(By Albert Chen) Recently, in the right to network dissemination of information dispute between Li Chengpeng, a well-known Chinese writer, and Apple, a Beijing judge held Apple as the actual operator of the App Store, even though the company had maintained that iTunes S.A.R.L (“iTunes”) is the actual operator, a fact afterwards admitted by iTunes. So, today’s post will introduce the reasoning used by the first instance court in its decision.
Li filed the lawsuit with the Beijing No.2 Intermediate People’s Court (“Intermediate Court”) on January 16, 2012, claiming that his latest work “李可乐抗拆记” was made into an app downloadable in App Store for free reading, which infringed his right to network dissemination of information. Additionally, as the operator, manager, and owner of the App Store, Apple should assume liability. Based on these points, Li demanded compensation for economic damages in the amount of 305,000 yuan and reasonable expenses in the amount of 5,425 yuan.
As to the claims of the plaintiff, Apple argued that it is not the actual operator of the App Store, and that the actual operator is instead iTunes, Apple’s subsidiary. Furthermore, after joining the lawsuit as a third party, iTunes also admitted that it is the actual operator in China, and that it is an independent legal person from Apple. Generally, to determine infringement liability, the first step is settle who is the subject of liability, then consider whether they meet the conditions for an exemption from liability, and then finally determine whether or not they must assume liability.
Facing the defense of Apple and its affiliated companies, the court did not mechanically consider and accept the argument, but rather decided that Apple was the actual operator by referring to the Registered Apple Developer Agreement, iOS Developer Program License Agreement (Schedule 1), and iOS Developer Program License Agreement (Schedule 2).
The above agreements contain the following articles:
(1) Registered Apple Developer Agreement: “THIS IS A LEGAL AGREEMENT BETWEEN YOU AND APPLE INC. (“APPLE”) STATING THE TERMS THAT GOVERN YOUR PARTICIPATION AS A REGISTERED APPLE DEVELOPER.”
(2) iOS Developer Program License Agreement (Schedule 1): “Please read the following license agreement terms and conditions carefully before downloading or using the Apple software. These terms and conditions constitute a legal agreement between you and Apple.” “Apple means Apple Inc., a California corporation with its principal place of business at One” “Apple Subsidiary” means a corporation at least fifty percent (50%) of whose outstanding shares or securities (representing the right to vote for the election of directors or other managing authority) are owned or controlled, directly or indirectly, by Apple, and that is involved in the operation of or otherwise affiliated with the App Store, including without limitation Apple Pty Limited, iTunes S.à.r.l., and iTunes K.K. Infinite Loop, Cupertino, California 95014, U.S.A.”
(3) iOS Developer Program License Agreement (Schedule 2): “By Your clicking to agree to this Schedule 2, which is hereby offered to You, You agree with Apple to amend that certain Developer Program License Agreement is currently in effect between You and Apple (the “Agreement”) to add this Schedule 2 thereto (supplanting any existing Schedule 2). ”; “You hereby appoint Apple and Apple Subsidiaries (collectively ” Apple “) as: (i) Your agent for the marketing and delivery of the Licensed Applications to end-users located in those countries listed on Exhibit A, Section 1 to this Schedule 2; and (ii) Your commissionaire for the marketing and delivery of the Licensed Applications to end-users located in those countries listed on Exhibit A, Section 2 to this Schedule 2, during the Delivery Period.”
Based on the above articles, the Intermediate Court held: Apple, as a signing party to the developer agreements, must surely be responsible for the contents in the App Store as an operator. Even though the agreements still stipulate that iTunes is in charge of the collection and settlement of the relevant fees for final users in China, Apple is still party to the executed agreements and takes the responsibility for the contents of the App Store agreement and amendment to the agreement articles or policies. For this reason, the court could confirm Apple as the operator of the App Store, and that it must take legal liability for the platform service provided by the App Store.
The Intermediate Court’s above opinions can be summarized as follows: when determining the actual operator of app stores, the duty arrangement in running the stores among the affiliated companies cannot be adopted to combat any third parties. And, the signing party with binding force in the agreement shall be deemed as the actual operator.
Before closing, the writer would like to say that, despite the opinion from the court, the compensation awarded in the case is surprisingly low, which was made with the consideration of the creation difficulty, market value, Apple’s conduct, infringement amount, scope of infringement, and subjective fault under the circumstances. In total, the amount of compensation awarded by the court was only 11,000 yuan, of which 10,000 yuan was for damages and 1,000 yuan was for expenses. This clearly does not match value of the infringed works. This shows a long-standing problem in Chinese copyright disputes: no proper or adequate compensation for infringement.
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