China: Unitalen Obtained Pre-Trial Behavioral Preservation In The Tencent v. Oppo Et Al Unfair Competition Case

Last Updated: 26 July 2018
Article by Unitalen Attorneys At Law

Case Summary

Oppo and ATC (jointly as "the respondents") implemented a series of acts on Oppo mobile phones, including forcing registration of Oppo account and popup window prompting for password identity verification when users install the "Tencent Mobile Phone Manager" downloaded from the official website of Tencent (the applicant) and download applications in the "Tencent Mobile Phone Manager", which has disrupted users' experience and normal operation of Tencent's software, interfered users' selection and hindered the normal installation of the downloaded software. The evidence submitted by the applicant also showed that the respondents differentiated the user experience between the applicant's "Tencent Mobile Phone Manager" product and the products of the respondents and other competitors.

Tencent therefore filed an application for Pre-trial Behavioral Preservation with Wuhan Intermediate People's Court against Oppo, ATC and Henghua Operation Division.

The Ruling

Wuhan Intermediate People's Court held that the following factors shall be considered: 1) The applicant is the interested party of this case and is entitled to filing a preservation application. 2) There is a likelihood that respondents have constituted unfair competition, by differentiating the user experience between the applicant's "Tencent Mobile Phone Manager" product and the products of the respondents and other competitors, which intentionally interferes the normal use of the applicant's application with worse experience to influence users' selection, so as to take advantage of the reputation, market influence and user base of the applicant's application for promoting the respondents' own products. In addition, as an Oppo mobile phone dealer, Henghua Operation Division's sales of mobile phones has increased the impact on the applicant, thus may constitute contribution to unfair competition acts. 3) If the above behavior is not stopped in time, it will seriously jeopardize the applicant's interest and may cause irreparable damage to the applicant's competitive advantage and market share. 4) Ordering the respondents to stop misconduct will not harm public interests, as the preservation measures will only require the respondents to stop the interfering behavior and will not affect the normal use of the Oppo mobile phone itself or adversely affect the interests of consumers and market order. 5) The applicant has provided a corresponding guarantee. As for the determination of the amount of guarantee and the form of guarantee, it requires a comprehensive consideration of factors such as the likelihood of the applicant's success and the possible loss that may be suffered by the respondents due to preservation measures. In this case, the applicant provided a guarantee in the form of a 10-million-yuan liability insurance guarantee letter issued by an insurance company. The amount and form of the guarantee met all the requirements.

Based on the above, Wuhan Intermediate People's Court ruled that 1) The respondents, Oppo and ATC, shall immediately stop the setting on the Oppo phones that will redirect users to the page of "Oppo Application Store" when they download and install "Tencent Mobile Phone Manager" application through the applicant's official website, or any other behavior in similar manner. 2) The respondents, Oppo and ATC, shall immediately stop the setting of identification verification prompt popup window and redirecting users to "Oppo Application Store" when they download and install applications in the applicant's "Tencent Mobile Phone Manager", or any other behavior in the similar manner. 3) The respondent Henghua Operation Division shall suspend the sale of Oppo mobile phones before Oppo and ATC stop the above-mentioned behaviors.

Typical Significance

The case was listed among "Top Ten Typical IP Cases in 2017" in Hubei Province.

The case reflects the new conflict in the mobile Internet industry competition, which is typical and attracts much attention from the society. As mobile phone manufacturers, the respondents in this case took advantage of the underlying system of the mobile phone and used technical means to interfere with the normal operation of the software legally provided by the applicant. The applicant initiated the litigation, applying for pretrial behavioral preservation and then claiming 80 million yuan's damage against the respondents. The respondents argued that its behavior was to maintain the safety of mobile phone use instead of unfair competition. The dispute of this case occurred before the latest amendment of the Unfair Competition Law, and there was no direct legal basis for judging this case. The handling of this case directly affects the demarcation of the competition boundary of related industries and the regulation of the competition order. As a new type of case in the country, with both sides being well-known technology companies - "Tencent" and "Oppo", the case has attracted great attention.

The case reflects the timeliness of behavioral preservation for effective prevention of misconduct and further expansion of damage. There is no established practice for this type of case in China yet, but the court has considered that infringement carries the characteristics of rapid speed, wide range, and large impact in the Internet environment; that in addition to the fast turnover for Internet products, once the user experience is damaged, the user base is lost and the usage habit is changed, it will be difficult to repair; and that if the above behavior of the respondents is not prohibited in time, it will seriously infringe on the interests of the applicant and may cause irreparable damage to the applicant's competitive advantage and market share. Therefore, the court reviewed the application and quickly issued an injunction to the respondents. This has laid a good ground for the subsequent handling of the case.

The case detailed the respondents' misconduct, detailed the misconducts that should be stopped, and provided direct guidelines for regulating competition behaviors and competitive order in the related industries. And due to the fair and efficient pre-trial junction ruling made by the court, the misconducts were promptly stopped, laying a good foundation to both parties for settlement. After communication with both parties, the court eventually prompted the two sides to shake hands and even concluded agreement for in-depth cooperation.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

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