Case involving liability of online trading platform selected as Top IP Case for 2011

China

The Supreme Court has released its Top IP Cases for 2011. One case that stands out is a dispute between Taobao.com, China's largest online trading platform, and a local brand owner. The fact that it is listed in the Top IP Cases for 2011 demonstrates its importance and reveals the Supreme Court's inclination with regard to the liability of online trading platforms.

According to various sources, the facts of the case are as follows. Yinian (Shanghai) Fashion Trade Co Ltd holds registrations for trademarks Nos 1545520 and 1326011, which are used for clothing. The figurative marks depicted on clothing sold on Taobao by an individual vendor, Du Guofa, was highly similar to the registered trademarks owned by Yinian.

Yinian alleged that Du Guofa’s infringed its exclusive rights to use the registered trademarks, and claimed that it had sent seven letters to Zhejiang Taobao Network Co Ltd requiring it to delete the infringing posts. Reportedly, Taobao deleted the infringing information that Yinian had notified, but failed to take any other measures against Du Guofa's infringing activities.

Yinian claimed that Taobao had deliberately provided facilities to infringe its exclusive rights in the registered trademarks and to assist Du Guofa in his infringing activities. Yinian requested that the court order Du Guofa and Taobao to jointly compensate it in the amount of Rmb84,900 for its economic loss and reasonable costs.

The court of first instance held that Du Guofa and Taobao were jointly liable and should compensate Yinian in the amount of Rmb10,000 for its economic loss and reasonable costs.

The court of second instance confirmed that Taobao had knowledge of Du Guofa’s infringing activities on the online platform, but had failed to take the necessary measures to prevent the infringement. As Taobao had committed a "subjective fault" and had assisted Du Guofa in committing the infringing acts, this constituted an act of contributory infringement and Taobao was jointly and severally liable.

This case is interesting for two reasons:

  • Taobao was found to have constructive knowledge of the infringement because of the take-down notices; and
  • Taobao was found to have failed to take effective and necessary measures to stop the infringer or remove the infringing posts.

The decision endorses the importance of take-down notices, but does not impose a burden on Taobao to clean up its site. The remaining issues for many brand owners are:

  • How many warning letters should be sent? 
  • Should Taobao filter out potentially infringing links based on certain criteria?

Ultimately, the relationship between Taobao and its vendors is contractual in nature. Therefore, Taobao must be held to have a higher duty of care to monitor its own website.

He Jing and Mingji Piao, ZY Partners, Beijing

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