App Store: Duty Free for Safe Harbor Principle in China?

By You Yunting

In March of 2012, 22 Chinese authors filed a lawsuit against Apple in Beijing No.2 Intermediate People’s Court and claimed compensation of more than ten million. In the case, the plaintiffs stated that their works have been adapted into apps used on iPhone, iPad and iPod Touch, free of being charged at App Store. The case is the first lawsuit with the operator of App Store being the defendants, and will produce a prominent influence on the newly developed online store, which was launched in 2008 and with more than 360 million users . Now the litigation is under the spotlight, and this essay is focusing on the legal status of Apple and the defects in the process complaints of the store.

I. What are AppStore and its features?

By Wiki, AppStore was first launched in July of 2008, and is a website for apps downloads used on iOS portable devices, like cellphones and tablets. Without the store, the products of Apple could be less valuable, like empty hardware. Furthermore, we could see many other similar online shops, like Google Play, Amazon’s Appstore, and Microsoft’s Marketplace, etc. And the following are the features of an AppStore:

1. No more than 1% of the total the 600, 000 apps in Appstore are developed by Apple, and most of them are the works of third party companies developing with Apple tools and rules. For these apps, Apple will illustrate the specifications and developers on the download and introduction page of each app.

2. Apple would do several reviews on programs uploaded to AppStore, including copyright, pornography, technology standard, fees model and so on. On any conclusion of dissatisfaction, Apple would reject the app.

3. AppStore has both free and charging apps, and for those charging ones, Apple could share 1/3 of the gains.

4. AppStore is shown in listings, and the ranking of some of these listings is decided by volume of downloads, while others’ rank by relying on Apple’s introduction. Surely, users can search for the apps they want?

5. The server of AppStore is in the USA, and its operation is in charge of the US branch of Apple.

6. Anyone may report Apple for the infringements detained, and Apple would arrange a reply from the developer. After considering the complaint and the reply, Apple will decide to retain or delete the claimed app.

II. Jurisdiction and governing judicature of AppStore infringement

As previously stated, the server of AppStore is in the USA, and its user agreement says all the disputes concerning it shall be heard in the USA and all relevant law applied there. Therefore, when a Chinese right holder detains the infringement against its right, could it file the lawsuit in China and apply the Chinese laws?

My answer is YES. First, the right holder in the infringement cases may not be a user of Apple, thus the case jurisdiction will not necessarily be USA, due to no binding user agreement on the right holder. According to Article 241 of Civil Procedure Law of China, when the defendant has detainable property or offices within the territory of the People’s Republic of China, local courts may have the jurisdiction on the case. To Apple, who may gain tens of millions in profits in China, it’s no doubt it has detainable property in China (such as IPR and shares option of its subsidies), and further considering its offices in China, Chinese courts shall have the jurisdiction on disputes concerning the store.

For the law application, as provided in Article 50 of Law of the People’s Republic of China on Application of Laws to Foreign-Related Civil Relations:

“Liabilities for infringement upon intellectual property rights shall be governed by the laws of the place where protection is claimed. Parties concerned may also choose to apply lex fori by agreement after occurrence of the infringement.”

Clearly, while the case could be filed in the Chinese courts, China will be the place where protection is claimed, and therefore its laws shall be the governing ones.

III. Safe harbor principle on App Store operator?

As introduced above, most apps in AppStore are uploaded and developed by third party companies, and to users from this aspect, AppStore tends to be a storage-space like website. So, the question is what liability shall be incurred by Apple on a finding of infringement?

There are many sorts of infringement against IPR, where patent, copyright, trademark or unfair-competition is all possibly involved. For the above infringements, the duty exempt is mainly regulated in Article 22 of The regulation on Protection of the Right to Network Dissemination of Information:

“Under the following circumstances, a network service provider that provides information storage space to a service object or provides works, performances, or audio-visual recordings to the public through the information network, shall not be liable for compensation:

1. Having clearly mentioned that the information storage space is provided to the service object, and also having publicized the name, contact information, and web address of the network service provider;

2. Having not altered the work, performance, or audio-visual recording provided to the service object;

3. Having not known and having no justified reason to know that the works, performances, or audio-visual recordings provided by the service object have infringed upon any other’s right;

4. Having not directly obtained economic benefits from the service object’s provision of the work, performance, or audio-visual recording;

5. After receiving the notification from the owner, having deleted the work, performance, or audio-visual regarded as infringing on the right of the owner according to the provisions of this regulation.”

Despite App Store meeting some of the above conditions, items 3 and 4 inadequately satisfy the law. As discussed above, Apple reviews the app uploaded and sets the ranking of the apps, that means Apple have a higher care obligation, and in the mean time, AppStore has many charged apps and Apple could get 1/3 gains of them. So, in my opinion, the operator of AppStore is not the ISP as regulated in the Regulation, who shall be the seller and provider of content and service instead, and could not be duty exempted with reference to the laws. Therefore, Apple shall take joint liability with the infringing developer of the infringement.

Such a situation could also be applied to trademark, patent and unfair competition issues concerning AppStore. Considering the legal principle of right and liability consistency, Apple shall take parallel infringement liability to that of the gains it gets from the involved apps.

Surely, despite the Safe Harbor Principle being inapplicable on the infringement at AppStore, to our understanding, Apple could take a lighter liability than in practices. Because AppStore is only a platform with numerous amounts of apps uploaded on it, and though Apple reviews the apps, being an operator, it could not guarantee any infringement in the store. Furthermore, as new things are good to man’s culture, the law enforcement may to some extent care for its development.

Finally, in my view, the similar dispute of infringement on Taobao.com, an eBay like website, heard in Beijing Haidian People’s Court could be a reference case, by which the infringer shall compensate RMB 20, 000 while the platform runner takes liability within the scope of RMB 10, 000. So, for the infringements at AppStore; when an infringement can be found and Apple is only partly at fault, the infringer shall decidedly take the main liability of the infringement. The platform operator shall only take the joint liability, to a certain degree.

Lawyer Contacts

You Yunting

86-21-52134918

youyunting@debund.com, yytbest@gmail.com

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