1st LD-Writethru-Xinhua Insight: Internet giants Tencent, Qihoo 360 begin legal battle
GUANGZHOU, Apr 18, 2012 (Xinhua via COMTEX) --
Court proceedings began
Wednesday for Qihoo 360 and Tencent, two Chinese Internet giants,
with Qihoo 360 suing Tencent over the alleged abuse of market
dominance and unfair competitive practices.
Qihoo 360, a leading antivirus software developer, is seeking
150 million yuan (23.8 million U.S. dollars) in compensation from
Tencent, China's largest Internet company.
A hearing on the case at the Guangdong Higher People's Court
lasted for the entirety of the day, with no ruling handed down as
The court debate centered around three issues; namely, whether
Tencent has a dominant market position, whether Tencent has
engaged in unfair competitive practices and whether the
compensation Qihoo 360 is seeking should be awarded.
In addition to compensation, Qihoo 360 is also asking Tencent
to apologize to Qihoo 360 on Tencent's website, as well as in
Tencent's lawyer Xu Yan said at court that "Qihoo 360's
allegations are unfounded and Tencent is asking the court to
reject all their claims."
As for the accusation of market dominance, Xu said that in the
instant messaging market, there are many products similar to
Tencent's QQ, such as Windows Live Messenger (formerly named MSN
Messenger) and Fetion, developed by China Mobile, as well as those
provided by social networking sites. Therefore, Tencent does not
have a dominant market position, Xu said.
However, Qihoo 360 believes that instant messaging software
that only permits text messaging should not be described as being
in the same market as QQ, which is a comprehensive instant
communication tool that allows for text and voice messaging, as
well as video chatting.
"For example, the iPhone is a cell phone that can take pictures
and play music, but the 'related market' that iPhone is in
includes other cell phones with similar functions, but not cameras
or music players," said Zhao Ye, a lawyer representing Qihoo 360.
Due to the complexity and high profile of the case, expert
witnesses were brought in for Wednesday's court session.
David Stallibrass, a special consultant for RBB Economics,
which specializes in providing consultation on the economic
aspects of competition law, and Jiang Qiping from the Chinese
Academy of Social Sciences, are the expert witnesses representing
Qihoo 360 and Tencent, respectively.
The case's presiding judge Zhang Xuejun said that the experts'
views do not represent those of the court and that a ruling will
only be reached by the judges after reviewing all the evidence.
The two companies have been engaged in a long and drawn-out
legal war since 2010.
On Sept. 27, 2010, Qihoo 360 accused Tencent of invading the
privacy of its users through the use of QQ Doctor, a security
program developed by Tencent for use with its popular QQ instant
messaging service. Qihoo 360 claimed that Tencent has used the
software to scan and monitor its users' personal information.
Following the complaint, Qihoo 360 released its own security
software called "Koukou Guard" on Oct. 29, 2010, claiming it could
speed up QQ and offer more privacy to its users. However, Tencent
responded by warning its users that the "Koukou Guard" could cause
QQ to malfunction.
The dispute escalated when Tencent said on Nov. 3, 2010 that it
would shut down the QQ instant messaging service on computers that
had security software created by Qihoo 360 installed on them.
Although both companies apologized to Internet users after
being ordered by the Ministry of Industry and Information
Technology (MIIT) to stop squabbling, the war between the two
Internet giants had already triggered a public outcry.
The MITT said in a statement in November 2010 that unfair
competition between the companies, especially Tencent's move to
unilaterally shut down its instant messaging service, had affected
users and caused "bad social consequences."
Tencent has nearly 1 billion registered QQ users, while Qihoo
360, China's largest free anti-virus software provider, has 300
Tencent also has a pending case against Qihoo 360 in which it
is claiming that the "Koukou Guard" software is a form of unfair
competition. Tencent is demanding Qihoo 360 to stop developing and
promoting the software and claiming 125 million yuan in
compensation. The case has been accepted by the Guangdong Higher
People's Court, although a court date has yet to be set.
The Qihoo 360-Tencent battle is just one of many conflicts that
have erupted between Chinese Internet companies.
NetEase, an Internet technology company, recently accused
Tencent of plagiarizing an iPhone news app.
"Tencent's version of the news app copied NetEase's designs in
terms of overall layout, photo viewing and commenting," NetEase
said in a statement posted on its website on April 12.
NetEase has asked Tencent to withdraw the app or face legal
action, the company said.
Qihoo 360's legal affairs director Han Han told Xinhua that
they are suing Tencent not only to protect their legitimate
rights, but also to ensure a sound competitive environment.
Tencent has long been accused of copying other companies. "For
example, when microblogging became popular, Tencent began to
offer a microblogging service; when 'Happy Farm,' an online farm
management game, became popular, Tencent followed suit. By simply
copying others and relying on QQ's billion-user base, Tecent can
drive its competitors out of business quickly," Han said.
Chinese Internet companies are still in a developmental stage
in which they frequently copy each other, said Li Yi,
secretary-general of the China Mobile Internet Industry Alliance.
Foreign companies usually use mergers and acquisitions to
acquire popular services offered by other companies, said Xu Xuan,
vice dean of the Intellectual Property Institute of
Guangdong-based Jinan University.
For example, social networking giant Facebook acquired
Instagram, a popular mobile photo-sharing firm, for about 1
billion U.S. dollars, a lucrative deal similar to those often
envied by small Chinese companies.
"Why didn't the same thing happen to smaller companies in
China? Actually, companies like Instagram have developed
technologies that cannot be easily copied, which is not the case
currently in China," Xu said.
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