People’s High Court of Shandong, Civl Judgment ( No.5-2(2010))

March 20, 2010

Summary:

       Beijing Baidu Wangxun Technology Co. Ltd. (hereinafter referred to as “Baidu”) started a legal proceeding on unfair competition at People’s Intermediate Court of Qingdao (“Intermediate Court”), listing China Unicom Co. Ltd., Qingdao Subsidiary ( “Unicom Qingdao”), China Unicom Co. Ltd., Shandong Subsidiary (“Unicom Shandong”), and Aoshang Network Co Ltd. (“Aoshang”) as the defendants, and listing Pengfei Airline (“Pengfei”) as the third party.

        Unicom Qingdao and Aoshang did not accept the judgment made by the Intermediate Court and appealed to People’s High Court of Shandong (“High Court”).

       The appellant Aoshang refused to appear in court without justified excuse after being served with summons, and thus was deemed to have withdrawn the appealing.

       Unicom Shandong and Pengfei, a defendant and the third party in the trial proceeding, refused to appear in court without justified excuse after being served with summons. The High Court, therefore, heard the case by default.

 Facts:

       Baidu, a search engine provider, discovered that web pages showing the results of internet searching via Baidu’s search engine, which should only show the results from the search engine without any other irrelevant pages, popped out irrelevant advertisement pages when search engine users accessed internet in the area where Unicom Qingdao was the internet access service provider.

       Aoshang and Unicom Qingdao committed the aforementioned acts of intervening internet search and benefited therefrom.

       The trial court declined to list Unicom Shandong among the defendants because: Unicom Shandong and the defendant Unicom Qingdao are both subsidiaries of the China Unicom Co. Ltd.; Baidu presented no evidence proving that one company set up the other, nor did Baidu have evidence proving that Unicom Shandong participated in the acts the trial court recognizes as established facts; in addition, Unicom Qingdao was a legal entity qualified to bear civil liabilities.

       The trial court also declined to list Pengfei as the third party because: Baidu failed to point out, in his pleading or during the trial, any acts of unfair competition from Pengfei or demand liability from Pengfei.

Issues:

Who are the proper defendants;

Whether Unicom Qingdao committed unfair competition.

Holding:

 Appeal is dismissed, the trial judgment is affirmed;

 Of the litigation cost of RMB ￥4300, the appellant Unicom Qingdao shall cover RMB ￥2150.

Reasoning:

       Unicom Qingdao and Aoshang are both market participators of Internet business, and thus are both “operators” as defined in the Anti-Unfair Competition Law of PRC.

       Unicom Qingdao and Aoshang, taking advantage of Baidu’s well-known and widely used search engine, commits the acts of showing to an internet search engine user advertise pages of Aoshang besides the search result when the user, accessing internet through the internet access service provided by Unicom Qingdao, does a keyword searching with Baidu’s search engine. These obviously are acts of making profits by exploiting Baidu’s market visibility, which acts failed to secure Baidu’s consent and are against internet users’ will, and thus violate the widely-recognized business ethics. 

       Moreover, Unicom Qingdao and Aoshang’s acts of forcefully popping out advertise pages before showing the result of Baidu’s search engine entice internet users, who might retrieve desired information through Baidu’s search engine, to click on the advertise pages, which adversely affects Baidu in providing services on his own will and thus frustrates Baidu’s business end and harms Baidu’s interest. In addition, the popup advertise pages might cause an internet user to mistaken the popup pages as the deeds of Baidu, which may lower internet user’s appraisal on Baidu and has adverse effect on Baidu’s goodwill.

       In view of the above, the court judges that Unicom Qingdao and Aoshang, whose acts constitute unfair competition, are liable.