Over recent years, live streaming e-commerce is rapidly gaining momentum. The first live broadcast e-commerce model started in 2016 with the use of live streaming tools to bring user traffic to e-commerce platforms for more online sales. During the decline in offline consumption from COVID-19 in 2020, live streaming e-commerce platforms acted as a lifeline for merchants. According to relevant statistics, within one hour of the June 18 “618” sales event, sales on Taobao Live already reached 2 billion. During the sales period, live stream sales from Li Jiaqi and Viya (the top two KOL live streamers in China) reached 8.5 million and 6.2 million, worth a total of RMB 2.7 billion and RMB 2.2 billion respectively. Meanwhile, “618” sales on Douyin Live achieved a GMV of over 1.4 billion.[i]
The live streaming e-commerce model has strongly boosted sales volumes and has energized the market. While such a sales model has brought forth many advancements, many existing problems in e-commerce, such as intellectual property and consumer rights infringements, have been exponentially magnified as a result. Moreover, whether live streaming platforms hold the legal responsibility for intellectual property infringements is also a long-standing dispute. In a recent landmark case, however, the Beijing Haidian Court recognised live streaming sales platforms as e-commerce platforms, which includes the penalties for trade mark infringements in the field of live streaming sales, and clarifies that an e-commerce platform is a platform that provides online live marketing services to parties through matching transactions, disseminating information and other services. Through this case, this article will set out the IP protection systems in live streaming sales platforms.
1. Case Summary
Recently, the Haidian Court held a landmark trade mark case in which live streaming sales platforms are recognized as e-commerce platforms. The Plaintiff, Saishi Trading (Shanghai) Co., Ltd. (“Saishi”) owns the exclusive right to use the trade mark “AGATHA” and its corresponding logo. Saishi discovered that Laizhou Hongyu Arts & Crafts Co., Ltd. (“Hongyu”) was selling handbags containing the "AGATHA" trade mark and logo on the Douyin live stream, and brought an action for trade mark infringement against Hongyu and Bytedance to the Beijing Haidian Court. The court held that 1) Hongyu’s sale of the goods in question constituted as infringement; and 2) the transaction provided by Douyin to the parties in terms of online marketing services on its platform belonged to the field of e-commerce. Though Bytedance was sued due to its alleged lack of reasonable duty of care, evidence of its performance of timely pre-audit, prompting, and disposal measures has led the court to find that Bytedance had performed its duty.
The court also held that e-commerce activities in live streaming e-commerce platforms have their unique features, and it is not appropriate to adopt overly strict pre-review standards for them. Instead, it should be combined with the following: whether the platform has established an access mechanism for live e-commerce, whether it has formulated and made public the live stream marketing management norms or platform conventions, whether the review of the qualifications and products of live broadcast room operators has been performed, whether a negative list has been established, whether intellectual property rights protection rules have been established, whether necessary complaints and reporting mechanisms have been established, and whether timely and necessary actions have been taken in order to determine if the e-commerce platform operators have fulfilled their reasonable duty of care.[ii]
2. Intellectual Property Protection Mechanisms of E-Commerce Live Streaming Platforms
2.1 Intellectual Property Laws and Regulations relating to Live Streaming
Live streaming e-commerce combines both advertising and sales, and is also subject to several laws, regulations and policies such as the Anti-Unfair Competition Law, the Advertising Law, the Law on the Protection of Consumer Rights and Interests, the Product Quality Law, the Food Safety Law, the Price Law, and the Provisions on Ecological Governance of Network Information Content, amongst others. Regulations relating more to intellectual property rights can be found in the Civil Code, the E-Commerce Law, the Measures for the Administration of Live Streaming Marketing (for Trial Implementation), Code of Conduct for Live Streaming Marketing and the Official Reply of the Supreme People's Court on Several Issues Concerning the Application of Law to Disputes over Internet-related Intellectual Property Rights Infringement, the Supreme People’s Court’s Guiding Opinions on the Trial of Civil Cases Involving Intellectual Property Rights on E-commerce Platforms, and the Guiding Opinions of the State Administration for Market Regulation on Strengthening the Supervision of Online Live Streaming Marketing Activities.
2.2 The Legal Status of Live Streaming E-Commerce
According to the provisions of the E-Commerce Law, e-commerce operators refer to natural persons, legal persons and unincorporated organizations that engage in business activities of the sale goods or provision of services through information networks such as the Internet, including e-commerce platform operators. An e-commerce platform operator refers to a legal person or unincorporated organization that provides services such as network operations, transaction matching, and information release for both parties or multiple parties in e-commerce in order for the two parties or multiple parties to independently carry out transaction activities.
Although social media and related live streaming and audio and video platforms are not set up for e-commerce, they in fact provide platforms and services for some e-commerce practices. According to the Guiding Opinions of the State Administration for Market Regulation on Strengthening the Supervision of Live Streaming Marketing Activities issued on 6 November 2020, a network platform that provides network business premises, transaction aggregation, information release and other services for operators who adopt live streaming to sell goods or provide services for both or more parties to carry out independent trading activities, especially operators that offer live streaming e-commerce services, should accord to the provisions of the E-Commerce Law. Moreover, in the case of this article, the court held that with the innovation of Internet technology and the diversification of online marketing models, the current platforms for e-commerce activities are no longer limited to the traditional platforms with e-commerce as their main business, and as live broadcast platforms, audio and video platforms and other platforms whose main business is to produce and provide content are also gradually providing online live streaming marketing services for their users. Therefore, for live streaming e-commerce platforms, the actual service provided is not only "inbound marketing", but also involves assisting in the sale of products. It falls within the relevant definition in the E-Commerce Law and should be regarded as an e-commerce platform.
2.3 IP Protection Mechanisms
For live streaming e-commerce platforms, IP issues are mainly related to counterfeit and inferior products. This requires the platform to establish and improve IP protection rules and complaint handling mechanisms, so that there are reviews and prompts in advance, regulatory warnings and timely disposal or punishments. In specific:
Setting up a pre-access mechanism
- Form and improve user agreements to clarify the ownership and use of intellectual property rights between platforms and participating entities such as merchants, anchors, and users;
- Establishing service agreements and rules for the hosts, set out the code of conduct for live streaming marketing behaviours, consumer rights protection, intellectual property protection, including trademark usage specifications, content creation specifications, content violation management measures, and more;
- Signing agreements with live marketing service agencies and live streaming room operators, requiring them to regulate the recruitment, training and management process of live marketing personnel, and to fulfill their obligations to review the authenticity and legality of live marketing content, goods and services;
Establish a complaint mechanism for handling intellectual property infringement disputes
- Establish rules for dealing with the sale of counterfeit and low quality products, infringement of other people's intellectual property rights such as trademark rights, copyrights, patents and unfair competition, as well as other violations such as name rights, portrait rights and reputation rights.
- Improve the dispute handling interface mechanism between platforms, provide adequate information support for consumers in accordance with the law, and actively assist consumers in safeguarding their legitimate rights and interests;
- Establish a convenient complaint and report mechanism, publicise information on complaint and report methods, and handle complaints and reports in a timely manner. For example, this can include providing guidelines for infringement complaints, by clearly setting out channels for accepting complaints, providing a list of supporting documents and requirements (and provide corresponding templates if necessary), handling process and feedback periods, amongst others;
- According to the provisions of Article 41, Article 42 and Article 43 of the E-Commerce Law, implementation measures on the notification and declaration of no infringement mechanism within the platform shall be formulated according to the types of intellectual property rights and the characteristics of goods or services. However, the relevant measures should not set unreasonable conditions or obstacles for the parties to safeguard their rights in accordance with the law.
- When consumers redirect to other platforms to buy goods or receive services through links or QR codes in the live room, and subsequent disputes arise, the relevant live streaming marketing platforms shall actively assist consumers to safeguard their legitimate rights and interests and provide necessary evidence and other support.
- Take measures such as blocking live broadcasts, closing accounts, blacklisting, and joint disciplinary actions for violations of laws and regulations.
Follow the "red flag principle" and "safe harbour principle" in intellectual property infringement, and strictly implement the "notice-delete" obligation in the platform
In regard to the infringement of the intellectual property rights in live broadcast marketing, the platform undertake the obligation of ‘notification -> deletion (blocking) -> statement of non-infringement -> restoration’ in accordance with the "safe harbour principle". However, it should be noted that according to the "red flag principle", that is, if there is an obvious infringement of the live streaming content, the platform cannot ignore it, or rely on lack of knowledge of the infringement as a defence for not being liable. If the platform knows or directly participates in the act, it needs to bear joint responsibility with the infringer. Therefore, content that is put on the top, forwarded, and recommended by the platform should be more carefully reviewed, and when obvious infringing content is found, it is necessary to take timely and proactive measures. Regarding the handling process of IP infringement on the network platform, the relevant legal regulations and judicial interpretations slightly vary. The relevant comparison is as follows:
Complaint Handling Process
Responsibility of the Platform
- Civil Code (1 January 2021)
- Notice (including the preliminary evidence of infringement and the true identity information of the right holder)
- Transfer notice (and take necessary measures based on the preliminary evidence and service type that constitute the infringement)
- Counter-notification (that is, a declaration of non-infringement, provision of preliminary evidence and identity information)
- Second transfer notice (and inform the relevant department to complain or file a lawsuit in the court)
- No reply within a reasonable time
If necessary measures are not taken in time, they shall be jointly and severally liable for the extended part of the damage.
If they are aware or should be aware of the infringement, and fail to take necessary measures, they shall bear joint and several liability.
E-Commerce Law (1 January 2019)
- Notice (including preliminary evidence of infringement)
- Take necessary measures in time and transfer notice
- Counter notice (i.e. non infringement declaration, provide preliminary evidence)
- Second counter notice (and inform relevant departments to complain or sue to court)
- (if no reply within 15 days)
Reply of the Supreme People's Court on Several Issues Concerning the Application of Law in Internet Intellectual Property Infringement Disputes (14 September 2020)
2. the network service providers, e-commerce platform operators receive the notice issued by the intellectual property rights according to law, the rights holder shall promptly forward the notice to the relevant network users, operators within the platform, and take the necessary measures based on prima facie evidence of infringement and the type of service.
3. Within a reasonable time limit after the legally transmitted statement of non-infringement has reached the intellectual property right holder, if the network service provider or e-commerce platform operator has not received the notice that the right holder has filed a complaint or filed a lawsuit, it shall terminate the lawsuit in a timely manner and take removal, blocking and disconnection measures accordingly. The delay caused by special circumstances beyond the control of the right holder such as notarization and certification procedures shall not be included in the above period, but the maximum period shall not exceed 20 working days.
If necessary measures are not taken in accordance with the law, the People’s Court may support the right holder’s claim that the network service provider or e-commerce platform operator shall bear joint and several liability for the enlarged part of the damage to the network user or the operator in the platform.
The Supreme People's Court "Guiding Opinions on the Trial of Civil Cases Involving Intellectual Property Rights of E-Commerce Platforms"
(10 September 2020)
3. If an e-commerce platform operator knows or should be aware of an infringement of intellectual property rights by an operator on the platform, it should take necessary measures in a timely manner based on the nature of the right, the specific circumstances and technical conditions of the infringement, as well as the preliminary evidence that constitutes the infringement, and the type of service. The necessary measures taken should follow the principle of reasonable care, including but not limited to removal, blocking, disconnecting and other removal measures. If the operators on the platform have repeatedly and deliberately infringed on intellectual property rights, the operators of the e-commerce platform have the right to take measures to terminate transactions and services.
11. Where an e-commerce platform operator falls into one of the following circumstances, the People’s Court will determine that it “should be aware of” the existence of the infringement:
(1) Failure to perform legal obligations such as formulating intellectual property protection rules and reviewing the operating qualifications of operators on the platform;
(2) The evidence of rights of the operators whose stores are marked as "flagship store" or "brand store" on the platform have not been reviewed;
(3) Failure to adopt effective technical means to filter and block infringing product links containing words such as "high imitation" and "fake goods", and relisting links to infringing products after the complaint is established;
(4) Other circumstances where obligations of reasonable review and care have not been fulfilled.
Generally speaking, the platform should take necessary measures for obvious infringements, including but not limited to deleting and blocking links. However, when it is impossible to confirm whether the infringement is sufficient based on the preliminary evidence provided by the right holder, the platform should urge both parties to proceed through judicial means.
In the e-commerce era, live streaming of goods remains extremely popular as it brings a rich consumer experience to consumers. While top live streamers continue to break their sales records, they also have exposed many problems. Different from traditional e-commerce, the live streaming of goods integrates the two formats of "live broadcast" and "selling goods" and has the characteristics of "e-commerce + promotion + shopping guide + selling goods". It also involves many parties such as merchants, anchors, and live broadcasting platforms, which in turn lead to complex legal relationships. There is an urgent need for a team of lawyers with comprehensive and in-depth knowledge and experience in fields such as e-commerce, network intellectual property protection, online entertainment, information network security, and Internet advertising to fully grasp the compliance standards in combination with characteristics of the live-streaming industry. In terms of specific matters in the field of live e-commerce, in addition to the drafting and reviewing of platform user agreements, service agreements and rules of the host, and codes of conduct for live streaming e-commerce, it may also be necessary to conduct relevant compliance training, drafting and reviewing of agreements and guidelines for all participants in the live broadcasting industry.
 E-Commerce Law of the People’s Republic of China
Article 41: E-commerce platform operators shall establish rules for the protection of intellectual property rights (IPR), strengthen cooperation with intellectual property rights holders, and protect intellectual property rights in accordance with the law.
Article 42: If an IPR holder believes that their intellectual property has been infringed, they have the right to notify the e-commerce platform operator to take necessary measures such as deleting, blocking, disconnecting, and terminating transactions and services. The notice should include preliminary evidence of infringement.
After receiving the notice, the e-commerce platform operator shall take necessary measures in a timely manner and forward the notice to the operator on the platform; if the necessary measures are not taken in time, the operator on the platform shall be jointly and severally liable for the enlargement of the damage.
If the operator on the platform is harmed due to an error in the notification, they shall bear civil liability in accordance with the law. If an error notice is sent maliciously and causes loss to the operators on the platform, the liability for compensation shall be doubled.
Article 43: After receiving the forwarded notice, the operator on the platform may submit a statement that there is no infringement to the e-commerce platform operator. The statement should include preliminary evidence that there is no infringement.
After receiving the statement, the e-commerce platform operator shall forward the statement to the IPR holder who issued the notice and inform them that they can lodge a complaint with the relevant competent authority or file a lawsuit with the People’s Court. If the e-commerce platform operator does not receive a notice of complaint or lawsuit within 15 days after the transfer statement reaches the intellectual property right holder, it shall terminate the measures taken in a timely manner.
Author: Sunny Su & Jennifer Xia(Lusheng Law Firm(Rouse's strategic partner))