Encyclopedia vs Apple: Why AppStore Could Not Ship into Safe Harbor?

By You Yunting

As reported by media, Beijing No.2 Intermediate People’s Court made the first instance decision for infringement claims made by Encyclopedia of China Publishing House (Encyclopedia) agains Apple’s AppStore. With the decision, Apple shall compensate Encyclopedia RMB 520, 000 yuan and immediately cease the infringement. In current, no intention to appeal has been expressed by Apple.

Case: Encyclopedia discovered Apple’s user could purchase and download apps of its copyrighted works, which could be read in iPhone and iPad. With the anger of the infringement, Encyclopedia filed a lawsuit against Apple, who counter-stroke that the actuall operator of AppStore is a company registered in Luxembourg, not Apple. And Apple provided no services in the process of software uploading, and therefore Apple shall be with no engagement in the dispute.

What interests us most is Apple argued itself an American company, yet the operator of AppStore is the one admitted in Luxembourg. For this reason Apple shall not take any liability to the claimed infringement. But the court did not list Luxembourg Company as the co-litigant, instead to judge Apple take the infringement liability. To my understanding, even the Luxembourg Company could present itself on the court; Apple shall still be liable to the infringement. That mainly because by China laws, AppStore could not be applied with Safe Harbor Principle. Hence, even the app of it is uploaded by a third party, AppStore shall still take the joint liability to the software infringement. This essay would discuss the legal status of AppStore’s operator, and the problems in the process of complaint.

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 service of AppStore is mainly from apple.com, whose register is Apple admitted in California USA, and the server of AppStore is also in the USA.

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, which could be proved by the decision made by the Beijing court. 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 meets 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. Like Encyclopedia discovered a charged download content as available from AppStore. 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.

Surely in the case, the amount for compensation judged by Beijing court honestly is not low, the claimed amount by the plaintiff is RMB 530, 000 yuan, and won the support from the court of its RMB 520, 000, which has superseded the compensation for normal literary works. That mainly because the high cost for the compilation and edition on the encyclopedia, or it mainly due to the weak argument by Apple and no true right owner could be found then. However, to my opinion, a legal protection shall be given to newly emerged things, and as to the case not with material misfeasance, it could be judged that the actual shall take the main infringement yet the operator of the platform shall take the joint liability within certain scope, like Beijing Haidian Court judged the actual infringer shall compensate right holder RMB 20, 000 yuan in the taobao knockoff selling case, and in the meantime, the platform operator shall take the joint liability within the scope of RMB 10, 000 yuan.

Lawyer Contacts

You Yunting

86-21-52134918

youyunting@debund.com, yytbest@gmail.com

For further information, please contact the lawyer as listed above or through the methods in our CONTACTS.

Bridge IP Law Commentary’s posts, including the comments and opinions contained herein, shall not be construed as the legal advice on any issues related. The contents are for general information purposes only. Anyone willing to quote or refer the posts to any other publications or for any other purposes, no matter there’s benefits gained or not, shall first get the written consent from Bridge IP Law Commentary and used under the discretion of us. As to the application of the reprint permission for any of our posts, please email us to the above addresses. The publication of this post or transmission of it through mail, internet or other methods does not constitute an attorney-client relationship. The views set forth here are of due diligence, neutrality and impartiality, representing our own opinions only and are our original works.

Short Link:

Bridge IP Law Commentary

Your Guide to China IP Law！

Encyclopedia vs Apple: Why AppStore Could Not Ship into Safe Harbor?

Leave a Reply Cancel reply