People’s Court Daily of May 7, 2016, 3rd page: Court Now. News: Recently, Shanghai Intellectual Property Court made the judgment of the second trial on the unfair competition case between the Appellant (Shenzhen Juwangshi Science and Technology Co., Ltd., hereinafter “Juwangshi”) and the Appellee (Beijing iQIYI Science and Technology Co., Ltd., hereinafter “iQIYI”). The appeal was rejected and the original judgment was upheld. According to the original judgment, Juwangshi shall compensate iQIYI for the financial loss of RMB 300,000 and reasonable expenses of RMB 60,000 and publish an announcement to eliminate adverse effects. The first unfair competition case of video aggregation link embezzlement in China was thus finalized. iQIYI alleged that its network video platform “iQIYI” under lawful operation provided free videos for users on the condition that users watched pre-video advertisements. iQIYI undertook royalty fees and the advertising revenue was its main source of revenue and profit. The software “VST Full-Aggregation” developed by Juwangshi played videos from iQIYI website directly without playing the pre-video advertisements of iQIYI, which lowered the exposure rate of advertisement and harmed the benefit of iQIYI. Therefore, iQIYI instituted legal proceedings to the People’s Court of Yangpu District of Shanghai. According to the judgment of the first trial, Juwangshi obtained and played the feature films by cracking the encryption key (Key value) of iQIYI to skip the pre-video advertisement of iQIYI. Juwangshi allowed some users to watch videos through “VST Full-Aggregation” without paying royalty fees, leading to the reduction in advertising revenues and the number of users of iQIYI. The court thus held that Juwangshi constituted unfair competition and made the judgment that Juwangshi shall compensate iQIYI for the financial loss of RMB 300,000 and reasonable expenses of RMB 60,000. Juwangshi refused to accept the judgment and instituted an appeal to Shanghai Intellectual Property Court. Juwangshi held that the encryption key (Key value) used by the software involved “VST Full-Aggregation” came from public information in the Internet instead of being obtained by Juwangshi’s cracking of iQIYI’s verification algorithm. In addition, Juwangshi skipped iQIYI’s pre-video advertisements due to unconquerable technical factors instead of Juwangshi’s subjective intent. So, Juwangshi requested to revoke the original judgment according to law. After trial, Shanghai Intellectual Property Court held that Juwangshi failed to provide evidence to support its assertion. On the contrary, the evidence provided by iQIYI could prove that iQIYI took encryption measures to its videos and Juwangshi skipped iQIYI’s pre-video advertisements by cracking iQIYI’s verification algorithm. Therefore, the Court didn’t accept Juwangshi’s grounds of appeal. In addition, Juwangshi allowed users to watch iQIYI’s videos without paying operating costs including royalty fees and the corresponding operating costs including royalty fees were undertaken by iQIYI. In addition to costs, iQIYI suffered from loss of commercial profits caused by the decrease in the number of users and hits of advertisements. As the technology implementer, Juwangshi should know that the implementation of technology may earn profits for itself but bring harm to others. However, Juwangshi implemented the technology anyway and its act was out of subjective intent and improper. Based on the above, Shanghai Intellectual Property Court made the final judgment, rejected the appeal and affirmed the original judgment. (Chen Yingying) ■News Link■ The essence of the Internet is interconnection and the development of the Internet aims to interconnect. Therefore, linking in legal and proper ways on the Internet doesn’t constitute unfair competition. The advertising revenue of iQIYI is mainly calculated according to the frequency and number of days of advertisement issuance. If “VST Full-Aggregation” adopts legal and proper means to link to and play videos of iQIYI and clearly marks that videos are from iQIYI, iQIYI’s advertisement statistical system can record the number of iQIYI advertisements played via “VST Full-Aggregation” and iQIYI’s legal right wouldn’t be harmed; instead, the popularity and influence of iQIYI would be enhanced to some extent, and there would be no infringement. However, if “VST Full-Aggregation” links to advertisements and videos of iQIYI by cracking iQIYI’s encryption key (Key value), it allows users to skip advertisements even though the content it presents to users is seemingly complete. This makes the iQIYI’s advertisement system unable to count the number of advertisements played. As a result, the act harms the legal right of iQIYI, thus constituting unfair competition.
