Shanghai High Court Removes Safe Harbour Defences for Chinese Online Shopping Malls
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China has the world's largest internet population and by 2015, it may also have the greatest number of online shoppers. New developments in e-commerce bring the issue of intellectual property infringement and the liability of e-commerce operators to light. The E-land v. Taobao case in China removed the defense of the "Safe Harbor Principle" for the first time for online shopping mall operators, and should serve as a grave warning to these operators in China.
[Eland v Taobao]
China has the world's largest internet population and by 2015, it may also have the greatest number of online shoppers. New developments in e-commerce bring the issue of intellectual property infringement and the liability of e-commerce operators to light. The E-land v. Taobao case in China removed the defense of the "Safe Harbor Principle" for the first time for online shopping mall operators, and should serve as a grave warning to these operators in China.
[Safe Harbour Defence]
The "Notice-removal principle" stipulated in Article 23 of the Regulations on the Protection of Rights to Information Network Communication created a safe harbor for e-commerce operators in China, and many e-commerce operators have depended on it to escape from trademark allegations on their platforms. However, the E-land v. Taobao case cuts through the principle.
On April 25, 2011, the Shanghai 1st Intermediate People’s Court issued a final judgment, which maintained the first instance judgment for the E-land v. Taobao case. The court held that Taobao was responsible for trademark infringement carried on by an individual on the Taobao.com platform. The most controversial issue of the case was whether Taobao was still assumed to be jointly liable for trademark infringement activities that were conducted again after Taobao had prohibited it. The court held that the an online shopping mall operator will be jointly liable for the infringement, because despite it knowing or should have known that its users make use of its services to commit infringement, it continued to provide internet services to the users selling counterfeits or did not take the appropriate measures to prevent the infringing activities. The court held that Taobao was aware of the illegal activities of various sellers on its set and instead of stopping them, it turned a blind eye. Thus, Taobao was found to be jointly liable for trademark infringement and counterfeiting under the Chinese Trademarks Law and the Chinese Law Against Unfair Competition.
[Tort Liability Law]
The Shanghai Courts made their decision based on the ChineseTrademark law, as well as Article 50.2 of the Implementing Rules and Article 36 of the Tort Liability Law (the “Tort Liability Law”), which stipulates that “Where an internet user commits a tort through the internet services, the victim of the tort shall be entitled to notify the internet service provider to take such necessary measures as deletion, block or disconnection. If, after being notified, the internet service provider fails to take necessary measures in a timely manner, it shall be jointly and severally liable for any additional harm with the internet user. Where an internet service provider knows that an internet user is infringing upon a civil right or interest of another person through its internet services, and fails to take necessary measures, it shall be jointly and severally liable for any additional harm with the internet user.”
[Conclusion]
This decision was not particularly surprising to IP lawyers in China. It is broadly consistent with the Beijing Intermediate Court’s decision that concluded that the well known Beijing Silk Market shopping mall was jointly liable for the counterfeiting activities conducted by the shops located within its mall. Although, China having a civil legal system as opposed to a common law legal system, does not have a strictly applied precedent system regarding court decisions, it seems settled now that shopping mall providers, both online and on-street, must take steps to monitor the activities of their tenants once they are alerted to their intellectual property infringing activities.
ABOUT THE AUTHOR: Han Yuanyuan
Han Yuanyuan is an Associate in the MMLC Group, in Beijing.
Copyright MMLC Group
More information about MMLC Group
Disclaimer: While every effort has been made to ensure the accuracy of this publication, it is not intended to provide legal advice as individual situations will differ and should be discussed with an expert and/or lawyer. For specific technical or legal advice on the information provided and related topics, please contact the author.
China has the world's largest internet population and by 2015, it may also have the greatest number of online shoppers. New developments in e-commerce bring the issue of intellectual property infringement and the liability of e-commerce operators to light. The E-land v. Taobao case in China removed the defense of the "Safe Harbor Principle" for the first time for online shopping mall operators, and should serve as a grave warning to these operators in China.
[Safe Harbour Defence]
The "Notice-removal principle" stipulated in Article 23 of the Regulations on the Protection of Rights to Information Network Communication created a safe harbor for e-commerce operators in China, and many e-commerce operators have depended on it to escape from trademark allegations on their platforms. However, the E-land v. Taobao case cuts through the principle.
On April 25, 2011, the Shanghai 1st Intermediate People’s Court issued a final judgment, which maintained the first instance judgment for the E-land v. Taobao case. The court held that Taobao was responsible for trademark infringement carried on by an individual on the Taobao.com platform. The most controversial issue of the case was whether Taobao was still assumed to be jointly liable for trademark infringement activities that were conducted again after Taobao had prohibited it. The court held that the an online shopping mall operator will be jointly liable for the infringement, because despite it knowing or should have known that its users make use of its services to commit infringement, it continued to provide internet services to the users selling counterfeits or did not take the appropriate measures to prevent the infringing activities. The court held that Taobao was aware of the illegal activities of various sellers on its set and instead of stopping them, it turned a blind eye. Thus, Taobao was found to be jointly liable for trademark infringement and counterfeiting under the Chinese Trademarks Law and the Chinese Law Against Unfair Competition.
[Tort Liability Law]
The Shanghai Courts made their decision based on the ChineseTrademark law, as well as Article 50.2 of the Implementing Rules and Article 36 of the Tort Liability Law (the “Tort Liability Law”), which stipulates that “Where an internet user commits a tort through the internet services, the victim of the tort shall be entitled to notify the internet service provider to take such necessary measures as deletion, block or disconnection. If, after being notified, the internet service provider fails to take necessary measures in a timely manner, it shall be jointly and severally liable for any additional harm with the internet user. Where an internet service provider knows that an internet user is infringing upon a civil right or interest of another person through its internet services, and fails to take necessary measures, it shall be jointly and severally liable for any additional harm with the internet user.”
[Conclusion]
This decision was not particularly surprising to IP lawyers in China. It is broadly consistent with the Beijing Intermediate Court’s decision that concluded that the well known Beijing Silk Market shopping mall was jointly liable for the counterfeiting activities conducted by the shops located within its mall. Although, China having a civil legal system as opposed to a common law legal system, does not have a strictly applied precedent system regarding court decisions, it seems settled now that shopping mall providers, both online and on-street, must take steps to monitor the activities of their tenants once they are alerted to their intellectual property infringing activities.
ABOUT THE AUTHOR: Han Yuanyuan
Han Yuanyuan is an Associate in the MMLC Group, in Beijing.
Copyright MMLC Group
More information about MMLC Group
View all articles published by MMLC Group
Disclaimer: While every effort has been made to ensure the accuracy of this publication, it is not intended to provide legal advice as individual situations will differ and should be discussed with an expert and/or lawyer. For specific technical or legal advice on the information provided and related topics, please contact the author.
