China’s online retail sales reached RMB5.16 trillion ($752 billion) in 2016. This year is on course to outstrip that – in the first six months of 2017, the number was RMB3.1 trillion.
Not surprisingly, the number of internet-related disputes is also soaring. The Hangzhou Internet Court was set up to target this. It’s been just over two months since the court started operating. Managing IP spoke to practitioners to get a sense of how the opening has gone, areas for improvement and future expansion into other areas.
Home to numerous internet companies – including Alibaba – Hangzhou was an obvious choice for where an internet court should be to make the process of resolving internet-related disputes more efficient. Alibaba and Taobao both include in their service agreements that any disputes arising from their internet service are to be judged by the court in the defendant’s domiciled.
Equivalent to the Local People’s Court, the internet court accepts filings electronically and cases are tried online through livestreaming. The court can handle cases ranging from contract and product liability disputes from online shopping, disputes arising from online financial loan contracts, disputes of online copyright infringement, disputes of internet domain names, internet service disputes and disputes arising from internet usage against others’ right of personality.
The court is limited to the Hangzhou jurisdiction, meaning the complainant or defendant must be located in or connected with Hangzhou. “The court has accepted a good number of cases so far, but most of these cases have been business to consumer disputes or disputes between local Chinese companies,” says Eugene Low, partner at Hogan Lovells. “There doesn’t seem to be a lot of cases involving foreign companies.”
Low adds: “Product liability cases seem to be the majority with over a thousand cases so far. A lot of these claims have been brought by individual consumers against e-commerce platform operators and there have been over 500 online copyright dispute cases.”
Elliot Papageorgiou, head of IP at Clyde & Co China, says “a glowing omission” is that the court does not handle trade mark cases.
“It could be because the Hangzhou court does not want to usurp jurisdiction from other courts that may be handling trade mark cases – to do so would not necessarily be more efficient,” says Papageorgiou. “Local courts would in any event still need to be used where there is no jurisdictional nexus with Hangzhou. Due to the very nature of copyright material and the ability to deliver such material virtually, such cases are indeed often more amenable to online infringement.”
Papageorgiou adds: “There is some scope for streamlining. There are several forms that require completing and they are not always user-friendly.”
A 15-day pre-litigation mediation process is mandatory to encourage parties to discuss their issues and to reduce the load of the court. With a high level of transparency and data sharing capabilities, the court could provide businesses and consumers with more case studies to learn from. Interestingly, identity verification is done through Alipay (Alibaba’s mobile and online payment platform), which brings into question the type of data that Alibaba is able to extract from cases.
If the Hangzhou internet court works and made more streamlined, similar courts could be further rolled out in the rest of China especially in e-commerce hubs. “Shenzhen could be an ideal next pilot, or indeed a permanent location,” says Papageorgiou.
