Analysis on the Assumption of Liability in the Serv-U Infringement Lawsuit in China

(By Luo Yanjie) Serv-U is a kind of widely adopted FTP server terminal software, and its main function is to help the transmission of documents on websites. Because the software is relatively small and the normal user has no way to sense the server terminal, many domestic websites in China are now using pirated Serv-U. For this reason, Rhino Software Inc., the developer of Serv-U has been continuously fighting against the piracy of its software, a story which has recently been widely reported. The list of companies sued includes LockLock from South Korea, as well as Netac and eMule, among others. The compensation claimed in these cases ranges from half a million yuan to 1.99 million yuan.

In daily life, aside from some large enterprises with their own IT departments, the majority of companies outsource the matter to a third party web-serving company. For this reason, in many situations, the proprietor of the website might be of unaware that is using infringing software on its server. Under such circumstances, who is ultimately liable for infringement and how should compensation be assessed? Today’s post will explain these issues to the reader.

I. How to determine the operator of the website

According to the Measures on the Record Management of For-Profit Websites and the Measures on the Record Management of Not-for-Profit Websites, websites in mainland China must be registered with the Ministry of Industry and Information Technology (“MIIT”) whether or not they are operated for profit. Therefore, for most official websites, the rights holder can easily find the web site’s actual operator by entering the page address into the MIIT’s inquiry system. Certainly, there are also many websites that have not been recorded, which poses an obstacle to the right protection by the right holder. Practically speaking, however, there is no way for rights holders to stop all infringement on the internet, and these un-recorded websites are of small scale and usually not worth the attention of the rights protection.

II. The actual operator of the website shall take the direct infringement liability to the copyright holder

As discussed above, owner of website (“owner”) is probably unaware there is infringing software used on its website. And, strictly speaking, the person who uploads the infringing software in this situation is a third party website construction company hired by the owner. So, because the owner did not directly upload the infringing software and did know it was being used on its website, could the owner invoke the safe harbor principle? The author believes the answer is no for the following reasons:

1. The safe harbor principle can only apply to the Internet Service Provider (“ISP”)

The subject of the safe harbor principle is the ISP, so it is impossible for the service content to include the upload of the server terminal whether or not the sued website is an internet service provider. For this reason, on the issue of the infringement from the terminal software, no website can claim itself as a safe service provider under the safe harbor principle.

2. The uploader in the safe harbor principle only refers to users

Moreover, the “uploader” stipulated in the exemption terms of the ISP of internet information storage space of the safe harbor principle only refers to the ultimate user. And, this kind of user is an unspecified majority, and cannot include the uploader of the terminal software when constructing the website. Therefore, even the operator has no awareness concerning the server terminal and is not the direct uploader, it still cannot use the safe harbor principle.

In fact, the owner of the website is the party directly benefiting from the website operation, and its relationship with of entrusting the software company to construct its website should viewed as only internally effective. Therefore, in the view of the ordinary user and the rights holder of the software, the direct service provider is the owner of the website. Therefore, the owner shall take the direct liability for the infringing software on its server.

III. The actual operator of the website can seek recourse from the website production company

As discussed above, the practical owner of the website shall take direct liability for infringement from its software use. After that, if infringement was brought about by the actions of a third party production company, the owner of the website may have the right to recover its losses from it through another lawsuit. Could the owner then add the production company as the third party or the joint defendant when first filing the lawsuit? The author believes this cannot be done if the plaintiff does not agree.

According to Article 57 of the Opinions on Several Issues on the Application of the Civil Procedure Law by the Supreme People’s Court:“When the parties are necessary for a joint lawsuit and absent from the hearing, the People’s Court shall notify them to participate in the procedure according to Article 119 of the Civil Procedure Law; the party can apply to the People’s Court to join the lawsuit.” Based on this, the party can request to participate in the lawsuit or to be added by the court only when the parties are for necessary for the joint lawsuit. For this kind of terminal infringement cases, it is actually two independent legal relationships: 1) the copyright holder investigating the owner and 2) the owner investigating the third party. This does not constitute a necessary joint lawsuit, as the copyright holder has no obligation to aid the owner in its rights protection. Therefore, if the plaintiff (the copyright holder) does not agree to add the third party production company in the lawsuit, even the court agrees, the defendant cannot add it as the defendant, and the owner can only claim compensation through a separate lawsuit against the third party production company.

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