference. Comments and suggestions are most welcome.

  1. The process of governmental attending Sohu’s press conference

On June 24, Sohu held a press conference to announce that Sohu would sue Toutiao for copyright infringement and unfair competition. In Sohu’s press release, it said that some National Copyright Administration (the “NCA”) leaders attended the press conference. Moreover, a NCA official publicly expressed that it is absolutely impossible to carry something that belongs to other people without permission back home or direct trading, thus being the baseline of the Copyright Law and the red line between the Copyright Law and new technology application.(Note: the link is in Chinese)

On July 9, Toutiao started to fight back through instituting lawsuits for the defamation. Toutiao also claimed that whether or not Toutiao constituted infringement has not yet been defined legally but Sohu flatly declared that “Toutiao constituted infringement” before the court’s judgment and estimated Toutiao in insulting and derogatory terms. Under such circumstances, the conduct of Sohu cause serious damage to Toutiao’s reputation and commercial credit.

  1. What is the misconduct of the NCA official?

Toutiao’s claims are not entirely unjustified. If Sohu is replaced by NCA officials in Toutiao’s claim over a slight change, it seems easy to find that the NCA officials misconducted themselves, resulting from NCA attending Sohu’s press conference. As such, it could be expressed that NCA officials attended Sohu’s press conference and made an improper statement before the court’s judgment, interfering with the judiciary’s independence and underminingthe government’s neutral stance.

The fight between Sohu and Toutiao has already entered into legal proceedings. It is the court that shall be entitled to judge the rights and wrongs. Where the NCA officials attended, on behalf of the public authority, the press conference held by one party, it is improper. According to the evidences of exchange emails between Sohu and Toutiao provided by Toutiao, it cannot exclude that they have reached cooperation on using Sohu’s copyrighted news and reports for their fight. In case the evidence is acknowledged by the court, it is likely that Toutiao did not constitute copyright infringement.

  1. Why does NCA official make such misconduct?

Acting as a spectator, I don’t understand why Sohu would benefit from inviting NCA officials to attend its own press conference which itself is designed to crack down on its competitors. Despite being invited, NCA officials shall have known the negative effects of government image and taken risks of their own position in the future. Seen from the domestic governmental system, leadership at national level or big city level always behave themselves with caution. By comparison, why are NCA officials not so cautious in this way?

On the surface, public opinion is going against Toutiao. Toutiao is being investigated by NCA, when NCA behaved like that. Toutiao’s huge finance and its high valuation has attracted attention from traditional media, and its non-standard use of copyright at its growth stage incurred criticism from the whole traditional media, even being a public event. As well as traditional media, internet media and reporters also expressed criticism, thus Toutiao is at a disadvantage. As such, Toutiao has already been investigated by the NCA, and thus kept silent about NCA officials’ misconduct.

The underlying reason is that there is a lack of sufficient supervision and judicial remedies when it comes to the Internet. This has led to little possibility of NCA officials being punished for their misconduct. In China, internet supervision is mostly under the propaganda departments, such as NCA. The propaganda departments are responsible for the supervision of governments and the Communist Party of China by public opinions but they also shall be self-supervised. However, it is difficult for oneself to conduct self-supervision.

Meanwhile, the whole internet industry is being excessively supervised. The supervision departments have always acted in a strong position, so that, if there are few objectionable contents on a legal website, the regulators can shut it down without having to consider the 99.999 percent of legitimate and healthy contents.There are too many licenses and restrictions for enterprises to apply for in the internet industry. If there are a few contents inconsistent with regulations, when officials single them out, the private entrepreneur who has a net worth of millions yuan is also taken aback and keeps an uneasy silence without exception. The courts issued an inner regulation rejecting to accept the cases concerning posts deletion in the websites. Under such circumstances without sufficient supervision and remedy, it is difficult for regulators not to be arrogant. As such, is it a great event if the regulators attend a press release which may affect the position of governmental neutrality and judicial independence?

This incident offers a glimpse into the duality of rationality and irrationality in the internet industry. The rationality is the competition between enterprises, for example, the lawsuits of Toutiao vs Sohu fully showing the competition in the internet industry. The irrationality is industrial supervision, such as the misconduct of NCA officials indicating their decreasing judgment because of their arrogance. However, within the growth of social progress, the irrationality will be changed at last, just like NCA officials will never think that a lawyer like me may step forward and criticize their misconduct.

Finally, a conflictofinterest shall be disclosed to prevent Toutiao from being implicated. On June 21, three days before Sohu’s press conference, I was invited by Tencent’s Culture Department to attend a seminar on Toutiao’s copyright issues. One day before the seminar, I visited Toutiao and the Beijing News respectively to ask for background information. Hereby, for the avoidance of doubt, I have not had any cooperation with Toutiao until now.

Lawyer Contacts

You Yunting86-21-52134918  youyunting@debund.com/yytbest@gmail.com

Disclaimer of Bridge IP Law Commentary

China Laws and Regulations Update in July 2014

  1. The Legislative Affairs Office of the State Council Releases the newly revised Copyright Law of the People’s Republic of China (under Review) and Solicits Public Opinions for It

On 6 June 2014, the Legislative Affairs Office of the State Council released the newly revised Copyright Law of the People’s Republic of China (under Review) and solicited public opinions for it. The deadline for opinion solicitation will be 5 July 2014.

What is most significantly revised according to the draft copyright law under review includes provisions on objects, contents, ownership and the validity period of rights within the scope of copyright. Also, it has stipulated more penalties that will be imposed on those who infringe others’ copyrights and has set forth means of enforcement by administrative authorities concerned, who have powers of seizure and confiscation, which was first stipulated by laws.

(Website of the Legislative Affairs Office of the State Council:

http://www.chinalaw.gov.cn/article/cazjgg/201406/20140600396188.shtml)

  1. The State Administration for Industry and Commerce of the People’s Republic of China Solicits Public Opinions for Regulations (Used for Opinion Solicitation) on Prohibiting Administrations for Industry and Commerce from Abusing Intellectual Property to Eliminate or Restrict Competition

On 11 June 2014, the State Administration for Industry and Commerce of the People’s Republic of China released the Regulations (Used for Opinion Solicitation) on Prohibiting Administrations for Industry and Commerce from Abusing Intellectual Property to Eliminate or Restrict Competition, for which it solicited public opinions. The deadline for opinion solicitation will be 10 July 2014.

(Website of the State Administration for Industry and Commerce:

http://www.saic.gov.cn/gzhd/zqyj/201406/t20140610_145803.html)

  1. The State Administration for Industry and Commerce Publishes Trademark Review Rules

On 28 May 2014, the State Administration for Industry and Commerce of the People’s Republic of China published Trademark Review Rules, which took effect on 1 June 2014. To adapt new amendments to the Trademark Law and the Implementation Rules of the Trademark Law, the Trademark Review Rules made clear types of review cases, differences between the review procedure for invalidity announcements and that for cancelling applications and the review scope of rejected registration and review applications, and stipulated the rectification period shall be changed to fifteen (15) days and supplementary evidence shall be submitted within thirty (30) days, and provided solutions to the issue of transition from old rules to new ones.

(Website of the State Administration for Industry and Commerce:

http://www.saic.gov.cn/spw/gzdt/201405/t20140530_145651.html)

  1. China’s Central Bank Issues Guiding Opinions on Implementation by the People’s Bank of China of Opinions on Fostering Steady Growth of Foreign Trade Businesses Issued by General Office of the State Council

On 11 June 2014, the People’s Bank of China issued the Guiding Opinions on Implementation by the People’s Bank of China of Opinions on Fostering Steady Growth of Foreign Trade Businesses Issued by General Office of the State Council, in which a number of measures to boost foreign trade businesses were put forward.

As expressly set forth in the Guiding Opinions, cross-border trade and investment RMB settlement procedures shall be simplified, and cross-border RMB capital centralized operation and individual cross-border trade RMB settlement businesses will be allowed. According to the Guiding Opinions, multinational groups will be allowed to engage in cross-border RMB capital centralized operation businesses, including cross-border two-way RMB capital pool businesses, current-account cross-border RMB centralized collection and payment businesses, etc., and individuals may do cross-border trade RMB settlement businesses.

In addition, the Guiding Opinions encouraged banks and payment service providers with duly obtained ‘online payment’ business license to cooperate with each other to provide enterprises and individuals doing cross-border cargo and service trade with RMB settlement services.

(Website of the People’s Bank of China:

http://www.pbc.gov.cn/publish/goutongjiaoliu/524/2014/20140611191050127890297/20140611191050127890297_.html)

  1. The State Administration of Taxation Makes an Announcement of Several Policies Relevant to Enterprise Income Tax Calculation and Payment

On 23 May 2014, the State Administration of Taxation made the Announcement of Several Policies Relevant to Enterprise Income Tax Calculation and Payment to offer clear solutions to issues relating to enterprise income taxes and taxable income. The Announcement is applicable to the calculation and payment of enterprise income taxes of 2013 and the following years. Income enterprise taxes on assets received from governments or shareholders before calculation and payment of taxes of 2013 may be dealt with based on the Announcement.

(Website of the State Administration of Taxation:

http://www.chinatax.gov.cn/n2226/n2271/n2272/c729150/content.html)

Lawyer Contacts

You Yunting86-21-52134918  youyunting@debund.com/yytbest@gmail.com

Disclaimer of Bridge IP Law Commentary

China Laws and Regulations Update in June 2014

  1. The State of Council Promulgates the Newly Amended Implementing Regulations of the Trademark Law of the People’s Republic of China

On 29 April 2014 the State Council promulgated the newly amended Implementing Regulations of the Trademark Law of the People’s Republic of China. The Regulations took effect on 1 May 2014.

The newly amended Implementing Regulations of the Trademark Law provides supplementary provisions to the new Trademark Law, in connection with renewing the trademark application division system, in which the part of any patent application that does not be refused may be registered before the refused part of the same application is completely reviewed, initiating the trademark agency filing system, clarifying legal responsibilities for illegal acts of trademark agencies, imposing tougher punishment on those who infringe others’ exclusive trademark use rights and adding a chapter entitled ‘international registration of trademarks’.

 (Authorized to be published on

http://news.xinhuanet.com/legal/2014-05/01/c_1110495197_4.htm)

  1. Pilot Intensive Operational Management of foreign exchange funds of headquarters of multinational companies in Shanghai Free Trade Zone

On 16 May 2014 the signing ceremony was held, where twenty-one enterprises and thirteen banks signed cooperation contracts respectively, for the purpose of launching the pilot program of intensive management of foreign exchange funds of headquarters of multinational companies in Shanghai Free Trade Zone.

The pilot program of intensive operational management of foreign exchange funds for headquarters of multinational companies in Shanghai Free Trade Zone is intended to create multinational account system, optimize the simplified document review and approval procedures, facilitate financing of multinationals , introduce a negative list for capital settlement administration, improve the statistical supervision and measurement system to prevent and control risks.

Specifically the pilot program offers multinationals permission to simultaneously or independently open domestic or international foreign currency principal accounts, intensive collection and remittance of funds, netting settlement, application of the same foreign debt and loan limits to all or a part of funds in an account, removal of quota restrictions on funds transferred between international foreign currency principal accounts and overseas accounts, implementation of the voluntary capital settlement system.

 (Officially published on http://finance.caixin.com/2014-05-16/100678346.html)

  1. China Securities Regulatory Commission Publishes IPO and GEM Listing Regulations and Provisional Regulations of GEM Listed Companies’ Securities Offerings

On 17 May 2014 China Securities Regulatory Commission published IPO and GEM Listing Regulations and Provisional Regulations of GEM Listed Companies’ Securities Offerings. The two Regulations became effective on the same day.

The IPO and GEM Listing Regulations mainly included provisions in connection with moderately lowering the entry criteria of financial indicators, nullifying the requirement of a continuous increase in profits, removing the restriction that confines GEM companies in nine major sectors, improving the merger & acquisition mechanism to encourage and promote business innovation and development.

The Provisional Regulations of GEM Listed Companies’ Securities Offerings mainly included provisions in connection with creating the non-public minority share issuance mechanism, in which applications for share issuance without being sponsored or underwritten may be filed and decisions should be made within 15 business days upon the date when such applications were filed.

With publication of the above two regulations, the IPO financial entry criteria was lowered as a continuous increase was no longer required, the confinement removed, and the listing threshold reduced, which was an incentive for the GEM listing.

(Official Website of China Securities Regulatory Commission:

http://www.csrc.gov.cn/pub/zjhpublic/G00306201/201405/t20140516_249060.htm

http://www.csrc.gov.cn/pub/zjhpublic/G00306201/201405/t20140516_249061.htm)

  1. The updated version of the Environmental Protection Law of the People’s Republic of China

On 24 April 2014 National People’s Congress Standing Committee published the updated Environmental Protection Law of the People’s Republic of China.

The amended Environmental Protection Law imposes tougher punishment on enterprises illegally polluting the environment by, for example, stipulating in Article 59 that enterprises, institutions and other business entities illegally emitting or discharging pollutants, who are required to pay penalties and ordered to redress their wrongdoings by administrative authorities, but refuse to abide by such orders, shall pay to the authorities who give such orders the aforesaid required penalties each day following the date when such orders are given.

(Authorized to be published on

http://news.xinhuanet.com/2014-04/25/c_126431703.htm)

  1. Results of A Survey Released by Coface Group Suggest Accounts Receivable of Chinese Companies Deteriorated More Sharply in 2013 than Recently Before

Results of a ‘survey on credit risk management of Chinese companies’ released by Coface Group, a globally leading credit insurance company suggested accounts receivable of Chinese companies deteriorated more sharply in 2013 than those in any one of the past three years. 80% companies were beset by overdue payments for goods accountable to their buyers. The amounts of and the duration of delay in such overdue payments were greater in 2013 than those in previous years, especially in chemical, mechanical, consumer electronics, electrical appliance, etc. sectors.

According to the survey, 82% enterprises selling products on credit had overdue receivables owed by buyers of their products in 2013, hitting the highest level over the past three years, while in 2012 the number of such enterprises was 5% smaller than that in 2013. 45% enterprises with overdue receivables owed by others complained of having more overdue receivables in 2013 than in 2012. Meanwhile, the number of days overdue was larger than before. In 2013 18% enterprises had receivables that were more than ninety days overdue, while the number of such enterprises was 5% smaller than that in 2012. Researchers are concerned that enterprises in such a situation may encounter serious cash flow problems and incur a series of chain reactions.

(For details about the survey please refer to the official website of Coface:

http://www.coface.com.cn/News-Publications-Events/News/Corporate-overdue-payments-in-China-at-the-highest-level-in-last-3-years-80-of-corporates-affected-in-2013)

Lawyer Contacts

You Yunting86-21-52134918  youyunting@debund.com/yytbest@gmail.com

Disclaimer of Bridge IP Law Commentary

Is CCTV Refusing to Sub-license World Cup Broadcasting Rights Found Violation of the Anti-Monopoly Law?

(By You Yunting)The 2014 FIFA World Cup is taking place at several venues across Brazil, and is attracting attentions from all over the world. According to reports, CCTV holds the exclusive rights of broadcasting 2014 FIFA World Cup in mainland China. However, CCTV refuses to sell the right of live network broadcasting but only sells the on-demand right of network broadcasting to video sharing websites. In reality, CCTV refusing to sell the right of live network broadcasting could potentially be considered to be a violation of the Anti-Monopoly Law. The following is our legal analysis.

To begin with, we shall look at how CCTV received the rights of broadcasting the World Cup to mainland China. In the last century, all local TV Stations participated in bidding for the right to broadcast the World Cup and other major events in mainland China. However, in 2000, SARFT issued a Circular for Enhancing the Management of Reporting and Broadcasting Sporting Events (the “Circular”), providing that “CCTV shall be responsible for negotiating and purchasing the right to broadcast significant international sports competitions, including the Olympic Games, the Asia Games, the World Cup and other major sports events in China, and that all other local TV Stations (including Cable broadcasting and TV Station) will not be allowed to purchase them outright”. Since the Circular issued by the SARFT, CCTV has become the sole authority to purchase the right to broadcast the World Cup.

As the Circular gave privileges to CCTV and thus eliminated its competitors, CCTV’s broadcasting rights were much lower when acquiring the right to broadcast the Olympics Games, World Cup and other major sports events. There is no doubt that because of this governmental order, it means that football fans can watch the World Cup for free, quite different from some other countries. In regard to this point, it seems that the Circular is good, but regarding competition within the market, it has led to unfair competition. This is because CCTV has unfairly dealt with the right of broadcasting in China. They have often refused, without any justified reason, to sublicense the right of broadcasting to other media, triggering a lot of controversy.

In 2006 FIFA World Cup Germany, CCTV only sublicensed part of competitions in the group phase to local TV Stations.

In 2010 FIFA World Cup South Africa, CCTV prohibiting Shanghai TV Station from broadcasting the World Cup triggers controversy.

In 2014 FIFA World Cup Brazil, video sharing websites are excluded from live broadcasting, becoming the latest victims.

From a legal perspective, the following questions exist in regard to SARFT’s Circular and CCTV refusing to allow the live network to broadcast the World Cup.

According to Article 37 of the Anti-Monopoly Law, it stipulates that administrative authorities shall not misuse their authority by drafting regulations containing provisions that eliminate or restrict competition. However, SARFT’s Circular is a policy that eliminates competition, thus conflicting with the Article 37 of the Anti-Monopoly Law. Objectively, the starting point for issuing the Circular was not to misuse administrative authority, but to aim to solve the competition among TV Stations which forced prices to become inappropriately higher. As such, the Circular is a restriction that constrains the irrational matters in a market-oriented economy.

Although the unreasonable price problem of major sports events can be solved by administrative orders, economic common sense tells us: there is no free lunch. We have paid the price for the Circular, as the openness, fairness and justness in the field of sports broadcasting has been destroyed.

Since SARFT empowered CCTV to purchase the broadcasting rights to major sporting events through an administrative order, CCTV should sublicense the right of broadcasting fairly in accordance with public interests. However, the reality is different. As the World Cup, a popular TV event, is an ideal approach to gain a strong position in the field of media, CCTV has acted as the sole monopolist in broadcasting the World Cup and made full use of its right of broadcasting as a main means of competing with its competitors. On the one hand, through the sale of ads, CCTV has obtained higher profits. However, on the other hand, other television and video sites threaten its market share and could risk CCTV’s strong position against its competitors.

However, CCTV, by refusing to sublicense, is under suspicion of violating the Anti-Monopoly Law. According to the Anti-Monopoly Law, those who have the ability to control the prices or volume of commodities or other trades in a relevant market, or can obstruct or affect other operators’ capability to enter into a relevant market, shall not refuse to trade with relevant trading counterparts without justified reasons. If an operator who holds a dominant market position carries out the afore-said conduct, this will be regarded as abuse of market dominance. CCTV may have controlled the prices or volume of commodities or other trades in the broadcasting of the World Cup market, or may have obstructed or affected other operators’ capability to enter into such a market, therefore because of the conduct of CCTV, the company is under suspicion of abusing its dominant position.

Observing the current situation, on the surface CCTV is abusing its dominant position but underneath this problem all results from the Circular issued by SARFT.The prohibition on inflating prices and the nationwide coverage of broadcasting shall be taken into consideration when solely authorizing CCTV to purchase the right of broadcasting, however fair competition is not considered. As broadcasting major sports events brings huge economic benefits for CCTV, how have CCTV dealt with such administrative benefits? How could CCTV make a fair sublicense after its sole purchase?

In the market-oriented economy, the afore-mentioned questions are important by virtue of their relationship with economic interests. However, there is no such provision in the Circular, resulting in the possibility that CCTV may be entitled to the sole ownership of all the economic benefits. This also shows the value of the Circular, that SARFT may strengthen the position of CCTV through issuing public policies. However, this completely violates the basic principles of market economy.

Finally, there is very serious monopoly and unfair competition issues in the field of radio, television and online networks. As such, Local TV Stations and private-owned enterprises have encountered so much unfair treatment. Local TV Stations rely on local governments so that they can compete with CCTV. However, private-owned enterprises have become completely oppressed. For example, when CCTV refused to sublicense the right of live network broadcasting of the World Cup, and in doing so violated the right to broadcast, no private-owned enterprise objected, because of the government regulation, and on the condition that the “Sword Net Action” is ongoing. Private-owned video sharing websites may, as potential targets of law enforcement, be frightened into complete silence.

Lawyer Contacts

You Yunting86-21-52134918  youyunting@debund.com/yytbest@gmail.com

Disclaimer of Bridge IP Law Commentary

Why UniStrong’s Navigation Found Guility of Copyright Infringement against Microsoft?

microsoft(By Luo Yanjie)Our previous post How does Microsoft Settle Its Problems of Software Copyright Infringement in China introduced the difficulties of protecting its rights and interests in China. However, in today’s post, the court decided the trade practices constituted copyright infringement and ruled in favor of Microsoft, thus boosting confidence for all software owners.

Introduction to the Case:

Appellant (defendant at first instance): Beijing UniStrong Science & Technology Co., Ltd (“UniStrong”)

Respondent (plaintiff at first instance): Microsoft

Court of first instance: Beijing No.1 Intermediate People’s Court  No.: (2011)一中民初字第12617号

Court of second instance: Beijing Higher People’s Court  No.: (2013)高民终字第2263号

Microsoft is the computer software copyright holderand manufacturerof “WindowsCE6.0”, the sixth major release of the Microsoft Windows embedded operating system targeted to enterprise specific tools such as industrial controllers and consumer electronics devices. In 2011, Microsoft found that UniStrong’s navigation products were not labeled with copyrighted software in line with Microsoft’s customs and thus they were considered to use “WindowsCE6.0” without Microsoft’s authorization. As such, Microsoft brought UniStrong to the court.

In the court, UniStrong proved that it commissioned CHENG UEI Precision Industry Co., Ltd to purchase its WindowsCE6.0 from HON HAI Precision Industry Co., Ltd. HON HAI Precision Industry Co., Ltd purchased the WindowsCE6.0 from Synnex Technology International Corporation, the agent of Microsoft in Taiwan. UniStrong affirmed the purchase order on April 2, 2010 with CHENG UEI Precision Industry Co., Ltd but there was no signature or stamp on the purchase order. Furthermore, UniStrong argued that Microsoft’s rule requesting labeling copyrighted software is an internal policy and therefore not binding. For these reasons, UniStrong insisted that its WindowsCE6.0 was legally sourced, thus not infringing the copyright of Microsoft.

Beijing No.1 Intermediate People’s Court heard the case and held that, by virtue of no signature or stamp on the purchase orders, the evidence provided by UniStrong would not be accepted. As such, Beijing No.1 Intermediate People’s Court determined that UniStrong had constituted copyright infringement and shall make a compensation of more than 1 million RMB.

Dissatisfied with the judgment made by Beijing No.1 Intermediate People’s Court, UniStrong appealed to Beijing Higher People’s Court. Beijing Higher People’s Court decided the following upon the hearing:

  1. Microsoft has copyright over WindowsCE6.0 and thus shall be protected by laws.
  2. UniStrong provided a certificate from CHENG UEI Precision Industry Co., Ltd, which says that the 248040 pieces of MicrosoftWinCELabel sent by CHENG UEI Precision Industry Co., Ltd were legally purchased from HON HAI Precision Industry Co., Ltd, the Microsoft’s agent in Taiwan. This demonstrated that CHENG UEI Precision had already provided copyrighted labels for UniStrong. During the first instance, UniStrong also affirmed that CHENG UEI Precision Industry Co., Ltd had already provided copyrighted labels. However, the involved software was not tagged with any copyrighted label.

Therefore, Beijing Higher People’s Court held that thejudgment of Beijing No.1 Intermediate People’s Court was correct and upheld the verdict.

Lawyer’s Comment:

  1. The infringer in good faith may be exempted from liability in the case of computer software infringement.

Article 30 of the Regulations on Computer Software Protection stipulates that, “a holder of copies of a piece of software that neither knows nor has reasonable grounds to know that such copies are infringing ones does not bear liability of compensation but shall cease the use of, and destroy, the infringing copies. Nevertheless, if the cease of use or the destruction of such copies is likely to cause heavy losses to him, the holder of such copies may, after paying reasonable remuneration to the software copyright owner, continue to use such copies.” In this case, the defendant tried to make use of Article 30 to exempt from its liability but in the end did not provide sufficient evidence, leading to the judgment that they infringed copyright.

Based on the above stipulations, we suggest that enterprises in business be sure to purchase software through the formal channels and keep all relevant documents, such as receipts, to avoid unnecessary disputes.

  1. Business practices may also be a legal basis for the judgment.

Generally, it is the explicit stipulations that shall be the legislative basis for the court to determine the case. However, because the law, in practice, often lags behind actual trades, in most countries, business practices and customs are acknowledged as one of the sources of law. For example, the United Nations Convention on Contracts for the International Sale of Goods stipulates that “the parties are bound by any usage to which they have both agreed and by any practices which they have established between themselves”.

In this case, Microsoft provided its standard contract to prove that the embedded operating system of Microsoft shall be owned with a copyright label that must not be removed from the products. Even though UniStrong kept doubt over its trueness, legitimacy and relevance of the customs, through its readme and other evidences, this indicated the existence of this ‘custom’. The court acknowledged such a practice being a key fact basis to decide that UniStrong had constituted copyright infringement.

Lawyer Contacts

You Yunting86-21-52134918  youyunting@debund.com/yytbest@gmail.com

Disclaimer of Bridge IP Law Commentary

Is It Illegal for the SARFT to Prohibit Installing Youku and Iqiyi in Internet Cable Box?

Is It Illegal for the SARFT to Prohibit Installing Youku and Iqiyi in Internet Cable Box?

–Analysis on the Prohibition of Installing Youku App and Iqiyi App on the Internet Cable Box

 

广电总局(By You Yunting) According to some media reports, the State Administration of Press, Publication, Radio, Film and Television (the ”SARFT”) issued a rule to local administrations requesting to delete Youku App, Iqiyi App, Sohu App and browsers from Wasu Box and Internet cable Set-top boxes (the “boxes”), which enables users to support TV, games, online video, music and photos. At first glance, i was astonished how it could be called boxes if without Youku App, Iqiyi App and browsers. However, Hangzhou Wasu Digital TV Media Group confirmed receiving the rule shortly after the reports came out. That being the condition, we would like to analyze the rule.

The rule relies on the Demands for Management Concerning Operation of Institutions with Internet Television Licenses (the “Demands”), stipulating that “institutions integrated Internet and television shall be designed to establish cooperation on Internet television end product with a unique integrated platform,. The Internet television end product shall not have other Internet connection and shall not link to any other management system and database of Internet companies.”

The Demands, effective as of at the end of 2011, was actually planted a hint. As such, the rule is just issued to carry out the Demands. However, the videos of Youku Box, Iqiyi Box and Sohu Box are from their websites, which had already obtained the Permit for Spreading Audio-Visual Programs via Information Network (hereinafter referred to as the “Permit”) issued by the SARFT and also blocked network reaction and network pornography in accordance with the requests of the Issuance of the Administrative Regulations on Internet Audio-Visual Program Services issued by the SARFT. This also means that Youku, Iqiyi and Sohu are entitled to provide users of the boxes with their services.

A primary question is why a legal private-owned Internet companies could not broadcast their videos on the television through boxes. According to reports, two reasons are likely to interpret the question:

The first is copyright matter. Section 4, Article 1 of the Demands stipulates that, programs broadcasted on the platform of internet TV content services shall be of the same standard, scale, and management demands of those of television programs, and shall have the copyright as the program broadcasted on TV. On the basis of current laws and regulations, the contents of video websites are on-demand video but Youku and other video websites are authorized to have the right of communication of information via network. Under the condition, we think, the Demands, in conflict with the Copyright Law, shall be considered to be invalid.

Boxes could use two approaches to broadcast videos on the television, i.e., live broadcasting and on-demand broadcasting. Pursuant to current Copyright Law, broadcasting by means of wire dissemination shall be considered as the right of broadcasting, but on-demand broadcasting shall be contained in the right of communication of information via networks. As such, Youku, Sohu, Iqiyi and their apps provide on-demand services, thus belonging to the right of communication of information via networks. More detailed information please read my previous post Which Copyright Should Internet TV Operators Purchase.

The second is to protect the enterprises of radio, film and television. Since copyright is just an excuse, private-owned enterprises are willing to purchase the right of broadcasting under an open policy. The essence of the rule is to maintain departmental benefits and protect the interests of enterprises of radio, film and television.

The core content of the Demands is the Article 2, stipulating that the integrated platform of internet and television shall be a legal service platform of the internet cable television institutions issued by the SARFT. However, the SARFT is likely to issue the license to the state-owned enterprises in the television and radio industrial, thus state-owned enterprises may receive monopolies to operate internet cable television boxes. If private-owned enterprises are trying to provide that service, it is possible to pay for state-owned enterprises.

It is considered to charge for unreasonable departmental benefits, and the essence of the rule is a monopoly and unfair competition. Article 7 of the Anti-unfair Competition Law stipulates that a local government and its subordinate departments shall not abuse their administrative power to limit others to purchase the goods of the business operators designated by them so as to restrict the lawful business activities of other business operators. Article 8 of the Anti-Monopoly Law stipulates that administrative authorities and other organizations authorized by laws or regulations to administrate public affairs shall not abuse their administrative power to eliminate or restrict competition. Article 32 of the Anti-Monopoly Law stipulates that administrative authorities and other organizations authorized by laws or regulations to administrate public affairs shall not misuse their authority to force, openly or disguisedly, individuals or entities to sell, purchase, or use the products of Operators designed by said authorities.

If the governments break the law, administrative lawsuits can be brought to protect interests. In the radio and film industrial, they live in a military-style management. As governments play a dominant role in the radio and film industrial, private-owned enterprises are afraid to initiate lawsuits against governments. In my understanding, the rule may lead to a result that bad competition drove out good ones, which in turn disrupt the order of supervision. Under the fact that a fierce competition exists between legal boxes and unregulated copycatted boxes and now legal boxes were cracked down through deleting video apps and browsers such as Youku App and Sohu App, it is a good chance for copycatted boxes. Since copycatted boxes are unregulated, great users experience will make them encroaching on legal boxes’ market share.

Finally, I feel kind of pity for my ex-boss Chen Tianqiao, a legend who became the richest at his thirty-year-old ten years ago and hoped to change the world. He spent all the efforts of SNDA on producing an internet cable boxes called Shenda Box, which brings the Internet into sitting room. However, in the April of 2006, the SARFT issued a letter to China Telecommunication and China Mobile prohibiting SNDA as an example from bringing the Internet into sitting room without permits. Therefore, Shenda Box was stopped in the cradle.

Once again, Chinese entrepreneurs encountered such supervision similar to that of ten years ago. Why could Chinese entrepreneurs not change the world just like the others all around the world? Why could their efforts get killed only by a governmental document? Why could the SARFT treat private-owned companies so cold? Maybe it is because our political system is not a society with rule of law. As such, private-owned enterprises are not entitled to equal political status and freedom, and thus unlikely to receive equal treatment with state-owned enterprises.

Lawyer Contacts                                      

You Yunting86-21-52134918  youyunting@debund.com/yytbest@gmail.com

Disclaimer of Bridge IP Law Commentary

Supreme Court Determined Trademark Non-infringement for Using Prior Enterprise Name with Good Faith

(By Luo Yanjie) Both the enterprise name and the trademark distinguish the sources of goods or services, so that in practice they may conflict with each other. However, trademark, an exclusive right, has functions so as to prohibit others from using it as enterprise name. Under some circumstances, the enterprise name can coexist with the trademark. In today’s post, we would like to introduce such a case.

Introduction to the Case:

Retrial Applicant (Plaintiff at first instance, appellant at second instance): Yinchuan Buma Trading Co., Ltd (the “Yinchuan Buma Trading”)

Retrial Respondent (Defendant at first instance, respondent at second instance): Dazhou City Kaida Business Hotel

Court of final appeal: Sichuan Province Higher People’s Court  No.: (2012)川民终字第119号

Court of retrial: Supreme People’s Court  No.: (2012)民申字第1543号

Dazhou City Kaida Business Hotel (translated from “凯达商务酒店”) was established on June 27, 2006 within the business scope of hotels, Chinese food, tea and bathing services. On September 28, 2007, Wang Hongjuan was approved to obtain the No.4153971 “凯达” (the “disputed trademark”) under the Class 43 for hotels, restaurants, bar services, teahouse and Cafes. On September 7, 2009, after the approval of the Trademark, Wang Hongjuan transferred the disputed trademark to the Yinchuan Buma Trading. Yinchuan Buma Trading held that Dazhou City Kaida Business Hotel was unauthorized to use the words containing the disputed trademark and thus engaged in trademark infringement. Subsequently, the Dazhou City Kaida Business Hotel brought Yinchuan Buma Trading to the court. The courts of first instance and second instance heard the case and determined that Dazhou City Kaida Business Hotel’s enterprise name, consisting of the disputed trademark, did not constitute infringement of the exclusive right of the disputed trademark. Dissatisfied with the ruling, Yinchuan Buma Trading appealed to the Supreme People’s Court.

The Supreme People’s Court held the following after deliberation:

1.    Where Dazhou City Kaida Business Hotel used the “Kaida Business Hotel” on its signboard and some service products, the use of “Kaida Business Hotel” simplified its enterprise name and should be considered fair use of its enterprise name.

2.    The Dazhou City Kaida Business Hotel’s use of the words “凯达” on some of its service products was similar to the use of an unregistered trademark, beyond the limit of the right of enterprise name as regulated in law. However, the use of “凯达” by Dazhou City Kaida Business Hotel was prior to the date of the disputed trademark registration. Furthermore, Yinchuan Buma Trading did not sufficiently prove that the use of “凯达” by Dazhou City Kaida Business Hotel  was done with subjective malicious intent.

For these reasons, Supreme People’s Court rejected the appeal application of Yinchuan Buma Trading, with the determination that Dazhou City Kaida Business Hotel did not engage in infringement.

Lawyers’ Comment:

  1. Judicial practice and legislation of trademark priority

Regarding whether a prior trademark user is entitled to the right of trademark priority, this was not clearly stipulated in our previous trademark law. The Supreme People’s Court determined that Dazhou City Kaida Business Hotel’s lawful use of its enterprise name was backed by Supreme People’s Court, acknowledging the existence of trademark priority in reality.

With the implementation of the currentTrademark Law, trademark priority is now stipulated. Paragraph 3, Article 59 of the currentTrademark Law stipulates that where, prior to a trademark registration application by a trademark registrant, another party has used a trademark which is identical or similar to the registered trademark, and has a certain reputation based on the same type of commodities or similar commodities before the trademark registrant, the holder of the exclusive right to use such a registered trademarks shall have no right to prohibit  such a pre-existing user from the continuous use of  such a trademark within the original scope of use, but may request that the user insert appropriate additional distinguishing mark(s). This means, that trademark priority is now explicitly regulated, although the current Trademark Law does regulate some limits on trademark priority.

  1. Lack of subjective malicious intent is a defense for trademark non-infringement.

Article 106 of the General Principle of the Civil Law stipulates that, in general, fault liability may be applied in infringement liabilities. However, this is controversial, as there are no explicit provisions in any relevant and separate laws to regulate the liabilities of intellectual property infringement. According to general understanding and judicial practice, Chinese courts generally apply the standard of presumption of fault in specific cases. In China, the approved trademark should be publicized by the Trademark Office. Now that everyone should have known that the trademark is approved for registration by the Trademark Office, one would be at fault and thus likely to have engaged in infringement if they are still using the approved trademark without authorization.

In this case, although the Supreme People’s Court had not elaborated too much on the above legal issues or legal theory, at least subjective malice is considered as a factor in judging whether infringement has been engaged in or not. However, in judicial practice there is no final standard in judging the cause of trademark infringement.

Lawyer Contacts

You Yunting86-21-52134918  youyunting@debund.com/yytbest@gmail.com

Disclaimer of Bridge IP Law Commentary

Traditional Media shall Enhance Themselves against Internet Infringement

toutiao(By You Yunting) According to news media’s reports, the National Copyright Administration of China (the “NACA”), State Internet Information Office (the “SIIO”), Ministry of Industry and Information Technology (the “MIIT”) and the Ministry of Public Security (the “MPC”) recently initiated the 10th special campaign dubbed “Sword Net Action” against online piracy and infringement, centered on cracking down on some websites’ unauthorized reprint from traditional media. This “Sword Net Action” could be better for traditional media, but governmental action gradually has different stages. Traditional media must improve practicing skills in the legal campaign against new Internet media.

It results from the disagreement with copyright for the works of news.

An entrepreneur of a news mobile app recently asked me if the Copyright Law stipulates copyright for the works of news, if the news is made to spread around the world, and why reprinting the news must be authorized. Actually these questions show us some public’s knowledge that it is contradictory between the news’ broadcasting and its authorization. According to the laws, the Copyright law does not apply to news of current events. If there are any comments in the news of current events, the news must be protected by the Copyright Law. News media that create the news shall enjoy the copyright under the Copyright Law, and be entitled to charge licensing fees of others’ reproduction for their operation. However, most of the public does not know the afore-said general knowledge. Currently, the result that news owned by traditional media is free of reproduction is from traditional media’s failure on cultivating the public’s ability of copyright for news of works.

Public perception and opinion have actually already affected the legislation and law enforcement. Current national standard towards remuneration of articles is very low, because the beginning of the Provisions of Published Written Works Remuneration made in the last century has not been updated for many years in accordance with the magnitude of price increases and the actual market. The administration responsible for making the new standard has been difficult to resolve the update. Except the internal reasons, it is also connected to the actual public perception and opinion on the content of the news. The administration is also worried that there is more backlash on the increased remuneration standard.

On the law enforcement, public perception also does affect on the judges. For example, a few years ago, in a case of copyright infringement, a court in developed area of China ruled that more than ten articles were made to the average compensation of each of 20 yuan, with rarely supporting a reasonable fee for notary and attorney. This compensation only plays a small proportion in the whole actual expenditure of right holders. If the public improved a higher awareness of the value of the copyright, we believe such a possibility of unreasonable compensation judgment will be much smaller.

Traditional media shall pay attention to copyright and legal works

As for media that sells copyright, its department for legal works shall be attracted attention. As far as I am concerned, however, both stated-owned and private-owned traditional media are likely to attract less attention to its department for legal works. For example, in a leading traditional media, its legal director has been performed for a long time concurrently by its editor responsible for legal news. Even though the legal director is capable, legal works relevant to intellectual property are required high demand for concentration on legal works. Under high demand that copyright authorization and protections will be taken by strong execution, it is inappropriate for one who concurrently performed two works, thus deepen reflecting the awareness of its senior managers towards legal works.

It is easy to make mistakes in the copyright authorization and protection if less attention is paid. When one traditional media sued a remote Internet company on grounds of copyright infringement in the court where the plaintiff is located, the case was transferred to the court in the place where the defendant has been domicile, by virtue of a jurisdiction objection. A custom of the defendant’s local court is that a works shall be filed in a lawsuit. Considering that it is reasonable for the court to decide that large amount of original works, submissions and purchased works shall be filed in different lawsuits, however, the plaintiff refused to file large amount of lawsuits and then the court rejected its claim. Unreasonable custom and local protectionism is an assured ground of condemnation, but the plaintiff shall also rethink its legal works and lawyers’ profession, at least its lawyers that had not dealt with the jurisdiction, because it is a low mistake to transfer the case to another court after a court accepted the case.

Another question arising from traditional media is the ownership and management issues of the work made for employment. Traditional media discovered that their works wrote by its journalists would be posted on their blogs and Wechat and then were reposted by other media, which will damage the interests of traditional media. This may be connected to the complex ruling about corporate works and the works made for employment as regulated in the Copyright Law. If the department for legal works and the department of human resources could rule such ownership and management of their labor contract and inner regulations, it will be greatly improved. However, it may be too late to solve such issues at this time, because traditional media already in a declining mood have dismissed the capacity to competent with its journalists.

Traditional media shall deal with the legal challenge against new technologies.

With the rapid development of Internet technologies, entrepreneurs continuously develop new products for news but still present the contents which owned by traditional media. Traditional media, If could not understand such new technology, will be at risk of benefits loss.

Taken Toutiao as an example, it is clearly right to recommend news through code transformation at its mobile app, but it will arise some questions such as content loss, huger distribution and layouts. The Regulations on the Protection of Rights to Information Network Communication may apply in this case, but it is illegal to remove traditional media’s ads. Traditional media shall, when protecting their interests, differentiate its unlawful acts from legitimate part, for purpose of pursuing expected effects with a well-grounded explanation.

In the face of Internet media’s challenge, the competitive disadvantages of traditional media are obvious, especially in the industry of newspapers and magazines. Under such conditions, self-reflection and improving skills is particularly important because a survive struggle may be used to describe their actual situation.

Lawyer Contacts

You Yunting86-21-52134918  youyunting@debund.com/yytbest@gmail.com

Disclaimer of Bridge IP Law Commentary

Beijing Intermediate Court Published Its First Preservation Injunction Against Baidu

360诉百度(By You Yunting) The Chinese internet industry is a fiercely competitive one in which many large internet companies have used lawsuits to gain a competitive advantage. Lawyers are engaged by internet companies to fight against their competitors using any new laws and regulations that might offer opportunity. In the most recent unfair competition litigation Qihoo 360 v. Baidu, Qihoo 360 applied for a litigation injunction to prevent Baidu engaging in infringement. On May 23, 2014, the Beijing No.1 Intermediate People’s Court issued its first litigation injunction since the new Civil Procedure Law came into effect.

Introduction to the Case:

Plaintiff: Beijing Qihoo 360 Technology Co., Ltd (the “Qihoo 360”)

Defendant: Beijing Baidu Network Information Technology Co., Ltd (the “Baidu”)

Court: Beijing No.1 Intermediate People’s Court

On April 1, Qihoo 360 filed an unfair competition lawsuit to the Beijing No.1 Intermediate People’s Court. Qihoo 360 alleged that when searching Qihoo 360’s products, services or its enterprise name in Baidu search engine, Baidu inserted a dialog box without authorization that showed several links showing information relevant to “Qihoo 360 defied the Several Provisions Regulating the Market Order of Internet Information Services (the “Order No. 20”) issued by Ministry of Industry and Information Technology, and acted to prevent users from downloading and installing Baidu Antivirus and Baidu Guard. In order to guarantee the legitimate rights of users’ freedom of choice, please uninstall Qihoo 360’s products before installing Baidu Antivirus and Baidu Guard to ensure normal installation.”

The Beijing No.1 Intermediate People’s Court ruled that, as both Qihoo 360 and Baidu are internet companies, there they directly competed against each other. Qihoo 360’s evidence could prima facie prove that Baidu had engaged in such alleged conduct and further that such conduct likely constitutes anti-competitive behavior. Furthermore, if Baidu continued to engage in such conduct, it is likely to cause Qihoo 360 to suffer substantial losses. Therefore, the Beijing No.1 Intermediate People’s Court made a ruling which ordered Baidu to cease infringement.

In researching this article, we searched Qihoo 360’s products, services and enterprise name in the Baidu search engine。 At the time of writing  a dialog box was displayed on the right of the page, reading that “Zhou Hongwei and Qihoo 360 are refusing to make an apology to Baidu regarding their punishment by the court”, instead of “Qihoo 360 defied the Several Provisions Regulating the Market Order of Internet Information Services (the “No. 20 Order”).

Lawyer’s Comment:

A highlight of the 2012 version of Civil Procedure Law was the first establishment of the act preservation system. Act preservation, evidence preservation and property preservation make up the preservation system in our Civil Procedure Law. Act preservation refers, similar to a litigation injunction in the western legal system, to an order for the purpose of protecting the interests of the party from sustaining further damages, where the court may, upon the request of the applying party or relying on its legal mandate, order compulsory measures.

Article 100 of new Civil Procedure Law states that:  The People’s Court may, regarding the behavior of a party or for other reasons, issue an order where there is difficulty in executing a judgment or where conduct of a party may give rise to losses. On a party’s application, the court may order the preservation of property, demand the engagement in a prescribed conduct or the cessation of a prescribed conduct; where the parties have not raised an application with the court, the court may, at a necessary time, order the adoption of preservation measures.

Where the court orders for preservation, it may require the applying party to issue a guarantee. In this situation, where the applying party refused to issue a guarantee, the court may reject the application for an order of preservation.

If the circumstances are urgent, the court may issue a preservation order within 48 hours of receiving the application; where the court has made such a ruling for preservation, the order will immediately come into effect.

Where a party has successfully applied for a preservation order, it may prevent, either before the lawsuit or during it, the suffering of further damages and might keep self-inflicted damages to a minimum. The different preservation actions can be divided into before-trial and during trial types. Generally speaking, the People’s Courts will require an applicant to give a guarantee. Where such an injunction was found to be erroneously issued, the guarantee will be used to compensate the affected party for any losses suffered as a result of this preservation.

We can see from the circumstances of the above case that, Chinese People’s Courts has already started issuing an increasing number of these injunctions. In the articles: An Introduction to Chinas Commercial Secrets Injunctions,HaiDing Court issuing such an order for the sharing of the Talent Show I am a Singer on an unauthorized video website,the Court issuing a pre-trial injunction preventing an auction company from auctioning letters between the famous writer Yang Jiangshu and Qian Zhongshu, this website has already written about these injunctions in the circumstances of Commercial Secrets and Copyright litigation.

Lawyer Contacts

You Yunting86-21-52134918  youyunting@debund.com/yytbest@gmail.com

Disclaimer of Bridge IP Law Commentary

Could Toutiao.com Achieve a Settlement with Traditional Media?

toutiao(By You Yunting) Toutiao and its investors would never have thought that a bomb from traditional media would come close on the heels of the Toutiao announcement that it had secured $100 million USD of Series C financing at a valuation of $500 million USD. The Beijing News made a comment “Toutiao.com: Whose headlines are they?” to attack the copyright infringement of Toutiao.com. Afterwards, Toutiao instantly replied, categorically denying infringement. However, just as the trees may wish to be still, the wind doesn’t stop, Toutiao may prefer the criticism to stop, but the traditional media will not subside. Soon, the copyright infringement of Toutiao soon became a public focus, being the subject of a variety of media’s collective enforcement on the grounds of copyright infringement.

I. The form of the attacks on Toutiao

In the attack of Toutiao, traditional media, portal websites and even some individuals jointly participated. Beijing News, other newspapers and some reporters increased criticism in many of their stories. Some portal websites such as Sohu.com and Tencent announced that they would cease cooperation with Toutiao. Dayoo.com, an affiliation of Guangzhou Daily, directly used a legal approach to protect its interests through the filing of a lawsuit on the grounds of copyright infringement against Toutiao, claiming that the court should request Toutiao delete all of its articles and news, by making a month-long apology on Toutiao’s mobile app, as well as asking for an according level of compensation.

Why did a variety of media file complaints and drop such a large bomb against Toutiao, an app concentrated on recommending news? It is inconsistent with a general tradition of tolerance towards new things. On the surface, the reasons are as follows:

1.   Traditional media suffered fiercely from the Internet and lost many readers. With the growth of mobile Internet, traditional media could have been using mobile internet to reclaim their dominance but could only watch while more technically capable mobile apps, such as Toutiao, seized the market. Compared to some internet websites that are purchasing the copyright from traditional media, mobile Internet companies usually appear to proceed by both removing their ads and not purchasing copyright. Now that traditional media cannot reclaim their dominance, they can only prefer copyright disputes, in order to increase their income streams in this area, on the grounds that many mobile Internet companies did not purchase copyright from them, and accepted the corresponding legal risks. Portal websites such as Sohu.com and Tencent, as vested interest groups, have always faced the risks of losing their dominance, so they chose to gather with traditional media to file complaints against Toutiao, for the purpose of attacking their competitors.

2.   Toutiao behaved outside the industry standards. In order to survive and develop as a rapid growing start-up company, Toutiao preferred using its design  to attract readers by improving the reading experience, and appeared to fail the take into account the  writing, distributions system and the interests of traditional media whose news were scraped. They not only failed to purchase copyright from the original media sources, but also walked at the edge of legality, reposted the contents of the original media via code transformation on its website, and removing the original ads during its display to users.

3.    Since Toutiao had secured $100 million USD financing, the current attack could merely be laying the groundwork for copyright payment in the future. As a new recommendation app, Toutiao claimed its commercial mode was designed to accurately deliver ads based on a user’s interests. Due to the fact that Toutiao has gathered such large amounts of both users and news distribution, it would have been a risk if Toutiao did not purchase copyright from the writers and copyright holders. Since Toutiao had secured such an enormous amount of financing, if traditional media attacked Toutiao at this time, they obviously could take an initiative in copyright payment negotiation in the future.

Actually, similar to this public event starting from Toutiao, in recent years, the copyright contradiction is a prominent question that has caused several public incidents.

In the first half of 2011, Baidu produced and went online with Baidu Library and was subsequently the subject of filed complaints by about 50 writers, like JiaPingao, Han Han, and Li Chenpeng. Such complaints soon became a public event and resulted in Baidu issuing an apology and deleting thousands of documents.

In the first half of 2012, the State Copyright Office publicized the Draft of Copyright Law. Due to the illegitimate organization of both music covers and copyright collective management, the draft raised immediate skepticism in the whole music industry, and many famous musicians such as GaoXiaosong, Songke and Wang Feng unleashed withering criticism upon the draft, soon causing a public outcry. By virtue of the over-sized opposition from relevant interest groups, the legislative proceeding of the Copyright Law has suffered setbacks, being slow to develop in the past two years.

In the afore-mentioned copyright events writers and musicians used the intense speeches to express their anger (similar to the Beijing News), and would have preferred a stronger position and language, creating a considerable impact among the public. However, these attempts still failed. Even though Baidu Library deleted thousands of documents and only left hundreds of documents, users continued to upload their documents and thus immediately the amount of uploaded documents was far more than that that was deleted. As musicians slowed the legislative proceedings of the Copyright Law, it did not decrease the impact on the music industry and thus it is unlikely for musicians to reclaim their higher income in the 1980s. Similarly, even if traditional media could eliminate Toutiao, I am still wondering whether such attack would actually improve their situation. According to the laws of the market, competitors will quickly grab any vacant market space left by  a potential demise of Toutiao, and users accustomed to smart phones will also unlikely to use the website of traditional media to read news.

II. Did copyright holder’s anger make no difference to the matter?

Why is the copyright holder angry? Why does their anger make no difference? Multiple factors determine the answers:

First, legislation and commercial models have not kept up with the development of technology.

Current legislation and commercial modes have not kept up with technology, as the commercial model of copyright industry has being taken mankind several hundred years to set up. This commercial business model shall refer, in short, to where writers distribute their contents to the public and charge th through distributing the copies. In this commercial model, there are three major subjects, i.e., the writer, the distributor and the user. Amongst the three major subjects, the writer plays the leading role in in controlling the distributors, through their authorization of reproductions and distribution. Corresponding to this commercial model, current Copyright Law aims to protect the right of reproduction and the right of distribution, and is designed to fight against unauthorized reproduction.

With rapid technological advances from the Internet, reproduction and broadcasting will be greatly simplified and thus technology attacks the writers from all sides. Every reader could share the contents and act as a distributer. Furthermore, technology allows commercial distributors to bypass the authorization, gaining a commercial advantage. For example, if a type of news app such as Toutiao could only recommend the news links of traditional media, no authorization is required. If the Maginot line of the right of reproduction and the right of distribution as regulated in the Copyright Law has been bypassed, such a bypass would push traditional media into extinction, relieve them from crucial monetary streams and shake their foundations. Technology would tip the scale towards the distributors and users.

As there has been rapid growth in technology and business models, as usual the law is slow to catch up. Considering that the Copyright Law aims to protect the right of reproduction and the right of distribution, it will be hard for the Copyright Law to protect writers in the internet environment. The copyright holder finds it hard to punish the large amount of small infringers who are unauthorized to publicize their contents, on the grounds that the law is not responsible for the public, furthermore with regards to the new big distributors such as Toutiao, whose commercial model questionably constitutes copyright infringement, it is difficult for the copyright holder to protect its rights and interests. Therefore, the copyright holder feels helpless to fight against smaller infringers as well as the big distributors. The feeling of helplessness is likely to a cause of copyright holder’s anger.

Secondly, intellectual property enforcement is constrained by China’s actual conditions.

Intellectual property protection corresponds with China’s actual condition. In the judicial system, there is a slogan that intellectual property protection shall be in accordance with China’s actual condition. The fact that China is at the primary stage of socialism is the true condition. Based on China’s actual condition, China sets a sufficiently low standard of compensation upon intellectual property protection and its judicial enforcement. Take traditional media filing lawsuits against Toutiao as an example. The compensation of copyright infringement generally is in accordance with a low payment of an article made in the last century. It is likely that a copyright holder spends so much on filing lawsuits against the infringer, that they will receive so little compensation from the infringer that it might be less than the cost of litigation.

Intellectual property legislation, enforcement and jurisprudence all attempt to create a uniform standard. As with the old saying that a single move indeed affects the whole system. If the compensation standard is increased in legislation, there will be some difficulties to the courts because so many infringing lawsuits will be flooding the courts which have limited judges and are already overburdened.

Low compensation is just not good. However, the standard for intellectual property crimes is actually low in China. The Interpretation (II) of the Supreme People’s Court and the Supreme People’s Procuratorate on Certain Issues Concerning the Specific Application of Law in Hearing Criminal Cases of Intellectual Property Rights Infringement stipulates that the crime of selling pirated goods, such as selling pirated DVDs, will  amount to a serious crime of copyright infringment, stipulating that whoever reproduces and distributes the copyright owner’s works more than 500 times in total shall fall within the crime of copyright infringement, close to that of developing countries. In this way, a seller of pirated DVDs shall be committed a crime. However, actually, there are not many sellers of pirated goods being caught, so that less than one percent of the sellers will be sentenced for committing a crime. If the violation will not be punished, this not only reduces the legal credibility, but is also detrimental to law enforcement.

Thirdly, the Internet industry is more competitive than traditional media.

Under the normal circumstances of fair competition, traditional media is less competitive than Internet media in the news cycle, interaction and media experience. Traditional media have the advantages of content creation and habits of readers, but Internet media can create contents, hire more staff, and learn the creation model. With regard to the habits of readers, most readers may change their reading habits, and some readers who are unwilling to change their reading habits are getting older and older, thus the advantage of traditional media is gradually being swept away.

Considering unfair competition, the advantages and disadvantages of internet media and traditional media clearly show up. Traditional media is further restricted with regard to taboo topics, governance and other constraints compared to Internet media. Content creation takes, despite being the advantage of traditional media, more effort and money. Most of the time internet media does not spend any money of receiving contents from traditional media, instead using the help of technology. For example, Toutiao could transcode the contents of traditional media to control access to the original content. The approach of using links is permitted in China, but if the linking page has been changed, it will damage the interests of traditional media. Initially, Toutiao linked in such a way as it changed into its website for reader’s reading, with no more linking to the original website. After being criticized, Toutiao put a link jumping to original website, rather than just scraping the contents. However, whether displaying the article on its website or the original website, news in Toutiao’s mobile app are all transcoded pages, removing ads from the original websites, which damages the interests of traditional media.

Internet companies have taken many similar opportunities with the excuse of putting the user first. Except for just linking, Internet media also steals the content of traditional media and then remakes an article, far from being real original content creation. Actually, Chinese internet companies carry on wars against the copyright holder in the industry of copyright, similar to that of Toutiao. 

III. Traditional media and Internet media could work together toward a win-win situation.

However, most Internet companies which attempt to reuse original content and removing their ads, do so because they have fewer resources and are subject to fierce competition. Internet companies have had no choice but to adopt this approach for its development. Most Internet companies that have their intact individual vision are likely to take a step toward making major changes in world affairs. For example, CEO Chen Tianqiao producing EZ Station brings the Internet into sitting room, and Xiami.com used P2P networks to sell music helping the recording industry out of trouble. At the initial establishment of Shanda Corporation and Xiami.com, they were also troubled by issues of copyright.

Traditional media hopes to achieve a win-win situation in line with the law of the Internet within the commercial model of new copyright. It is likely that their hope is conceived in start-up Internet companies such as Toutiao, which make the utmost use of their technology, grasping information, analyzing the habits of readers and the user directional push, which traditional media just does not have. According some reports, Toutiao plans to send ads personalized ads, similar to what Google and Facebook implement. If Toutiao can deal with this dispute, pay attention on further cooperation and establish a win-win situation. Toutiao is likely to become a company which helps traditional media out of trouble and causes a sea-change in news-reading.

Finally, copyright holders encounter this problem all around the world. Even in the U.S, New York Times and the Wall Street Journal are still stuck in bottleneck. Therefore, anger arising from traditional media cannot change the situation. It takes time to change the situation. Most importantly, the traditional media need to push forward towards a practical cooperation with new internet companies and technologies and explore a new commercial model, despite the risk and length of time this may entail.

Lawyer Contacts

You Yunting86-21-52134918  youyunting@debund.com/yytbest@gmail.com

Disclaimer of Bridge IP Law Commentary

Is It Legitimate for Toutiao.com to Transcode News Websites for Mobile Users?

toutiao(By You Yunting) According to news, Toutiao, a personalized news app, announced that Toutiao has secured 100 million dollar of Series C financing at a valuation of 500 million dollar. Afterwards, the Beijing News, a traditional paper news, soon posted a comment that Toutiao’s contents are suspected of copyright infringement. However, Toutiao instantly replied in denying infringement. In today’s post, we would like to analyze the infringement issues of Toutiao from the legal prospective.

First is to introduce the push approach of Toutiao. When visiting its official website on a computer, it is found to be relatively regulated, similar with the news channel of Baidu and Google, that every recommended news had an abstract linking to the original website which published the news.

When using its mobile apps, Weibo account and Weixin account, some problems turn out in its recommended news. These three push approaches are similar to each other through the recommendation of the news’ title or abstracts linking to an optimized page on Toutiao.com, followed up with an original link at the bottom of the optimized page. Except for the relatively nice interface, the greatest difference of the optimized page is removing the ads published on the original news. When I was writing this article, I once visited Toutiao’s app and found that the recommended news links was directed to the media’s website at the bottom of the optimized page without ads. However, it is clicking the links at the bottom of the optimized page that could visit the original news. On its Weibo account and Weixin account, the links are also directed to the optimized page on Toutiao.com, other than the original news.

Following the introduction, we would like to introduce some legal problems below:

  1. Is Toutiao entitled to grasp the contents of news websites?

As the recommending news app, Toutiao shall first grasp relative contents from different news websites through its search engine crawlers, then analyze the news and recommend the news to users. So, is Toutiao entitled to grasp the contents of news websites? According to the general basic tenet of the internet, if the news websites have nothing against Toutiao, Toutiao is entitled to grasp the contents.

If the news websites oppose being grasping through search engine crawlers, the news websites could set up some black/white list in the documents designed for search engine crawlers to prohibit some search engine crawlers from grasping their contents, or enable some search engine crawlers grasping their contents. If the search engine crawlers still forced to grasp the news, the news websites could bring the case to the court on the grounds of Article 2 of the Anti-Unfair Competition Law.

  1. Is it legitimate for Toutiao to optimize or transcode the news?

Code transformation is new. It may apply for Article 21 of the Regulations on the Protection of Rights to Information Network Communication, stipulating that “where a network service provider obtains the works, performance or audio-visual products from any other network service provider for the purpose of improving the efficiency of network transmission and automatic storage, and automatically provides the aforesaid work to its service objects based on technical arrangement.” But three following conditions shall be satisfied: (1)  Having not changed any of the works, performance or audio-visual products that are automatically stored; (2) Having not affected the original network service provider of the works, performance or audio-visual products in grasping the information on the relevant works, performance or audio-visual products received by the service objects; and (3) When the original network service provider revises, deletes or shields the works, performance or audio-visual products, automatically revising, deleting or shielding in accordance with technical arrangement.

  1. Is it valid to optimize the news contents?

Based on the above two conditions, issues of what Toutiao conducts show up. First, where Toutiao’s optimized page removing the ads from the news website damages the income of the news website, does it satisfied “affecting the original network service provider of the works in grasping the information on the relevant works”? Second, where it appears the Toutiao’s link, instead of the original links from the news website on the optimized page, and may mislead the public, does it satisfied “changing any of the works that are automatically stored”?

Literally, both parties could easily deride interpretation which is beneficial to their individual parties. Maybe there is a big controversy between two parties, no more narration in this article. However, out of the abstract provisions, it may be more clear to read their business scope for reference.

Paper Medias would spend efforts and money on writing original works, which may be paid through selling subscriptions, ads and so on. This is their commercial mode. If users are accustomed to read news of traditional Medias through Toutiao’s mobile apps, Weibo and Weixin, it is difficult for paper Medias to maintain their individual livelihood. Because it is convenient for users to freely read news on Toutiao’s products, decreasing the website visiting and the selling of subscriptions and ads. Thus it is likely to decrease the income of subscriptions and ads.

On the contrary, Toutiao does not neither gather or write any news, nor purchase copyright from traditional Medias like some big websites. Instead, Toutiao makes the use of its advantages on techniques to grasp news and then recommend news to users, and attracts users by removing ads from the original news websites through its techniques on code transformation. At the same time, Toutiao also gets its income through different ads. Even though Toutiao’s using its techniques to analyze, recommend and transcode the news is an outcome of technological progress, their commercial mode is set up upon the damage to the Medias which gathers and writes original news, an obviously more self-interests than win-win results.

Lastly, two years ago there happens a similar case in Europe concerning that traditional Medias filed fights against Google. In that case, different from Toutiao which optimized the news contents, Google displayed the news summary to attract users clicking the links to read the news. More interests please read our previous post Is It Lawful for News Websites to Demand Payment of Fees for Google and Baidu Searches

Lawyer Contacts

You Yunting86-21-52134918  youyunting@debund.com/yytbest@gmail.com

Disclaimer of Bridge IP Law Commentary