In August 2018, an E-commerce Law for the People’s Republic of China was adopted. On 31st of August 2021, the Standing Committee of the National People’s Congress of the PRC began conducting a public consultation on proposed changes to increase liability provisions for e-commerce platforms that breach the law or support infringing vendors on their platform. In extreme cases, they can be restricted from online business operations or have their licenses revoked. It would appear that China’s online watchdog intends to strictly regulate e-commerce to prevent IP infringement.
The public can provide feedback to the proposed law amendment until October 14 by submitting comments on various channels including placing an opinion on the interactive part of the website of the State Administration for Market Regulation. Further details are described below.
The E-commerce Law of the People’s Republic of China of 2018 regulates the duties of platform operators to remove IP infringement from their platforms and establish legal liabilities for them. In this regard, platform operators could be jointly and severally held liable together with on-platform acting infringers, if they knew or should have known that an on-platform business operator infringes any intellectual property right and failed to take necessary measures such as deleting, blocking or disconnecting links and terminating transactions or services.
However, the law requires notification of the IP owner together with proof of infringement for the platform operator to take necessary measures. Normally, the platform operator would then forward the notice to the accused on-platform business operator. The alleged infringer may submit a declaration of non-infringement of the IP right to the platform operator. The IP owner is required to take legal action against the infringers in a court or at a relevant authority. If the platform operator does not receive a notice within 15 days from the IP owner that a legal action or complaint was filed, they will not take any action against the alleged infringer.
The proposed changes in the new draft seek to make these provisions more effective. The IP owner would have more time to start a legal action (20 working days). The alleged infringer on the other side may achieve a temporary stop of measures taken by the platform, if the alleged infringer provides a guarantee to ensure compensation for loss caused by the potential IP infringement.
These are minor changes to fine-tune the balance between IP owners and alleged infringers, while platform business operators and the platform providers will face higher liabilities. If a platform vendor provides untrue declarations of non-infringement to the IP holder, the platform business operator is subject to double liability for any losses to the IP holder resulting from this.
Most importantly, platform providers themselves who do not follow key provisions of the E-commerce law with regard to IP are facing a threat from the regulators to restrict the e-commerce platform operator from carrying out relevant online business operations. In very extreme misconduct cases, revocation of relevant licenses for online business operations may be seen.
This threat may provide some leverage against platform operators who are not fulfilling their duties under the IP protection clauses of the law and will motivate them to ensure that procedures are followed diligently, should this become the new law.