King & Wood’s Intellectual Property Group

In recent years, the world has witnessed several milestone events signaling the arrival of a new generation of global internet companies. Apart from the much-hyped dawn of social media, there is a much broader trend taking place, one that has outgrown the traditional boundaries of the tech sector itself. “In short,” as Marc Andreessen wrote in a recent Wall Street Journal column, “software is eating the world.” As corresponding developments are happening in China, this new era has caused and will continue to cause dramatic implications on the monitoring and enforcement of intellectual property rights in the country.

In the United States, consider the examples that Andreessen cites in his article. With the fall of Borders earlier this year, Amazon is now the largest bookseller in the US; but through the power of software, Amazon is beginning to emerge as a threat to the traditional retail industry. The most dominant and rapidly growing distributors of music, movies, and television programming are companies like Netflix and Apple (through its iTunes service), both of which sell and stream their content entirely online. The world’s fastest growing telecom company is Skype (purchased by Microsoft earlier this year). The fastest-growing recruiting company? The newly-listed LinkedIn. Even the multi-billion dollar gaming industry is being taken over by online gaming providers such as Zynga and leaving behind traditional hardware manufacturers such as Sony and Nintendo.

Parallel developments are also taking place in China, where the social, political, and regulatory landscape have made the domestic internet sector notoriously difficult to penetrate for foreign players. Fast-growing consumer e-commerce websites such as Alibaba’s Taobao and are squeezing the market share of traditional brick and mortar retail businesses. Online video providers such as and Tudou are beginning to partner with media production companies such as Time Warner and Disney to provide paid video-on-demand services.

As the retail industry begins to migrate online and the prospects of e-commerce have become more lucrative for small businesses, the online sales of counterfeit goods have also spiked in recent years. Likewise, the more primitive methods of copying DVDs or sharing media through the web are now giving way to streaming media websites that often contain copyrighted movies or television programming. The result is that the battle between intellectual property infringers and enforcement efforts to contain them is increasingly taking place online and within the bounds of software platforms operated by third parties such as Taobao and Youku.

Rather than employing litigation tactics or notifying the authorities, shutting down a retail operation for counterfeit goods now often involves notifying consumer-to-consumer or business-to-consumer software platforms of the infringing activities. Similarly, rather than seeking to destroy countless DVD copies of copyrighted content, removing infringing media from mass distribution involves corresponding with online video-sharing platforms. In both cases above, the platform provider risks exposure to secondary liability if it is notified of infringing content and fails to make sufficient efforts to remove such content or accounts.

Thus, as infringement activities become consolidated onto online software platforms, whether these activities be the sale of counterfeit goods on an e-commerce site or the distribution of a copyrighted content on an online video site, the methods of monitoring and controlling intellectual property infringement are changing.

The traditional view of the IT sector is that the internet has transformed the way we obtain, process, and communicate information, whether that information is in the form of a study in an academic journal or the latest status update from a friend on Facebook or Renren. However, in this new world of software-dominated companies, the internet is not only a means of manipulating information, but a means of providing consumer goods, entertainment,  and services (the list goes on). How this will continue to shape the future of intellectual property enforcement in China remains to be seen.

(Contributed by Peter P. Li)