The First China E-Commerce Law lightens the burden of E-commerce platforms when dealing with IPR infringements, while making it more expensive and burdensome for the holders of IP Rights!
The long awaited E-commerce Law of the PRC has been finally approved, entering into force on August 31, 2018. This is the first Law that expressly regulates the relation between IPR owners and e-commerce platforms. The Law seems to favor e-commerce platforms by shifting the whole burden to the right holders to prove infringement in case of disputed takedown notices. Compared to the established business practices, the Law appears to be more e-commerce than IP friendly.
1. An overview of the relevant provisions
Instead of providing strict rules regarding the protection of IP rights online, the new Law has simply codified the current practices on takedown notices. This will leave it to the e-commerce platforms to continue self-regulate the procedures for the takedown of IPR infringing content. In particular, the Law has neither introduced any measure or standards to lighten the burden of proof of infringement of the right holders when filing takedown notices, nor has provided a procedure of effective cross examination of the defenses filed by the alleged infringer in case of disputed takedowns. The platform retains the discretion to examine and interpret the evidence and is free from the burden of having to make a final decision in case of a disputed takedown notice. This is particularly critical in those cases in which the alleged infringer denies liability, shifting the whole burden on the right holders to overcome such refusals by filing judicial or administrative lawsuits!! As we shall see below, this will give counterfeiters a good tactical advantage and will likely increase the number of disputed takedown notices in the future.
Also, the Law does not provide any strict obligation and standards imposing on the platforms the creation of preventive IPR protection systems. Article 45 of the Law only provides a generic obligation for a platform to take appropriate protection measures if the former knows or should have known that a user has infringed others IP rights. Aside from failing to define the standard of “knowledge”, the provision refers to cases where the infringement has already taken place. No specific obligation to prevent postings of obviously infringing content has been introduced, thus freeing the platforms from the obligation and burden of having to take preventive measures. If any such measures are or will be in place, this will be the result of lobbying and self-regulation, and not a consequence of this new law.
As we mentioned above, the Law acknowledges that the IPR holders have a right to request the removal or the block of infringing content by filing a notice with the platform, which must be supported by prima facie evidence of infringement. This is nothing new. It has been the common practice of e-commerce to allow so called takedown notices supported by evidence of infringement.
Like in the consolidated business practice, the Law allows the alleged infringer to defend itself by filing a response to the notice supported by evidence. However, and unlike the text of the 3rd and last draft, the final text of the Law has added to the safe harbor rule of e-commerce platforms, a 15 days time limit for the IPR owner to file a litigation or complaint (maybe with the IP office) or drop the case. If a lawsuit/complaint is filed, the take down measures already taken by the e-commerce platform will remain in place, with the e-commerce platform’s measures becoming a de facto “preliminary injunction”. If not, the measures will be revoked. In practice, an unlike the previous drafts, the platform is taking no further responsibility in deciding who is right or wrong and the law helps her out of trouble by forcing the right holder to escalate the dispute to the judicial level.
2. Enhanced risks and costs on IPR holders
If from a procedural point of view such measure may seem factually objective, in practice it will only create more cost, time waste and troubles to the right holders, while it will favor the clever counterfeiters and elevate the e-commerce platforms to the role of a “Pontius Pilatus”! In a market where counterfeiter are thriving and brand owners are under pressure to make efficient use of resources against myriads of violations, forcing the latter to initiate complex judicial procedures each time a counterfeiter refuses to take down, makes the whole system inadequate and unrealistic. Instead of a pragmatic solution, the Law offers only an impractical remedy.
if we expand our view on this part of the Law, we see that instead of creating favorable presumptions for the right holder’s case and expediting the resolution procedure before the e-platform, the new Law gives an unjustified weight to the e-shop defenses and refusal to take down. In practice, the Law does not even allow the right holder the possibility to initiate a cross-examination of the filed defense before the platform. In this way, the procedure is cut short by the simple filing of a refusal to takedown. In a country where forged documents are common, we can imagine how counterfeiters may make good use of such new provision. They will file any bogus defense they can, just to stall the procedure and put the right holder in front of the decision to see a simple takedown case escalate into a civil or administrative litigation with high costs and a waste of time before a favorable resolution is obtained. This could have dramatic repercussions on planning and budgeting anti-counterfeiting strategies in China!
The history of this Law has been dotted by heavy critic, especially by the foreign brands and governments. The legislators have lacked the courage to look at more IP friendly legislations like those in the EU and take more drastic measure in favor of IPR holders in the e-market that actually most needs them! The new Law is a simple codification of the actual practices, and some its amendments may disadvantage rather than assist IP right holders. It will now be interesting to see how counterfeiters will react to this Law and whether they will be clever enough to exploit the tactical advantages they have been unwittingly (on the legislator’s side) provided with.
Disclaimer: This article was first published on LinkedIn by Paolo Beconcini on https://www.linkedin.com/pulse/e-commerce-platforms-up-trademark-holders-down-paolo-beconcini/