China Media & Entertainment Law Report : China Media Lawyer & Attorney : Reed Smith Law Firm : Entertainment, Sports & Consumer Rights Law

If legal protections for intellectual property move too slowly in China, creators still have some recourse: public shaming. Dozens of Chinese authors, including China’s most widely read blogger Han Han, recently confronted search giant Baidu and its CEO Robin Li for facilitating online piracy of books on a massive scale through its Baidu Wenku (Library) service. Although the authors’ campaign led Baidu to remove an estimated 2.8 million copyrighted files from its service, many issues remain unresolved, including compensation for past piracy and mechanisms to prevent future infringement. The controversy presents an opportunity to explore the powers and limits of public pressure in framing a case and compelling compliance outside of the court system.

At the end of March, around fifty Chinese authors signed a letter to Baidu requesting compensation for illegal downloads of their copyrighted materials and asking that Baidu install a system to review uploaded documents to determine whether or not they infringe on an author’s copyright. When initial negotiations broke down, the backlash from Chinese authors was considerable, with numerous angry and, naturally, well-written essays criticizing Baidu and Robin Li appearing on the internet. 

While the creators’ complaints received coverage in both the English and Chinese language media, perhaps the most important commentary came from Han Han, who used his online megaphone to frame the issue as not only Baidu’s exploitation of China’s lax IP protections but also Robin Li’s personal moral failing in two acerbic blog posts. Within days, Baidu had issued an apology to writers, promised to remove millions of files, and arranged to continue discussions with industry representatives regarding compensation and Baidu’s planned infringement prevention system.

The use of public pressure to push an ideal of intellectual property protection appears to be a powerful social development in favor of creators with significant commercial implications, but the effects on China’s legal development may be mixed. We will report developments on this as they arise.

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The dispute between software companies Qihoo 360 and Tencent late last year revealed complex relationships among Chinese regulators, netizens, media outlets, and the companies themselves. 

The dispute, which escalated through September and October before it was quashed by the Ministry of Industry and Information Technology (MIIT), had its roots in the competition to provide China’s over 450 million internet users with antivirus software. Tencent, which operates the wildly popular Chinese instant messaging service QQ, alarmed Qihoo 360 by auto-installing its QQ Doctor software along with the instant messenger. Qihoo 360, the leading provider of antivirus software in China, struck back by accusing QQ of spying on its users and labeling QQ malware. In an effort to force users to take sides, Tencent then halted QQ services on any computer with Qihoo’s antivirus software installed, gambling that users would choose to keep using their familiar instant messaging software as opposed to a much less well-known antiviral product. 

Unfortunately for Tencent, their move to hold QQ hostage was widely panned and derided by netizens as rumors swirled that Qihoo 360 was correct about QQ’s proclivity to track users’ behavior. As the embarrassing war of words dragged on, providing endless fuel for netizen satirists and creating space for international companies to target newly dissatisfied Chinese consumers, the Chinese government began to get involved. Articles in China Daily and other state-run media harshly criticized both companies and called for a resolution to the conflict. Next, MIIT began its own investigation into Tencent and Qihoo’s business practices and compliance with national laws and regulations. It determined that the two companies were both at fault for engaging in non-competitive practices and ordered the companies to cease their conflict, restore mutual compatibility, and apologize to the public.

MIIT’s involvement ended the dispute and seems to have largely restored the status quo, but the conflict spurred the development of a new regulation. On January 14, MIIT released for public comment the Provisional Measures on the Supervision and Management of Order in the Internet Information Services Market. The draft Measures would bar providers of online services from interfering with other providers’ provision of legitimate and legal products or services and from discrediting competitors. The draft also emphasizes the importance of protecting users’ information, prohibits software that maliciously blocks or intercepts information from internet services, and directs companies to desist from bundling software products.

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On March 30, the State Administration of Radio, Film and Television (“SARFT”) issued a new regulation, entitled “Notice on Strengthening Content Management of Online Audio-Video Programs” (“Notice”), that established licensing requirements for films, TV series, cartoons, and documentaries that are to be broadcast via the Internet. The Notice also set forth a list of 22 types of audio-video programs that online program service providers would be required to remove in a timely manner. Privately owned online program service providers are not prohibited from applying for licenses. However, licensing requirement provisions may be difficult to enforce because approval procedures may end up being too time consuming given the demand from users for timely content.

The Notice supplements the “Provisions on Administration of Internet Audio-Visual Programs” (“Provisions”) that were issued by SARFT and the Ministry of Information Industry (formerly the Ministry of Industry and Information Technology) on December 20, 2007. The Provisions required all online audio and video service providers to apply for an “online Audio-Visual Broadcasting License.” According to reports from Guangzhou Daily, in April 2008, 23 online audio-visual websites were among the first group to receive licenses under the Provisions. In December 2008, SARFT released a list of 332 online audio-visual websites that had been granted licenses. At present, almost all of the privately-owned online audio-visual websites that enjoy industry clout (e.g., www.tudou.com, www.youku.com, and www.ku6.com) have received licenses. Some websites have been shut down due to a failure to obtain a license as required by the Provisions.

Online Audio-Video 22 Prohibitions

The Notice requires Online content providers to remove any content that can be deemed to:

1. maliciously misinterpret Chinese culture, history or historical facts, or maliciously misinterpret the history of other countries, disrespect human culture, or the cultures and customs of others;
2. intentionally disparage revolutionary leaders, heroes, important historical personalities, or famous Chinese or foreign literary works or important characters of such famous literary works;
3. maliciously disparage the image of the people’s army, armed police, public security bureau and justice organs, or contain content about maltreatment of prisoners or extraction of confessions through torture, etc;
4. display criminal aggression, disclose specific investigation methods or disclose the image or voice of reporters or witnesses when they should be protected, etc;
5. preach religious extremism, provoke conflicts between different religions, different branches of religions or between religious and non-religious individuals, or harm public sentiment;
6. propagate superstitious activities such as fortune-telling, etc;
7. adopt an ironic or mocking tone in describing natural disasters, accidents, terrorist incidents, wars or other disasters;
8. graphically display promiscuous behavior, rape, incest, necrophilia, sexual perversion, etc;
9. display or imply sexual behavior or details related thereto;
10. intentionally display sexual organs;
11. contain suggestive sexual content;
12. contain content concerning extramarital affairs, sexual maltreatment or other related issues;
13. use “pornography” or other provocative words or pictures as video titles;
14. contain graphic murder scenes involving sexual activity, violence, suicide, kidnapping, drug use, gambling or other similar content;
15. contain scenes, subtitles, background music or audio effects that contribute to a sense of excessive horror;
16. graphically display content concerning the slaying or mistreatment of animals, or
17. capture and consumption of state-protected animals;
18. infringe upon individual privacy;
19. display fighting or abuse in an affirmative way;
20. preach a negative life outlook or worldview, or intentionally exaggerate backward tendencies among people or the dark sides of society;
21. contain scenes from films, television series or programs prohibited by SARFT;
22. violate the spirit of related laws and regulations.

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On May 19, the PRC Ministry of Industry and Information Technology (“MIIT”) issued a controversial regulation requiring all computer manufacturers to equip computers and PDAs manufactured in or shipped to China as of July 1 with “Green Dam Youth Escort” filtering software. The controversy, originating both from within China and abroad, included concerns over anti-trust, copyright infringement, and security and privacy issues. Despite efforts by MIIT to assure the public of the reasonableness of the regulation, it postponed implementation just prior to the July 1 deadline. In a mid-August press conference during which he acknowledged that the Green Dam launch had been mishandled, MIIT Minister Li Yizhong clarified that even though the software would not have to be installed on personal computers, it would still be mandated on school and Internet cafe computers.

The government sought to develop the Green Dam software to limit access to Internet content deemed “potentially damaging,” and to build on the government’s “Special Campaign to Restore the Internet from a State of Vulgarity.” Unlike previous methods of Internet censorship employed by the Chinese government which controlled content at the ISP and ICP levels, Green Dam, dubbed “The Filtering Bully” by Chinese Internet users, represented a new form of monitoring that linked computers and users directly to databases of prohibited sites and blocked access to prohibited addresses.

Some of the more prominent criticisms from sources such as Chinese legal experts, technology providers, international organizations, governments, and Internet users are summarized below.

1. Anti-trust complaints. Two Chinese law professors brought complaints to MIIT and the Anti-monopoly Committee stating that MIIT’s exclusive specification of Green Dam software represented a breach of China’s Anti-Monopoly Law (“AML”). The professors argued that the government abused its authority and excluded competition in violation of Articles 8, 32 and 37 of the AML to the extent it did not allow other software manufacturers to develop competitive filtering products.
2. Consumer rights violations.  Article 9 of China’s Consumer Protection Law provides that consumers have discretion in choosing products and services. Thus, pre-installation of Green Dam software breaches consumers’ rights to Internet filtering software options.   
3. Security and privacy. A University of Michigan analysis of Green Dam software revealed various security vulnerabilities, potentially allowing malicious sites to steal private data, send spam, or transform personal computers into “botnets,” which allow hackers to control computers installed with Green Dam. 
4. Copyright infringement. The authors of the University of Michigan study also suggest that a number of blacklisted files used by the Green Dam software were taken from the American-made censorship program CyberSitter. Other reports indicated that Green Dam lifted code libraries and configuration files from another software company. Solid Oak, a small US software company, said it had evidence to support a copyright infringement claim against Green Dam’s developers.
5. International trade concerns. The US government met with representatives of the Chinese government, notifying them of concerns with respect to potential international trade violations surrounding the implementation of the Green Dam regulation.

Regulators Crackdown on Google

The month of June also saw the government temporarily shut down some Google search functions after a report released by the China Internet Illegal Information Reporting Center indicated that Google China’s search engine contained “vulgar” online search results. Soon after the report was released, Google was the subject of intense public criticism including substantial television coverage from China’s central television station (“CCTV”). Industry followers and Chinese Internet users noted that similar search results could be found at any number of Google competitors, foreign and domestic. Mr.Li Kaifu, the president of Google’s China operations, was asked to meet with Chinese regulators to discuss this issue and develop solutions to the problem. Google promised to strengthen its control of “vulgar” online search results in China in order to assure compliance with PRC laws and regulations. 

Given the extent of coverage by the Chinese government and media on the issue of pornography and Internet use, and criticism directed at Google China’s management of Internet searches for pornographic content, we can expect more developments on the Green Dam/censorship front in the future.    This is not an easy issue for regulators from any country to tackle. China’s first major attempt at implementing regulatory measures at the consumer level did not work out as planned, but it probably won’t be the government’s last. Given the extent to which Google appeared to be singled out from some of its domestic competitors, foreign service providers and technology companies should be particularly sensitive to heightened oversight and potential investigations from PRC regulators. 

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