Aug 3, 2011

Taobao is China's largest online shopping website. It provides a platform for business-to-consumer (B2C) and consumer-toconsumer (C2C) retail mainly catered to consumers in mainland China, Hong Kong, Macau, and Taiwan.

Recently, Zhiqian (Beijing) Financial Consulting Co., Ltd. ("Zhiqian") sued the owner of "channa store," an online retail store on Taobao that sold "Zhiqian Club Stocks Training Course" video without authorization from Zhiqian, for copyright infringement. Taobao, as the Internet service provider ("ISP"), was named as a co–defendant.

Although the current laws and regulations do not clearly define the obligations of ISPs for online transactions in China, the Tort Liability Law provides protection of civil rights and interests (for example, intellectual property rights), infringed by Internet users and ISPs. The Tort Liability Law requires an ISP to take necessary actions such as deleting content and breaking links after being informed of infringement. If the ISP fails to do so, it will be jointly and severally liable with the Internet user for the infringement.

In this case, Taobao was held liable for failure to delete infringing links within a reasonable time period after receiving notification of infringement, leading to increased damages to Zhiqian. However, the First Intermediate People's Court of Beijing clarified that Taobao was not responsible for actively deleting infringing links unspecified in a notice of infringement, and that such a requirement lacks legal basis, is non-practical, and broadens the obligations of Taobao, considering the large number of and constant changes in retailers and goods.

In sum, a copyright/trademark/patent owner may seek protection of its intellectual property rights against an ISP under the Tort Liability Law in China. When an Internet user engages in tortuous conduct through Internet services, the rights owner can inform the ISP that it should take necessary actions to prevent further infringement.

By Kening Li and Clive Sedden