In a recent IP dispute, China’s Tianjin Binhai People’s Court ruled that American company Apple was responsible for unauthorized content published by third-party apps in the App Store. As a result, Apple was fined 12 million yuan (USD 1.9 million), according to a report (link in Chinese) from China Security Journal  on November 1.

The lawsuit was brought by COL Digital Publishing Group (COL), which is an online publisher. The plaintiff claimed that Apple failed to conduct due diligence to stop copyright infringement by several third-party apps. These apps, which are available in the online App Store in China, published unlicensed content, including novels, according to the claims.

According to the China Security Journal’s report, Tianjin Binhai People’s Court, which is the court of first instance, found that Apple, as the actual operator of the App Store, has strong control and management capabilities over the App Store’s network service platform. This is supported by Apple’s business model, operating policies, and terms of agreement. However, Apple failed to take reasonable measures when it should have known that the apps involved in the case were not properly licensed. The defendant did not exercise its due diligence obligations, and therefore its behavior constitutes copyright infringement.

The litigation involves 83 incidents, involving more than 460 publications with a total value of more than 70 million yuan, according to the plaintiff.

The ruling in this case is not available to the public yet, but previous rulings in similar cases may give some clues as to the reasoning.

The plaintiff, COL, holds the copyrights of many well-known Chinese novels and books. It has been engaged with Apple on several other rounds of copyright litigation for a decade. In 2011, it brought the first copyright infringement lawsuit against Apple. By April of 2020, it had been granted compensation of up to 5 million yuan in multiple lawsuits, according to a report (link in Chinese) by China Intellectual Property Magazine.

In the most recent ruling {(2019) Jing 73 Min Zhong No. 3380} on a similar copyright infringement case brought by COL against Apple, Beijing IP Court sustained the ruling of the court of first instance that Apple infringed the plaintiff’s copyright because it failed to fulfill its due diligence.

In that case, the IP court first cited the court of first instance’s ruling:

Article 8 of the Provisions of the Supreme People's Court on Several Issues Concerning the Application of Law in the Trial of Civil Dispute Cases Involving the Infringement of Right to Disseminate works Online stipulates that the court shall determine whether the network service providers (NSPs) shall be liable for instigating or assisting infringement based on their fault. The NSPs’ fault includes knowing or should have known about the network user’s infringement of right to disseminate works online. According to the provisions of Article 9, Article 10, and Article 11 of the interpretation, it is necessary to comprehensively determine whether the NSPs should have known [about the infringement], based on whether the facts of infringement are obvious, the ability of NSPs to manage information through its service, and whether NSPs take the initiative to select, edit, and recommend the works, and various other factors. If the NSPs have directly obtained economic benefits from the [infringing] works, performances, audio and video products provided by the network users, the court shall determine that the NSPs have a higher level of due diligence for the infringement of  right to disseminate works online.

As the actual operator of the App Store, Apple has strong control and management capabilities over the App Store network service platform, based on its own business model, operating policies and terms of agreement. In the civil ruling of the Supreme People’s Court of the People’s Republic of China (2015) Minshenzi No. 1853, which is in effect, it stated that: “Apple basically controls the direction and standards of app development on the platform through a series of agreements including Apple Developer Agreement and Apple Developer Program License Agreements. According to the agreements, Apple not only permits and charges relevant developers to use Apple’s software to write and test applications to run in the iOS environment, and provide content and services such as related operating systems, documentation, software (source code and object code), applications, demonstration codes, simulators, tools, application inventory, API, data, and others to developers, it also requires developers to submit all apps to Apple for distribution and to agree to allow Apple to be the sole decider on whether to distribute the app or not. In determining the distribution, Apple has adopted the terms of the agreement which gives it almost absolute control. Apple has selected and chosen the apps to be published on its App Store based on its own policy and needs. Apple’s ability to control and manage apps through its platform makes Apple different from NSPs that simply provide information storage space services.”  ... In this case, considering Apple's ability to control and manage the App Store, Apple has not taken reasonable measures when it should have known that the apps involved were provided by the app developers without authorization. Therefore, it can be determined that Apple did not fulfill its due diligence; it is therefore at fault; the conduct involved in the case constitutes infringement.

The court of appeals, Beijing IP Court, then ruled that “although our country is not a case law country, in order to unify the judgment standards and save litigation resources, the legal determination of previous rulings has a certain guiding effect, unless the facts involved are inconsistent with the facts in the previous ruling.”

In this regard, the IP court acknowledged Apple’s claim that the facts in this case are different from the cited case, but the court found that Apple failed to provide any evidence.

In the end, the IP Court sustained the ruling of the court of first instance and a fine of 368,100 yuan (57,526 USD) on Apple. The fine was lowered than the 429,000 yuan requested by the plaintiff.

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