Case about Dispute over Unfair Competition
Cases Involving China (Shanghai) Pilot Free Trade Zone Tried by the People's Court of Pudong New Area, Shanghai Municipality: Beijing iQIYI Science & Technology Co., Ltd. v. Shanghai Qianshan Network Technology Development Co., Ltd. and Yueguan Network Technology (Shanghai) Co., Ltd. (Case about dispute over unfair competition)
-- When playing videos from other video websites by clicking links, the act of a video aggregation software taking technical measures to avoid the advertising previously set by such video websites constitutes unfair competition.
(1) Basic Facts
iQIYI Company was a top-ranking video website in China. Shanghai Qianshan Network Technology Development Co., Ltd. (hereinafter referred to as “Qianshan Company”) and Yueguan Network Technology (Shanghai) Co., Ltd. (hereinafter referred to as “Yueguan Company”) were operators of the video aggregation software “MoreTV.” By using this software, users of Qianshan Company and Yueguan Company may watch videos from major video websites by clicking links. When playing videos from www.iqiyi.com of iQIYI Company by clicking links, the software “MoreTV” took technical measures to avoid the advertising previously set by iQIYI Company, which enabled users of the software “MoreTV” to directly watch advertising-free videos on www.iqiyi.com. iQIYI Company held that the acts of Qianshan Company and Yueguan Company violated the provisions of Article 2 of the Anti-Unfair Competition Law of the People's Republic of China, which constituted unfair competition. Therefore, it filed a lawsuit with the People's Court of Pudong New Area and requested that Qianshan Company and Yueguan Company should immediately cease the infringement, eliminate the adverse impacts, and compensate iQIYI Company CNY1 million for economic losses, CNY50,000 for lawyer's fee, and CNY12,500 for notary fee.
In the view of the Court, when playing videos from www.iqiyi.com by clicking links on the software “MoreTV,” Qianshan Company and Yueguan Company took technical measures to avoid advertising previously set by iQIYI Company. Such acts made network users who were unwilling to view the advertising previously set or pay the iQIYI subscription fee switch to the software “MoreTV,” which was a malicious act. If Qianshan Company and Yueguan Company persisted in doing so, it would cause decrease in the number of network users of iQIYI Company and abnormal loss of advertising clients. The business pattern of iQIYI Company would get into trouble, the normal operations of video providers and even telecom service providers would also be affected, and the sound Internet ecosystem for entire video websites would even be endangered. Therefore, the acts of Qianshan Company and Yueguan Company violated the principle of good faith and the recognized business ethics, and constituted unfair competition. Accordingly, the Court rendered a judgment that Qianshan Company and Yueguan Company should cease the infringement, eliminate the adverse impacts, and compensate iQIYI Company CNY100,000 for economic losses and CNY50,000 for reasonable expenses.
Under the support of the relevant national policies, the Internet industry within SHFTZ is developing rapidly and there are also constant innovations on business patterns. This case involved the much-discussed video aggregation software at present. The so-called “video aggregation software” refers to a business pattern in which users can watch videos from major video websites by clicking the relevant links through a single software, and it provides consumers with convenient services. However, in order to attract users, some video aggregation softwares avoid the commercial advertising originally set by video websites before the videos, in which way, such video aggregation softwares provide users with “advertising-free” versions and gains vast users. The commercial advertising set before the videos is precisely the main source of income of major video websites and it is the basic business pattern of the entire video website industry for development. According to the found facts, balancing of interests, and full reasoning, the Court determined that the act constituted unfair competition. The determination will undoubtedly escort the orderly and benign development of the video website industry and simultaneously provide some guidelines for the standardized operation and fair competition of Internet enterprises within SHFTZ.