How to Effectively Stop Online Infringement

By Guo Xuehui,[Patent]

In the year of 2014, China overtook the United States to become the world’s largest online retail market and ranked No.1 in online retail transactions.

According to statistics, by December 2014, the proportion of national shopping online had been increased from 48.9% to 55.7% with Chinese online shopping users reaching 361 million. Along with that, Chinese e-commerce market grew rapidly.

The trade volume growth was 48.7% in 2014 that was 2.8 trillion Yuan in transactions. Compared with 2014 total retail sales of consumer goods released by National Bureau of Statistics of China, the turnover mentioned above is almost equalled 10.7% of 2014 total retail sales of consumer goods , which is overwhelming.

The vigorous development of online shopping renders unlimited business opportunities. However, brand owners who are supposed to enjoy benefits find out that various kinds of Internet infringements are encroaching on the market share. They are e-commerce shopsselling counterfeit goods, fake websites simulating online factory shops, social media bombarding counterfeit goods commercials, search engines providing infringers with advertising services, etc.

A few days ago, a report on the protection of consumer rights and interests was submitted by the law-enforcement inspection group of the Standing Committee of the National People’s Congress. It sharply pointed out that over 40% of China’s online retails are either counterfeit or inferior goods. This news was immediately reported by major mainstream media home and abroad. Whereas, rampant counterfeit goods not only violate Chinese consumers but destroy brand images.

Due to special attributes of Internet, it breeds new types of IP infringement and becomes a new haven for infringers. Internet enjoys intrinsic attributes of openness, virtuality, and non-boundary.

Openness provides infringers with low entry requirements and operation costs that refer to low infringement costs. Virtuality helps infringers to hide with ease, which hinders obligees from tracking infringers and targeting offline sources. Non-boundary expands the scope and extent of infringement, which makes it difficult to define the jurisdiction of infringement further request law enforcement.

All mentioned above result in an expensive and difficult approach with low success rate for obligees to protect their IPR online .

Therefore, how to effectively stop online infringement becomes the major concern for obligees.

In the following part, the author will introduce several common infringements in real practice as well as approches to effectively stop infringements.

“Notification---Removal” Procedure According to Tort Liability Law of the People’s Republic of China, in defending against Internet users who apply Internet services to conduct infringements, the infringed party has the right to notify the network service provider to take necessary measures such as deleting, blocking, breaking, etc. Hence, obligees could take actions according to “Notification- --Removal” procedure, which is applicable within Tort Liability Law. They have right to send notifications to network service providers and require them to delete, block or breaking links involving infringements. At present, e-commerce website like Taobao, social media like WeChat, and search engine like Baidu have all been installed with online infringement report channels respectively.

Currently, e-commerce websites are severely afflicted places for online infringement, which are flooded with counterfeit goods and other infringed products. It is slightly reassuring that government has attached great importance to IP protection on Internet. E-commerce platforms have been gradually establishing and completing IP protection mechanism, and conducting “ N o t i f i cat i o n - - - Removal” procedure with openness, standards as well as flow operation.

In terms of its practical effect, the timeliness and success rate of this procedure are quite good, and general disputes could be handled effectively. Demonstration of Taobao and WeChat IP policies and procedures is as followed.

As the largest online transaction platform worldwide, Taobao has been criticized for lacking in IP protection in recent years. In order to solve this problem, Taobao launched a complaint platform.

After registering on this platform providing identities and IPR information, obligees could report allegedly infringing products and stores via this online platform.

Generally speaking, if obligees find infringing goods on Taobao, they could inform Taobao with infringed IPR, justifications as well as proofs to make a complaint. If it is approved, Taobao will delete infringing goods within two weeks from the date of complaint. Taobao has been continously amending and revising its IP regulations, and hopes to curb infringements via penalties. For example, in the first half of this year, Taobao initiated “Three Strikes” on those who sell counterfeit goods, which means that as long as approved complaints of the same product within a store reach three times, its account will be permanently blocked. While previously, a store might be closed only if it was reported for many times and its deduction reached 48 points (a store would be deducted 2 points for each infringing good).

WeChat that has 650 million active users with enormous economic momentum is also targeted by infringers. They attract followers by setting up official accounts which are further linked with personal accounts, and then they sell counterfeit or inferior goods on social media (here it refers to the “Moments” of WeChat). In dealing with above infringement, obligees could report unauthorized offcial accounts and other infringing information in “Moments” via WeChat officialaccount and other channels.

WeChat will correspondingly carry out punishment such as delete account and restrict functions of reported accounts.

Taobao and WeChat launched some specific protecting programs in succession and invited qualified brands to participate in, aiming to develop IP protection mode in a more profound manner. For example, the credit mechanism within Taobao provides green channel for obligees with good records. The green channel includes shortening the time of complainthandling (from 10-13 weekdays to 1-3 weekdays), simplifying report requirements, and serving with commissioners. WeChat developed “110” online rights and interests protection platform that enables users to report counterfeiting of both official and individual accounts, and directly transfer counterfeiting proofs to obligees. This platform creates a channel gathering and collecting counterfeiting clues. And this channel helps obligees to carry out information analysis and strategic planning.

Third-Party Payment Instruments Nowadays, there are a flood of English websites that are actually operated in China. They simulate official websites, discount stores or factory stores of famous brands, and sell counterfeiting clothing, shoes, and bags to overseas customers, which severely stain images of original brands.

Dealing with these multinational e-commerce websites, obligees could also use IP protection policies from third-party payment service providers besides traditional “Notification— Removal” procedure.

Multinational e commerce websites mostly use internationally accepted payments such as PayPal, Western Union, and credit cards.

Considering they are independent international third-party payment tools or credit card organizations with pretty intact IP protection policies, they could be applied as powerful tools to fight against online infringements. Take PayPal as an example, it is the most widely used online payment for multinational transactions. PayPal has a quite intact online complaint mechanism for IP infringements with quick responses. If obligees find out infringements by PayPal users, they could state it in complaint forms and submit it online with proof attachments. After receiving complaints, PayPal will start the investigation and inform infringers to rectify the issue. If users fail to stop infringements within the deadline, PayPal will take further actions based on their policies.

In recent years, many famous brands start to use third-party payment tools to win infringement compensation. For example, obliges could file a lawsuit in the United States, and apply to the court for a freezing injunction and emergency injunction. If infringers do not respond as scheduled and the court concludes the infringement, these accounts will be permanently frozen and funds within accounts will be cleared and allocated to plaintiffs as compensation. Early this year, many domestic media like Beijing News reported that a large number of Chinese PayPal users had been sued overseas and their accounts were frozen. Accounts under more than 5,000 Chinese merchants were frozen or cleared with conservatively estimated over 50 million US dollars.

Conventional “Notification--- Removal” procedure has certain limitation in terms of deterrence.

For example, if websites have been closed by network service providers due to infringement, they could immediately find another new service provider and resume operation with low costs. However, third-party payment tools are able to block the economic channels of infringers so as to help judicial authorities freeze accounts and even reallocate frozen funds, which has more deterrence on infringers.

I n short , as a new type of “Notification---Removal” procedure, third- p a r t y payment could have more protection including compelling infringers to stop in a short time and help obligees win compensation.

Domain Name Dispute Resolution Procedure With wide use o f I n t e r n e t , obligees are in urgent need of promoting brands and expanding e-commerce business with matched domain names. Another online infringement facing them is cybersquatting, which refers to a third party registering domain names of infringed trademarks or brand names in advance. The fundamental reason of scrambling for domain names is their scarcity and potential business value behind them. It happens particularly among foreign brands. Some of them have not expand business to China yet; therefore, they have not applied defensive domain name registration. By the time they establish Chinese websites with corresponding domain names to serve Chinese market, they willrealize that their domain names have been cyber squatted.

Generally speaking, “first come, first served”is universally applied in domain names registration, which means the first applied and get registered , will be primarily approved and protected respectively. However, in order to prevent cyber-squatting and infringement, domain name registration administrations have come up with corresponding dispute resolutions. Take “.CN” and “. 中国” (which refers to “China” in Chinese characters) as examples, China Internet Network Information Center (CNNIC), the the domain name registration administration of China, has formulated CNNIC Domain Name Dispute Resolution Policy and Rules for CNNIC Domain Name Dispute Resolution Policy.

Anyone who considers that existing domain names are against his/ her legitimate rights and interests, he/she could make a complaint to a designated dispute settlement body, such as the Domain Name Dispute Resolution Center of China International Economic and Trade Arbitration Commission’s (CIETAC) (CIETAC Domain Name Dispute Resolution Center) and Hong Kong International Arbitration Centre (HKIAC). Available reliefs include cancellation of the domain name or transfer of the domain name to right holders.

Domain name dispute resolution is professional and efficient. After the submission of a complaint, expert panel will review and adjudicate it. The expert panel consists of IP scholars and lawyers, which guarantees its professionalism and authority.

Moreover, domain name dispute resolution is highly efficient, usually obligees will receive arbitral awards within 60 days after the submission.

More prominent characteristics are the predictability of adjudication and the determinacy of enforcement. Referring to and quoting previous adjudications, obligees are able to significantly anticipate their own adjudications.

Meanwhile, the enforcement of ruling is guaranteed. Based on Domain Registration Agreement, registrars could unilaterally implement adjudications and complete cancellation or transfer without the assistance from registrants. It is completely efficient and convenient.

Domain name dispute resolution serves for civil disputes caused by cyber-squatting. It is intended to provide two parties a convenient, efficient and economy Alternative Dispute Resolution (ADR) that reduces judicial proceedings.

Certainly, obligees might as well resolve disputes via litigation.

However , litigation is timeconsuming with more requirements of proofs and resources.

Comparatively speaking, domain name dispute resolution is top priority.

Online IPR Protection Strategies With the popularity of Internet and flourish of e-commerce, an increasing number of IPR infringers shift to online market from the offline; thus, it is of great significance and necessity to protect IPR online. However, online infringement is deteriorating towards an organized and chain operation. We still have a long way to go in fighting against online infringements, during which obligees are needed to come up with comprehensive online protection strategies as support.

At the same time, sources of Internet infringements exist offline instead of online. Hence, obligees are supposed to strengthen the coordination and cooperation between online and offline protection. For example, by the analysis of online information and data, obligees could quickly find, collect, identify and track offline infringing evidence, and then carry out offline protection. Finally to realize an ideal IPR protection mode of “finding it online, tracking back sources, capturing and ruling under jurisdictional administration, and investigating all along”.

(Translated by Yu Shiwen)

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