Infringement Liability of Cloud Server Providers

Source of Judgment:
China Judgements Online http://wenshu.court.gov.cn/

　　On June 20, 2019, Beijing Intellectual Property Court made a decision for the first IP infringement case related to cloud servers. In addition to overrule the holding of indirect infringement in the first instance and hold the cloud server not liable, the court also discussed in detail the nature and tort liability of the cloud server, as well as how to exempt the indirect infringement liability. Therefore, the right holder who wishes to assert its rights on the Internet platform may also learn from this case.

　　The right holder in this case is the copyright owner and developer of a mobile game named "I'm MT Online", which, after receiving a complaint from one of its players, found that a pirated game has been stored on the Ali Cloud server whereby the game service was provided to the customers. Thereafter, the right holder has issued in total three notices to Ali Cloud:

 1. For the first time: It was sent through the "Work Order Support" section provided on the Ali Cloud website for customers to solve technical problems of the cloud products. Ali Cloud customer service replied to the right holder, asking it to report to a specific e-mail address.

 2. For the second time: On the same day, the right holder sent an email entitled "Private Server Disposal for I'm MT" to the designated mailbox, but the content only contained the download URL for the infringing game version, the sender's name, company name, and the email address, etc.

 3. For the third time: the right holder sent a Letter of Notification to Ali Cloud through express delivery service. This letter contains no annex, but a general description about the infringement and their demands, without any contact information of the right holder or any preliminary materials that are sufficient to determine an infringement occurred.  

　　In the first instance, the court held that the second and the third notices issued by the right holder were valid. However, Ali Cloud did not take any measure until the litigation proceedings, which has passed the reasonable time period to respond. As a result the court ruled against Ali Cloud.   

　　In the second instance, the Court revoked the decisions of the first instance, holding that:  

1. The Tort Liability Law is applicable to cloud servers:

1) The cloud server is the first level of computer IaaS (Infrastructure as a Service) which provides customers with computing resources such as virtual computers, storage and networks. The platform can completely shutdown or release the space of the leased cloud server, but it is unable to control the specific contents stored in it. As being stipulated by law and by the supervising authority of the industry, cloud server is not providing an "information storage space service" as referred to in Article 22 of the Regulation on the Protection of the Right to Network Dissemination of Information (hereinafter “Regulations”).

2) The cloud server leasing service is also different from the automatic access, transmission and caching services, as well as the search and link services as referred to in the above Regulations, so these Regulations are not applicable to this case.

3) Article 36 of the Tort Liability Law deals with all infringement occurred in the network space. Wherein, Paragraphs 2 and 3 concern with the circumstances under which the network service provider shall be jointly and severally liable with the network user. A cloud server is not explicitly excluded in these two paragraphs. So, the Court in the second instance held that these two paragraphs are applicable to the circumstance where a network user uses the cloud server to commit an infringement and the cloud server leasing service provider shall bear the legal responsibilities.

2. The notices issued by the right holder to Ali Cloud did not comply with the law: In contrast to the holding of the court in the first instance that the right holder's notices were valid, the court in the second instance held that the right holder failed to notify Ali Cloud via a clear channel of complaint provided by Ali Cloud, and the materials it submitted contain no proof for the infringement or any contact information. Since what Ali Cloud received is nothing but noncompliant notices, it does not have to bear the responsibilities such as contact, verification, and investigation.

3. If the infringement complaint received by Ali Cloud is a valid notice, then the "necessary measure" taken under the Tort Liability Law does not have to be "take down", rather, Ali Cloud should "forward" the notice to the leaser of the cloud server.

1) Based on the technical characteristics of cloud servers, the measure that Ali Cloud can take, which is equivalent to "remove, mask or disconnect the link," is "shut down the server" or "remove forcefully all data on the server". The action will directly stop all Internet activities of the network service provider through said cloud server, with an effect that is totally different from the nature and consequences of removing a specific web page, picture or video. It will bring critical impacts to the cloud computation industry or even the whole Internet industries, which is inconsistent with the principle of prudence and reasonableness.

2) The Supreme People's Court pointed out in the Directive Judgment No. 83 that, the network platform provider should ensure a smooth delivery of the message of a valid complaint. Where it is not appropriate to directly take the measure of removal, forwarding the notice may express the intent of the network service provider to "warn" the infringer, and thus facilitates the deterioration of the result of the damage to a certain extent. Therefore, “forwarding the notice” can be a "necessary measure" that exempts the network service provider from the related liabilities.

3) Cloud computation service is still developing, the operation costs might be raised if too strict conditions are set for the exemption of liabilities. Besides, repeated removal of user's data or shutdown of the server would severely impact the trust of users on cloud server’s normal operation and the security of data, and thus affect the development of this industry as the whole.  

　　In conclusion, one may learn from the judgement that the Beijing Intellectual Property Court has adopted the following attitude toward cases related to the network platforms:  

1. When a right holder claims rights against a network platform, it must make a legitimate notice pursuant to the laws. If the notice is invalid, not only is the network platform not responsible for contact, verification, and investigation, but the consequences will all be borne by the right holder. That is, the network platform is not required to take necessary measures, and thus does not have to bear the liability for indirect infringement. A valid notice must contain the following elements:

1) The notice should be made through an appropriate channel;

2) The content must include:

A. The name and contact of the right holder or the notifier;

B. A description of the infringement of the direct infringer, the specific rights of the right holder being infringed, and the network address against which the necessary measures are required;

C. A preliminary proof for the infringement;

D. The reason to request the network platform to remove or disconnect the infringing link.

2. Upon a legitimate notification to the network platform, the right holder may achieve the following results depending on the nature of the network platform:

1) If the network platform has a direct control over the contents stored on it, the right holder can request the network platform to follow "notice-take down procedure".

2) If the platform cannot learn about the contents stored on the platform through the back-end server, and thus cannot make a preliminary verification of the infringement alleged by the right holder, then the network platform must take "necessary measure (s)" upon the notice of the right holder. The so-called "necessary measure (s)" may be removal, but in the case where a direct removal is not appropriate, the network platform must at least "forward the notice." In other words, the network platform must notify the direct infringer of the complaint of the right holder and prevent further infringement through a "warning" to the direct infringer.

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