Recently, Chengdu Intermediate People's Court of Sichuan Province had made a judgment in accordance with the law in case of a video platform v. a technology company over unfair competition where Lawyers Yang Yang and Pan Nanting of the firm acted for the client, and judgment has now taken effect. This was the first case in China to determine that the use of overseas over-the-wall software to assist overseas users in using domestic streaming media platforms violates Internet business ethics, disrupts the normal operation of streaming media platforms, and constitutes unfair competition.

 Basic Information of the Case

      In March 2022, the client (a video platform) discovered that a technology company operated an accelerator software and induced overseas users to download the cracked version without geographical restrictions to gain profit through advertising implantation and collection of membership fees. After download and installation of the software, overseas users can access the domestic video platform through the domestic virtual IP address set by the software. This behavior violated the video platform’s restrictions on the different delivery of video content in different regions, and harmed the normal operation of the overseas version of the video platform. As a result, the client sued the court in accordance with the Anti-Unfair Competition Law of the People’s Republic of China and requested an order for the technology company to stop providing domestic acceleration services that can be used for the video platform to overseas users through accelerator software and compensate for economic losses.

Focus of disputes

1. Whether the behavior improperly harms the competitive interests enjoyed by the video platform and constitutes unfair competition

      The Chengdu Central Court held that: it is necessary to comprehensively determine whether it is the unfair competition under Article 12 of the Anti-Unfair Competition Law of the People’s Republic of China from the three aspects of means, methods of conduct and results.

(1) Whether to technical means is used: The underlying accelerator allowed the display of user’s IP as the address of domestic central server other the true IP address through VPN

(2) Whether it affects the user’s choice or other: the video platform allowed the switch between the domestic version and the overseas version by identifying the users’ IP address. What’s more, the domestic version has more video resources than the overseas version. The defendant mentioned on his official website and official WeChat public account that the area restrictions on video copyright can be lifted through the underlying accelerator. Therefore, overseas users will naturally choose to use the domestic version of the video platform through the accelerator.

 (3) Whether it hinders or disrupts the normal operation of other people’s products or services: The main benefit damage caused by the underlying behavior is to reduce the transaction income of the video platform, that is, the user development and membership fee income of the overseas version of the video platform was reduced, which affected the overseas development layout of the video platform. For users, there was a possibility that the use of accelerators would be recognized as stolen account by the video platform, which would affect their experience. The court further held that in the defendant’s related publicity and promotion of the accelerator, acceleration of the video platform was used as an important selling point, which constituted a subjective intent to commit the acts of unfair competition and profit from it. Therefore, a higher duty of care should be exercised to avoid disrupting the business ecology and order of the video platform due to the accelerator.

       Therefore, after the comprehensive consideration of above factors, the Chengdu Intermediate People’s Court found that the behavior violated recognized Internet business ethics, hindered the normal operation of network products or services legally provided by other operators, and constituted unfair competition.

 2. Liabilities in this case

      After determining that the behavior constituted unfair competition, the Chengdu Intermediate People’s Court first ruled that the technology company immediately stopped providing domestic acceleration services to overseas users through the underlying accelerator which can be used for the video platform and its corresponding clients. Secondly, after taking into account the factors such as the number of downloads, rate of membership fee, circumstances of infringement, and the popularity of the video platform, the court determined a considerable amount of compensation with adoption of statutory compensation.

Case Summary

      This case is a new type of online unfair competition case. The infringement occurred at an Internet protocol address outside of mainland of China. Technical measures were used to destroy the operating model of the video platform, so that overseas users can use VPN to freely access the domestic version of the video platform and watch the Chinese film and television works, which mainly infringed on the user trading opportunities of the overseas version of the video software. The victory of this case effectively protects the efforts of domestic video platforms to impose geographical restrictions, guarantees the competitiveness of the Chinese video platforms in overseas markets, reduces the risk of Chinese video platforms facing copyright disputes abroad, and paves the way for the Chinese video platforms and film and television works to be distributed overseas.