Most Chinese users of Apple's products, such as iPhone, iPad and iPod were not aware that the "official" owner of App Store is not Apple Inc., the US company with millions of enthusiastic fans in China, but a company registered in Luxembourg, i.e. ITunes S.A.R.L , until recent cases decided by Beijing No. 2 Intermediate Court between eight Chinese authors (plaintiff), Chinese All (plaintiff) and Apple Electronic Products Trade (Beijing) Co., Ltd. (defendant), Apple Inc. (defendant), and ITunes S.A.R.L (third party).
Who is "Chinese All"? According to its website, this company was established in 2000 in Tsinghua University, and as one of the pioneers of digital publishing in China, it consolidates and manages digital content authorized from original authors or copyright entities, and provides to portable devices, internet and other media. In this particular case, Chinese All was authorized by several Chinese authors to file the lawsuit.
The plaintiffs' main grounds include that after downloading iTunes software from Beijing Apple's website, users of Apple';s products can log in Apple's App Store to purchase and download applications which infringe the copyright owned by the plaintiff or the plaintiff's licensors, so the two defendants infringe the plaintiffs' right of dissemination through information network as well as the right of obtaining remuneration of the copyrighted works. Based on the above grounds, the plaintiffs claimed that the defendants shall stop infringement, make a public apology announcement on the homepage of App Store for consecutive 30 days, and pay the plaintiffs damages of RMB 13.78 million (roughly equivalent to USD 2.2 million).
On the other side, the two defendants argued that Apple Inc.'s main business is hardware products, such as iPhone, iPad, but does not operate App Store by itself; in fact, App Store is operated and managed by ITunes S.A.R.L, which is a company registered in Luxembourg. Therefore the two defendants did not infringe or assist in any infringement against the copyright claimed by the plaintiffs. Besides, the operator of App Store has already deleted the suspected infringing applications after receiving the effective notice. The operator of App Store, as an internet service provider, already paid reasonable attention and thus did not constitute contributory infringement with the developers of the suspected infringing applications.
In the decision issued on December 27, 2012, Beijing No. 2 Intermediate Court held that Apple Inc. is the actual operator of App Store and has strong ability in controlling and managing App Store, it selects and distributes applications uploaded by developers through App Store platform, and obtains direct economic interests through paid downloads, and thus should bear higher attention responsibility. In the present case, Apple Inc. did not fulfill its attention responsibility, and should be liable for the infringement. The Court finally decided that Apple Inc. should stop infringement, and should pay damages of totally RMB 1.03 million (roughly equivalent to USD 165,100) to the defendants. Both the plaintiffs and the defendants expressed that they would consider whether or not to appeal. By the completion of this article, there is no news on the appeal yet.
According to Article 2 of the Regulation on Protection of the Right to Network Dissemination of Information, "The owners' right to network dissemination of information is protected by the Copyright Law and this regulation. Except where otherwise provided for in laws or administrative regulations, any organization or person providing to the public the works, performances, or audio-visual recordings of others through information networks shall obtain the permission from, and pay remuneration, to the owners."
The main debating issue of the cases is whether Apple Inc. is the "organization providing to the public the works of others through information networks" (hereunder referred to as "direct provider") under the aforesaid Article 2, or merely a "network service provider" under Articles 14-17 of the same Regulation, because the respective responsibilities are different. A direct provider should bear the infringement liability as long as it actually provides infringing content; whereas a network service provider should not bear the infringement liability unless it receives notice from the right owner but does delete the infringing content.
Obviously, Apple Inc. was trying to prove its role or ITunes S.A.R.L's role as a "network service provider"; however, the Court held that Apple Inc. is the actual operator of App Store and has strong ability in controlling and managing App Store, it selects and distributes applications uploaded by developers through App Store platform, and obtains direct economic interests through paid downloads, and thus should bear higher attention responsibility.
In fact, it is not the first time that Apple Inc. is held liable for copyright infringement for the content in App Store. In November of 2012, Beijing No. 2 Intermediate Court also held Apple Inc. liable for copyright infringement over the Encyclopedia of China, which was provided for download at the price of USD 20.99 on App Store without authorization of its copyright owner, and granted damages of RMB 500,000 (roughly equivalent to USD 80,230).
Since Apple Inc. is the developer of ITunes program, and provide it for free download; all the applications on App Store are either directly developed by Apple Inc. or developed by third-party developers who have entered into "The Registered Apple Developer Agreement" and "IOS Developer Program License Agreement" with Apple Inc.; besides, the electronic invoices for purchasing applications on App Store also show "Apple Inc." as the recipient, therefore, it has been confirmed by Court in different cases that Apple Inc. is the operator of App Store.
Under such situation, it can be foreseen that Apple Inc. will face more and more litigations over copyright dispute in China. Though the earlier cases did not reach very high damages, especially comparing with its profit acquired in China, there is still substantial risk on the part of Apple Inc. as its market in China grows and the number of applications offered on App Store grows.
According to Article 49 of the present Copyright Law (2010), "If anyone infringes other's copyright or copyright related rights, the infringer shall pay the right owner damages according to the actual loss of the right owner; if it is difficult to determine the actual loss, the damages should be determined according to the illegal income of the infringer. The damages should also include the reasonable expenses of the right owner for stopping the infringement. Where it is difficult to determine the actual loss of the right owner or the illegal income of the infringer, the People's Court shall impose an amount of damages of no more than RMB 500,000 according to the circumstances of the infringement."
In actual practice, due to the difficulty of obtaining effective evidences to prove the either "the actual loss of the right owner" or "the illegal income of the infringer", the Courts often adopt statutory damages (i.e. no more than RMB 500,000).
According to the latest draft of Amendment of Copyright Law, which is under discussion, the statutory damages may be raised to RMB 1 million. If this amendment is adopted in the final version, it will be likely that the average damages granted in copyright infringement cases in future would be higher than the past.