Beijing Wei Chixue Law Firm--Application of Online Resolution Mechanism for IP Disputes on E-Commerce Platforms

Holy WANG
Chinese attorney-at-law

Under the background of scientific and technological progress, the Internet economy is continuously squeezing the offline business by taking advantage of convenient supply chains and the low cost. According to the 2019 Government Work Report of the State Council, China's annual online retail sales amounted to RMB 9.0065 trillion, an increase of 23.9% over the previous year. Thereinto, the online retail sales of physical goods soared to RMB 7.0198 trillion with an increase of 25.4%, accounting for 18.4% of the total retail sales of social consumer goods, and the proportion it contributed rose by 3.4%; the online retail sales of non-physical goods was RMB 1.9867 trillion, increasing by 18.7%. According to the statistic of the National Bureau of Statistics of China, the national e-commerce transaction volume reached RMB 34.81 trillion in 2019, up by 6.7% over the previous year. The epidemic has taken a toll on the global economy this year, but not so much to the e-commerce. The "e-commerce platform + sales through live-streaming" consumption model has also become a new favorite in the market in the time of working from home.

The e-commerce economy is in full swing, and the IP protection on e-commerce platforms cannot be absent. From a legislative point of view, Tort Liability Law implemented in 2009 has already regulated on the obligations and responsibilities of network service providers, and the provisions on IP protection on e-commerce also covered in the E-Commerce Law implemented on January 1, 2019. In practice, for example, the Alibaba e-commerce platform began to explore the IP complaint system as early as 2003, and now a relatively complete online IP protection mechanism has been formed. JD, and even Pinduoduo which is widely criticized for copycatting, have established or are exploring an online IP dispute resolution mechanism for their own platform.

As the supplement to the conventional dispute resolution mechanism, the online resolution mechanism boasts the advantages of short adjudication period and low cost for rights protection, which is conducive to the right holders to quickly purify the online market. Although there are also intractable problems such as inconsistent review standards of each platform, malicious complaints, and reverse complaints in practice, with the increasing attention of major e-commerce platforms, the online resolution mechanism keeps evolving and improving. Therefore, how to better use the online resolution mechanisms to deal with IP disputes has also become a topic for IP practitioners to think about in the new situation

I. The right holders’ use of online resolution mechanisms -how to deal with infringing products found on e-commerce platforms

In recent years, the e-commerce platform itself is also perfecting the imitation product investigation mechanism. Many keywords and pictures suspected of infringement were directly blocked or ordered to be rectified in the early stages of uploading. However, since the transaction volume of the e-commerce platform still maintains an upward trend, most suspected infringements require active monitoring by right holders.
For right holders, when infringing products are found on the e-commerce platform, in addition to preserving the evidence to prepare for offline right enforcement, if a quick blocking of the online infringement information is desired, a notification stating the existence and reasons of the infringement facts should also be sent to the e-commerce platform early, requesting the e-commerce platform to take measures such as deletion and blocking as fast as they can.

Although the major e-commerce platforms’ requirements on the format of notification are different, they all need to include:

1. The identity information and supporting documents of the complainant; 2. proof of ownership of IP rights; 3. specific information of the complained product or service; 4. preliminary evidence of infringement facts. In particular, for the preliminary evidence of infringement facts, at least the reason why the complainant holds that the alleged infringement falls into the scope of protection of rights should be given, so that the e-commerce platforms can review the “validity of infringement notification” and judge on “the possibility of infringement”. As such some complaints that meet the formal requirements on the certification material but cannot substantially prove the possibility of infringement could be filtered out. Taking specific IP right as an example, if a patent infringement complaint is filed, a technical comparison should be made; if a trademark infringement complaint is filed, a comparison on the signs should be made and the statement on the possibility of causing confusion and misrecognition should be given; if a copyright infringement is filed, a comparison on the substantial similarity of the works should be made.

There will be some differences in the processing process after each e-commerce platform receives the complaint notification, but they are basically the same with only minor differences. Take the Alibaba platform as an example. After receiving the complaint notification, the platform will first conduct a preliminary formal review; after the initial review, the complaint information will be forwarded to the seller, who can submit evidences or evidentiary material related to the legitimacy of the product and file a counter notification online. After the seller files a counter notification, the system will automatically notify the complainant. If the complainant recognizes the counter notification, the link of suspected infringing product will be retained and will not be deleted; if the complainant does not recognize counter notification, the Intellectual Property Department of Alibaba will again conduct a substantive review, draw conclusions, and determine whether the link should be removed.

At present, major online e-commerce platforms such as Alibaba, JD.com, and Suning.com have established relatively mature IP dispute resolution mechanisms. They also have relatively professional IP infringement review teams to take care of IP-related disputes. The initial review process takes about 5-10 working days, and the whole process takes about one month.

In terms of the effect of complaints, online complaints are more suitable for the scenarios where it is easier to make judgment on infringements such as dead copy, keyword abuse, and image theft, which are also the most common scenarios for infringement. Since e-commerce platforms such as Alibaba and JD.com support a multi-links for single-right complaint model, for the infringing acts such as dead copy, keyword abuse, and image theft, "regular monitoring of infringing links + batch complaints" is significantly effective and can effectively eliminate the infringing acts including " traffic squatting " and "free riding" by using brand keywords.

On the other hand, for the relatively complicated technical comparisons, the comparison on substantial similarity of practical art works, and other complex scenarios of infringement that require written explanations to make them clear, due to the platforms’ lacking of professional skills in determining infringement, they would often be treated with caution. In this case, the platforms would prefer right holders to resort to judicial or administrative measures to resolve the dispute. Therefore, if the effect of online complaints is not satisfactory, it is necessary to seek more professional judgment through legal channels such as administrative investigation and litigation.

II. The respondent's use of the online resolution mechanism-how to respond to the infringement complaint

As the trend of economic globalization strengthens, international brands that enter the Chinese market late or establish its IP portfolio in China late may face a crisis of their IP rights being squatted. Once faced with unreasonable IP complaints, it is equally important to make a flexible use of online resolution mechanisms.

The respondents are entitled to two opportunities when being complained of infringement on e-commerce platforms. The first opportunity is to file a counter-notification asserting non-infringement after receiving the infringement notification. The second one is to appeal after the platform affirming the infringement. No matter which phase the respondent is in, the reasons for non-infringement should center on whether the right owner’s right based on which the complaint is filed is established and whether the alleged infringing act is established.

Therefore, after receiving the infringement notification, the respondent should timely understand the right base of the right holder and determine whether his own act has fallen within the scope of protection of the complainant's IP rights. In cases where the rights base is flawed or there is legitimate ground for defense, the respondent should also actively fulfill its obligations of filing counter-notification and try to defend within the framework of the online platform as much as possible. The respondent can strike back against the right holder's abuse of IP rights and malicious complaints. Common scenarios of unreasonable complaints include: 1. filing complaint after applying for trademark or design patents on other people’s product packaging and decoration (partial elements), or after copyright registration; 2. filing complaint after applying for design patents based on the designs in the public domain or creative works do not have originality, or after copyright registration; 3. filing complaints after applying for trademarks on geographical indications, common names and other elements. In particular, the signs or product packaging of some well-known foreign brands that entered the Chinese market late have been preemptively registered more severely, which has greatly affected the global market layout of these brands.

For the complaints with express malice, the timeliness of the online resolution mechanism can be fully utilized if they can be resolved through the internal rules of the online platform. If a malicious complaint greatly interferes with the normal operation of the operator, it can also be remedied through other legal channels.

Regarding the preemptive registration of trademark with malice, the real right holders may remedy their rights by considering filing trademark invalidation procedures separately. In addition, since the circle of “notification-deletion” satisfies the requirements of the infringement warning, the respondent can also seek for the resolution of filing a lawsuit of non-infringement affirmation after urging the right holder to prosecute. In the Top Ten Cases of Judicial Protection of Intellectual Property Rights of Zhejiang Courts in 2018, the case of malicious complaints filed by “professional” squatters about the genuine goods is included (first trial: (2017) Zhejiang 0110 Civil First No. 18627, second trial: (2018) Zhejiang 01 Civil Final No. 4546). In this case, the defendant Li preemptively registered the sign contained in Bayer’s sunscreen product packaging as a trademark and initiated an infringement complaint. In response to malicious complaints, Bayer first brought a law suit of non-infringement affirmation and then an unfair competition lawsuit. In the end, the court ruled that the defendant Li's malicious complaint was established and affirmed that Bayer did not infringe his trademark rights. The case ended with Bayer receiving the compensation for economic losses and reasonable expenses of RMB 700,000.

At present, the positioning of the online resolution mechanism remains flexible, and it is an important supplement to the traditional dispute resolution method. It provides rights holders with another convenient and feasible option in addition to litigation, administrative complaints, and warning letters. However, the online resolution mechanism is also a double-edged sword, which provides convenience to right abuse of some malicious complainants. Therefore, both domestic and foreign operators should pay enough attention to this regard and make rational use of platform rules so as to effectively reduce unnecessary losses.