Excessive use of online information collected on third parties’ websites amounts to unfair competition – rules the Shanghai IP Court in the Hantao v. Baidu case in China

Never has information on the internet been as interconnected as it is today. Thanks to the so-called web scraping technology, in which computer programs are used to extract information from different websites, online platforms are able to incorporate related information from different sources into a single webpage so that users can find and utilize desired information in a convenient way. However, the legality to use information collected by others deserves cautious examination, and unfair competition law is one of the aspects to be considered.

In September, the Shanghai Intellectual Property Court issued a second-instance judgment in Hantao v. Baidu case, laying out useful guidelines for assessing whether unauthorized use of information collected by others constitutes an act of unfair competition.

Background

Hantao operates dianping.com, a local life information platform providing customer reviews of local services such as restaurants, hotels etc. Baidu runs the most popular search engine in China, which includes features of online mapping (Baidu Map) and Q&A (Baidu Zhidao). Baidu was found to have scraped customer reviews from dianping.com, and, without the authorization of Hantao, displayed these reviews in Baidu Map and Baidu Zhidao, when users searched certain local services. Depending on website versions, the amounts of reviews Baidu displayed ranged from 3 reviews in excerpt for one restaurant to hundreds of reviews in full text for one restaurant. Each review was accompanied by a “from dianping.com” indication and a link directed to dianping.com.

Hantao sued Baidu for unfair competition. The first-instance court decided in favor of Hantao. Baidu appealed the decision before the Shanghai Intellectual Property Court (“the Court”).

Judgment

In the judgment, the Court recites Article 2 of the Chinese Anti-Unfair Competition Law (“AUCL”) stipulating that “a business operator shall, in his market transactions, follow the principles of voluntariness, equality, fairness, honesty and credibility and observe the generally recognized business ethics”.

The Court states that this general clause can be applied to identify acts of unfair competition when three requirements are met: First, no other specific provision in the AUCL is applicable to the act of competition; second, due to the act of competition, the legitimate rights and interests of another operator suffer actual damage; third, the act of competition actually violates the principle of honesty and credibility and the generally recognized business ethics. Since the present case does not relate to an act of unfair competition specifically defined in the AUCL, the first requirement is thus fulfilled. The main dispute in this case concerns the second and third requirements.

Regarding the second requirement, the Court acknowledges Hantao’s legitimate business interests in the customer reviews information, which has been accumulated by Hantao through long-term operation. And considering the relatively large amount of reviews scraped by Baidu and the daily experience that customers often only read a small amount of reviews before making decisions, the Court holds that Baidu has substantially replaced dianping.com in providing the relevant service. This replacement resulted in damages to the interests of Hantao.

As to the third requirement, the Court points out that business ethics itself is a recognized code of conduct formed in long-term business practice, however, in the emerging market areas such as the internet industry, various business rules are still being explored, and the boundary of the interests of the market players is still not clear. Although some acts of competition may damage the interests of other competitors, they may also promote market competition and increase consumer welfare.

Hence, in order to assess whether the unauthorized use of information collected by others violates business ethics, the Court empathizes the importance to balance the interests of information collectors, information users and consumers.

The Court states that, by integrating customer reviews from dianping.com into its online mapping feature, Baidu has enhanced consumers’ user experience and enriched their choices. Baidu’s act has thus achieved a positive effect. However, in achieving the positive effect, the amount of information used by Baidu was beyond what was necessary. Baidu could obviously have taken a way which would damage Hantao’s interests less, and still achieve the positive effect to a certain extent. In fact, in an earlier website version, Baidu only displayed 3 reviews in excerpt for each restaurant. The Court considered this practice as acceptable. The Court further remarks that the use of information beyond the necessary could reduce the incentive for market players to invest in collecting information, thereby damaging the consumer interests in the long run. Taking into account these factors, the Court holds that Baidu’s act violates the generally recognized business ethics.

In summary, the Court held that Baidu’s actions constituted an act of unfair competition, and thus rejected the appeal of Baidu.

Guidelines

The judgment in this case provides guidelines for use of information collected by others. According to the Court, the use of information should help achieve positive effects for consumers, should not substantially replace the original service provided by the information collector, and should damage the information collector as little as possible.

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