Judgment of Whether Software Interference Constitutes Unfair Competition in Internet Environment - Shanghai Intellectual Property Court Decided the Case of Dispute over Unfair Competition - Tmall v. Zaixin and Zaihe March 29, 2018 People’s Court Daily Page 6 Judgment Summary Whether software interference constitutes unfair competition in Internet environment should be judged based on whether the accused act has unduly impeded the plaintiff’s normal operation, whether it has positive market effect and how it affects the market competition order, so as to avoid moralized judgment against the legislative intent of the Anti-unfair Competition Law. Case Review Tmall Company is the operator of Tmall shopping platform, while Shanghai Zaihe Network Technology Co., Ltd. (hereinafter referred to as “Zaihe”) is the operator of “B5M” website who entrusted Zaixin Software (Shanghai) Co., Ltd. (hereinafter referred to as “Zaixin”) to develop a shopping assistant “B5T” to provide whole network search, price comparison, free postage and other services for users. The accused act in this case mainly involves two circumstances after users install and run “B5T”: i) a banner appears under the top address bar on Tmall webpage, containing “B5T” advertising promotion logo, search box and other contents, which can be shrunk by clicking; ii) buttons, such as “Scan QR code of B5M to Enjoy 1 Yuan Off” and “Cash Discount,” appear on the product page of Tmall platform, by clicking which the page will jump to the product page on “B5M” website. After a user placing an order on “B5M” website, the payment will be made to “B5M,” and then “B5M” buys the product from Tmall merchant on behalf of the user, while the seller delivers the product to the user subsequently. Believing that the act of Zaihe and Zaixin violated the principle of good faith and business ethics, and constituted unfair competition causing great losses to it, Tmall Company sued to court, requesting two defendants stop the unfair competition immediately, eliminate the effects and compensate for its economic losses. Judgment After the trial, Pudong New Area People’s Court of Shanghai held that the defendants’ act will reduce the customer stickiness to Tmall website and cause losses to Tmall Company. The shopping assistant is characterized by “hitchhiking” and will cause confusion about the service sources or inconvenient after-sales services, etc., which eventually harm the interests of consumers. If things continue this way, it will also demotivate the online shopping platform from cultivating traffic and destroy the market competition order in the online shopping industry. The court of first instance recognized that the defendants’ act constituted unfair competition and ordered them to bear the civil liability of compensating for the losses and eliminating the effects. Both defendants appealed. Shanghai Intellectual Property Court dismissed the appeal and affirmed the original judgment. Case Study The accused unfair competition in this case mainly arose from the defendants’ insertion of information into the website without the consent of Tmall, which actually interfered with the operation of Tmall website to some extent. As far as the interference in market competition is concerned, whether it goes against the recognized business ethics should be judged with consideration of the legislative purpose of the Anti-unfair Competition Law, that’s, to promote competition, encourage innovation and realize fair and free competition. Moralized judgment against such purpose shall be avoided. 1. Whether the accused act has unduly impeded the plaintiff’s normal operation. Market competition is the competition for resources and trading opportunities. In such a competitive market as the Internet where products are often interdependent with and related to each other, it’s impractical to require operators to improve their performance without interference just in their business area and competitors need to tolerate moderate interference. More importantly, innovation comes more from the intense collisions between operators’ technologies or business models than from their peaceful co-existence within their own domain. In this case, the banner inserted is of limited width and is located at the top of the webpage rather than at the center, it doesn’t mask the contents on the appellee’s website and can be shrunk, which, therefore, doesn’t unduly impede the normal operation of Tmall. However, the act of inserting icons and buttons at the prominent position of the product page, which guide consumers to its own website for transactions and can’t be shut down by consumers, has seriously damaged the integrity of Tmall webpage and prevented Tmall company from displaying information at it will. Such act has caused undue interference. 2. Whether the accused act has a positive market effect. Many so-called interferences in the Internet domain are often innovative technically, which might harm the interests of other operators but bring benefits to consumers or enhance the level of public interest protection. In addition to safeguarding the legitimate rights and interests of operators, the Anti-unfair Competition Law should also protect consumers’ interests and public interests by regulating unfair competition. Therefore, whether the accused act violates the business ethics should be judged from the perspective of a broader market environment and more stakeholders. On one hand, help to buy, price comparison and other services provided by the software involved have the positive effect of promoting consumers’ interests in that they help consumers to make optimal decisions based on the price comparisons and to buy products at lower prices. On the other hand, inserting icons and buttons at the center of Tmall webpage and guiding consumers to it website for transactions when the involved software runs will make the consumers confused about the service provider. 3. Comprehensively consider the interests of the parties involved and consumers, as well as the impact of the accused act on the market competition order. The defendants’ act of inserting logos and buttons into the page and guiding consumers to their website for transactions have caused undue interference and the damage thus incurred to the plaintiff is obviously disproportionate to the positive effect it intends to achieve. Besides, the defendants didn’t have to provide price comparison, help to buy and other services in this way. Instead, they should have provided these services in a more appropriate manner from the perspective of balance of interest. Seen the impact on the market competition order, services such as price comparison, help to buy and other services in the Internet environment are carried out on relevant e-commerce websites, while the overall operation performance of the website is positively correlated to such services. Only when the whole e-commerce industry runs normally and flourishes can related service industries such as price comparison and help to buy develop continuously. In this case, though the defendants’ act brought certain benefits to consumers, its undue interference caused to the normal operation of Tmall website not only harmed the interests of the appellee, but also negatively affect the commercial investment and innovation of e-commerce website in the long run, thereby destroying the coexistence of the website and price comparison, help to buy and other services, making it difficult for consumers to reap lasting benefits in the long run. Case No: (2015) Pu Min San (Zhi) Chu Zi No. 1962, (2017) Hu 73 Min Zhong No. 197 Writer: Fan Jingbo, Shanghai Intellectual Property Court
