Dec 16, 2018 WENWEIPO APP Recently, Shanghai Intellectual Property Court concluded the case of dispute over unfair competition between the appellant Beijing iQiyi Technology Co., Ltd vs. the appellee Beijing Sogou Information Services Ltd, et al. It’s ruled to dismiss the appeal and affirm the original judgment as Sogou didn’t commit unfair competition against iQiyi. Dispute: Whether loading “search nominated words” function in the input method constitutes unfair competition? Sogou Input has a function, that is, when a user uses the input method to spell under the Internet environment, it will provide both “input nominated words” and “search nominated words” at the same time. Clicking on “search nominated words,” it will jump to Sogou’s search site. “Input nominated words” and “search nominated words” are presented in two columns in different front sizes, meanwhile Sogou Input provides the setting to shut down “search nominated words,” but it has function of “search nominated words” by default at the time of installation. iQiyi argued that when ordinary users use Sogou Input software to enter in the search bar of iQiyi mobile webpage, the names of movies and TV series that may be entered by the user will appear automatically as “search nominated words” in a form that is likely to cause users to mistake “search nominated words” as “input nominated words,” thus enticing them to click. After clicking, the browser will jump to the “Sogou search” page of Sogou Company, and present a link to the same movie or TV series broadcast by its affiliate party -Sohu Video, thereby shifting iQiyi’s traffic and trading opportunities to Sogou’s affiliated companies or third parties. Believing that Sogou’s act constituted unfair competition andEduoacompany should be jointly liable for the infringement as it provided the download of the software involved at its NMarket, iQiyi sued to the court, requesting that Sogou should stop the unfair competition immediately and compensate for its economic losses amounting to RMB 1 million, whereas Eduoa should be jointly and severally liable for RMB 100,000 of the above-mentioned amount; Sogou and Eduoa should jointly compensate for iQiyi’s reasonable expenses totaling RMB 13,4000 incurred to stop the infringement. Sogou argued that it wasn’t in competition with iQiyi and didn’t commit the act of unfair competition. Courts: Sogou’s act didn’t constitute unfair competition After the trial, the court of first instance held that “search nominated words” function of Sogou Input won’t cause confusion to users as it has appropriate way of setting, which won’t jump directly to video playback and is still in the proper scope of use. It isn’t specifically designed for relevant movies and TV series. Besides, the accused act had no negative influence on iQiyi and consumers, and hence didn’t constitute unfair competition. It’s ruled to dismiss all the claims of iQiyi. iQiyi appealed to Shanghai Intellectual Property Court against the first instance judgement. After the trial, Shanghai Intellectual Property Court held that the accused act occurred after the user had logged in iQiyi website and had started searching. It’s obvious that user wanted to search or watch videos at iQiyi website, and iQiyi could obtain the corresponding trading opportunities or at least the corresponding search traffic. Sogou Input presented “search nominated words” and “input nominated words” in two columns in different front sizes, and provided the setting to shut down “search nominated words” function, which helped to reduce confusions to a certain extent. However, it’s necessary to consider other factors when determining whether it constituted unfair competition. Market competition is mainly manifested by the competition for trading opportunities. Losing a trading opportunity is an inevitable result of the competition, and only when the accused act violates the business ethics can it be held accountable. In view of the impact of the accused act on iQiyi, consumers’ rights and interests and market competition order, Shanghai Intellectual Property Court held that such act didn’t unduly hinder the normal operation of iQiyi website nor undermine the normal market selection and disturb the market competition order. Therefore, it’s ruled to dismiss the appeal and affirm the original judgment. Judge: there should be room for free market competition After the judgment, Fan Jingbo, judge of Shanghai Intellectual Property Court said that the Anti-unfair Competition Law encourages operators to compete in effectiveness through technological innovation and improvement in the quality of products and services, while discourages them from gaining competitive advantages through cheating, forced transactions or hindering other’s normal operation. In this case, Sogou Input has both the functions of “search nominated words” and “input nominated words,” which is a technological innovation and has a certain positive market effect. Although the accused act seems to interfere with the operation of iQiyi website, it doesn’t mean such act is illegitimate. First of all, with the increasingly fierce competition in the Internet market, as well as the development of information technology and Internet technology, the relevance and dependence of various products or services in the Internet market continue to deepen. It is impossible for operators to stick to their existing market or technology field and is inevitable for them to enter the field of competitors in various ways to compete. Second, the main purpose of encouraging market competition is to promote innovation, which often comes from fierce collision between business models or technology instead of blind self-learning. If a technology or business model is deemed illegitimate simply because of its interference in the operation of competitors, it will undoubtedly dampen the innovation impetus greatly. The accused act in this case didn’t unduly hinder the normal operation of iQiyi website nor undermine the normal market selection and disturb the market competition order. It’s still a kind of competition in effectiveness on the whole. Competition is the most basic operating mechanism of a market economy, and also the source of market vitality. It is the relatively full and free market competition that makes the Internet industry flourish. Implementing the legislative spirit of Anti-unfair Competition Law requires not only the judicial suppression of unfair competition which disrupts the market order, but also the judicial restraint to a certain extent, so as to give room for free market competition. This room for free competition is not only needed by Sogou, but also by iQiyi and all other market competitors Authors: He Yi & Chen Yingying Editor: Wang Xiang Editor in charge: Niu Yi
