Major portals Taobao, Tmall win website intervention tech appeal

The Shanghai Intellectual Property Court ruled in a recent appeal case that third-party technological interventions of a website's normal functions constitute unfair competition, despite potentially benefitting some online shoppers.

Zhejiang Taobao Network Co Ltd and Zhejiang Tmall Network Co Ltd, operators of leading retail portals Taobao and Tmall, filed unfair competition complaints against e-commerce platform Gshopper, as well as its subsidiary and software developer iZeneSoft, with a court in Pudong district of Shanghai in 2015.

Gshopper commissioned iZeneSoft to develop a shopping assistant plug-in, which went online in 2012. The program enabled users to compare prices across a range of major shopping portals, including Taobao, Tmall, JD and Amazon, and also to trace the pricing trends of the same products.

After users downloaded the plug-in, when on a shopping website it would pop up with links to other recommended online markets, including B5M, owned by Gshopper.

Taobao and Tmall said that the plug-in forced an entry into their websites with numerous third-party links, diverting their potential customers.

Such a practice robbed them of their trading opportunities, violating business ethics and thus constituted unfair competition, asserted the two Zhejiang-headquartered e-commerce companies, both owned by Alibaba.

They also said that while users have multiple options on the internet, a market player cannot profit from undermining its competitors' operations. What Gshopper and iZeneSoft, both headquartered in Shanghai, did constituted internet traffic hijacking and violated their interests, Taobao and Tmall said.

In response, the defendants said the shopping assistant plug-in, as well as its related services, is separate from Taobao and Tmall. It helps to ensure consumers' rights to make more informed choices. The service is totally at users' disposal. Providing such a neutral technological tool should not be considered an infringement, they asserted.

By using search engine technologies to secure product information from across a broad spectrum of markets, B5M provided navigation services for online shoppers, recommending options and diverting traffic free of charge. That, in essence, is no different from ordinary search engine services, the defendants said, claiming that there was no direct competition with the plaintiffs.

The court ruled in favor of Taobao and Tmall in April 2017.

Later, the defendants lodged an appeal with the Shanghai Intellectual Property Court. The appeal court upheld the verdict at the end of 2017.

Inserting links into others' websites without authorization constitutes technological intervention, according to the court. It found that the intervention had misled consumers - although it, to some extent, brought consumers convenience - and meanwhile acted as undue interference in the normal operations of Taobao and Tmall.

In the long run, the intervention would damage the business ecosystem where various e-commerce, price comparison and shopping agency services co-existed, the court said.

Hui Xiang, a senior partner at a Shanghai law firm, told Beijing-based China Intellectual Property News that a picture has emerged of new types of internet-based interference in recent years.

"Such interference generally shows tech innovation and brings consumers benefits, yet potentially damages other businesses' interests," Hui said, who is also a legal adviser for Alibaba, the parent company of Taobao and Tmall.

The senior attorney said judges need to identify technological interventions from the perspective of multiple stakeholders in the broader market environment to ensure the healthy and sustained growth of internet-based industries.

(China Daily 03/08/2018 page17)