The Impacts of PRC E-Commerce Law on IP Protection By Bisheng SHI  Quan YUAN 2018-09-06




On August 31, 2018, the Standing Committee of the National People’s Congress of the People’s Republic of China approved the E-Commerce Law.  The e-commerce market has tremendously exploded in China in recent years, which has brought a lot of new business opportunities as well as many legal concerns.  As a result of that, a comprehensive law regulating e-commerce activities is born of necessity.  Since intellectual property plays an important role in the e-commerce market, the PRC E-Commerce Law highlights intellectual property protection by clarifying the obligations and liabilities of e-commerce platform operators and business operators on e-commerce platforms in intellectual property protection.  Specifically speaking, the PRC E-Commerce Law may have impacts on intellectual property protection in the following aspects:



1.  It clarifies that e-commerce platform operators that “should have known” the intellectual property infringements shall be obligated to deter such infringements


Article 36 of the PRC Tort Law deals with internet service providers’ obligations in intellectual property protection; however, this provision leaves room for interpretation.  E-commerce platform operators are subject to Article 36, because they are within the scope of the network service providers.  Section three of Article 36 of the PRC Tort Law regulates thatwhere a network service provider knows that a network user is infringing upon a civil right or interest of another person through network services, and fails to take necessary measures, it shall be jointly and severally liable for any additional harm with the network user”.  Article 36 only stipulates the circumstance that an e-commerce platform operator is clearly aware of the infringing acts; in other words, literally, Article 36 does not talk about the scenario that an e-commerce platform operator does not know but should have known the infringing acts.  Attorneys sometimes had disputes regarding whether e-commerce platform operators that should have known the intellectual infringements on platforms also had the obligation to deter such infringements.  Although in practice, judges usually interpreted Article 36 as encompassing the “should have known” circumstance, the room for interpretation created by the literal meaning of Article 36 was not formally removed by legislators. 


Now, the situation has changed.  Article 45 of the PRC E-Commerce Law formally codifies the should have known” circumstance, regulating that “where an e-commerce platform operator knows or should have known an intellectual property infringement committed by a business operator in the platform, it shall remove, block or disable the link, or terminate transaction or services or take other necessary measures [to deter the infringing act].”


Thus, it is clear that an e-commerce platform operator, either does know or should have known an intellectual property infringement on the platform, will be obligated to take steps to deter such infringing act.


2.  It regulates different prerequisite for the notice-and-take-down procedures than that established in judicial practices


The PRC E-Commerce Law provides a formal framework for the notice-and-take-down procedures that already existed on many e-commerce platforms in China.  This formal framework does not fully absorb the notice-and-take-down procedures established in judicial practices prior to the PRC E-Commerce Law.  One of the most important differences is that the PRC E-Commerce Law regulates different prerequisite for the notice-and-take-down procedures than that established by China courts, including the Beijing High People’s Court. 


Beijing High People’s Court’s judicial guidance regarding the trial of intellectual property disputes in e-commerce (the “Beijing Judicial Guidance) is one of the most representative judicial practice rules in China regarding intellectual property protection in e-commerce.  The Beijing Judicial Guidance established a prerequisite for the notice-and-take-down procedures.  According to the Beijing Judicial Guidance, an e-commerce platform operator is required to take necessary steps to deter the alleged intellectual property infringement only in the circumstance that it is more likely than not that such infringement exists.  Specifically speaking, if an intellectual property owner finds any transaction information or its relative goods on an e-commerce platform infringing its intellectual property, it can notice the e-commerce platform operator of such infringing information or goods, and request the e-commerce platform operator to takedown (e.g., delete, block or disable the weblink of) them.  The e-commerce platform operator, after receiving the notice and request, will firstly evaluate the likelihood of existence of the alleged infringement; and then, if it is less likely than not that the alleged transaction information or its relative goods infringes the owner’s intellectual property rights, the e-commerce platform operator does not need to take necessary steps to takedown them. 


However, from the literal meaning of Article 42 of the PRC E-Commerce Law, it seems that the prerequisite of evaluating the likelihood of the alleged infringement’s existence for the notice-and-take-down procedures is not required.  Under Article 42 of the PRC E-Commerce, an e-commerce platform operator is obligated to take necessary measures to deter the alleged intellectual property infringement, so long as the intellectual property owner can provide prima facie evidence of such infringement.  In other words, even if it is less likely than not that the alleged infringement exists, an e-commerce platform operator still needs to takedown alleged infringing information upon reception of the intellectual property owner’s notice and request. 


This inconsistence may make it easier for intellectual property owners to enforce as well as abuse theirs rights.  The abusing of intellectual property rights may severally impact the benefits of the e-commerce platforms and the business operators.  Given that, it is a little bit confusing about the literal meaning of Article 42.  The language of Article 42 is relatively vague, and the above analysis is merely based on its literal meaning; so, it’s highly likely that there will be further implementing rules or judicial interpretations to give more detailed explanations on Article 42.  


3.  It establishes punitive damages for maliciously noticing e-commerce platforms of intellectual property infringements

According to Section three of Article 42 of the PRC E-Commerce Law, where an intellectual property owner maliciously notices an e-commerce platform of intellectual property infringements, and such notice causes damages to the e-commerce platform (“Damages”), the intellectual property owner shall compensate the e-commerce platform operator in the amount equals to several times of the Damages.


It is the first time that the law codifies punitive damages for such malicious complaints to e-commerce platforms.  Malicious complaints that badger and blackmail merchants on e-commerce platforms have been increasingly more common in China, which severally impact e-commerce platform’s normal operations.  The purpose of intellectual property protection systems is to promote innovation; however, deliberately abusing intellectual property rights by malicious or false complaints will cripple innovation.  We believe that the punitive damages will play a positive role in curbing malicious complaints and promoting the healthy development of e-commerce platforms.


In summary, the PRC E-Commerce Law deals with intellectual property protection in Article 41 to Article 45, and Article 84 and Article 85.  The PRC E-Commerce Law interconnects and overlaps with PRC Tort Law and Chinese intellectual property laws in the area of intellectual property protection.  As we discussed above, the PRC E-Commerce Law has some inconsistences with current judicial practices; so, we anticipate that implementing rules or judicial interpretations will be issued to further clarify the understanding and application of the PRC-Ecommerce Law.