Corporate Property Interest in Data – Emerging Norms in China

In China, data held by companies is not clearly protected as “property” under relevant laws. Instead, when pursuing litigation or administrative claims related to misappropriation of their data, companies typically rely on the Anti-Unfair Competition Law, trade secrets law, and copyright law (for databases). However, a number of court cases over the past several years hint at an emerging theory of “property ownership” in corporate data. The recently released Opinions on Instituting More Thorough Systems and Mechanisms for Market-based Allocation of Production Factors (March 30, 2020), with its emphasis, in part, on (i) enhancing the protection of enterprise data, and (ii) improving “the value of data”, may indicate cautious support for this trend among legislators.

It remains to be seen whether Chinese law will formally recognize a property right in data. But in the meantime, companies operating in China should be aware that courts may be receptive to arguments emphasizing a property interest in data, as a complement to other claims relating to breach of contract or relevant data regulations, and particularly in support of suits brought under the PRC Anti-Unfair Competition Law, which is widely used for internet- and data-related litigation.

Illustrative cases are as follows:

A. Weibo v. Maimai –Third parties using an Open Platform (Open API) should obtain prior consent from both users and platforms for information collection. 

(Beijing Intellectual Property Court, 2016)

According to Weibo’s complaint, in 2013 and 2014, Maimai, a Chinese business social platform, used Weibo’s open API to acquire from Weibo (a social network) a variety of public and non-public user information, e.g. nickname, profile photo, education background, career history, without consent from either Weibo or users, in violation of the API’s terms. Maimai provided this information to its own users, and misrepresented the origin of the data. 

The court held that Maimai had violated the Anti-unfair Competition Law in respect of (1) fairness, good faith and business ethics (Article 2), for failing to obtain proper consent from either Weibo or its users, and (2) the credit standing of its rivals (Article 11), for misrepresenting the legitimacy of its access to the data. In reaching this decision, the court noted that the user information is an important “operating interest” of Weibo. Maimai was required to pay RMB 2 million in damages.

B. Taobao v. Meijing – An enterprise has an exclusive property interest in its data.

(Hangzhou Intermediate People's Court, 2018)

Taobao, operator of the world’s largest e-commerce platform, offers to fee-paying Taobao merchants a service called Taobao Business Advisor (“Shengyi Canmou” in Chinese), a business and user data analytics platform. Meijing operated a website called Gugu Business Advisor Crowd Funding (“Gugu Shengyi Canmou Zhongchou” in Chinese), with the sole purpose of organizing the sharing of Taobao Business Advisor data among its users through remote log-ins and other mechanisms.

In Taobao’s resulting lawsuit, the court found that Meijing had violated Article 2 of the Anti-unfair Competition Law, which prohibits production and operational activities that disrupt market competition and infringe the legitimate rights and interests of other business operators or consumers. Key to this decision was the court’s conclusion that Taobao has an exclusive property interest in the commercial value of the data held by and accessed via Taobao Business Advisor. Meijing did not pay for access to this data. Meijing was ordered to pay RMB 2 million in damages.

C. Gumi Technology v. Yuanguang Technology - unauthorized data crawling constitutes unfair competition and theft of intangible property

(Shenzhen Intermediate People's Court, 2017)

Gumi (plaintiff) and Yuanguang (defendant) operate competing real-time transit information apps, "Kumike" and "Chelaile" respectively. To improve GPS data accuracy, Gumi partnered with a bus operator to install location devices on the operator’s busses, which then fed data to Gumi’s users via the Gumi app. Yuanguang then cracked Gumi’s crawl and scrape blockers in order to gain access to the real-time data and include it in its own products.

The court found that although Gumi’s real-time bus information is made freely available to individual users, Gumi expended considerable effort to collect, analyze, integrate, and coordinate this data, and gained a competitive advantage as a result. The court asserted that, due to this work and value, Gumi has an intangible property interest in the data, such that accessing the data without permission constitutes a violation of that intangible property interest. The court considered this a breach of principles of good faith and a disruption of the market’s competitive order under the PRC Anti-Unfair Competition Law, and ordered Yuanguang was to pay RMB 0.5 million in damages.

D. People’s Republic of China v. Shanghai Shengpin,Hou Mingqiang, Guo Hui, Zhang Hongyu, and Song Jian – Violation of national regulations, and using technical means to obtain data stored in computer information systems, constituting the crime of illegally obtaining computer information system data (Haidian (Beijing) Primary People’s Court, 2017)

In 2017, the defendant company Shanghai Shengpin cracked the crawl and scrape blocking measures used by ByteDance (operator of Douyin in China and TikTok globally) to protect certain video and user data. The court does not explain how this data was used, but did conclude that this constituted the crime of illegally obtaining computer information system data, resulting in an RMB 200,000 fine and prison sentences for Shanghai Shengpin officers Hou Mingqiang, Guo Hui, Zhang Hongyu, and Song Jian. The charge here implies a property interest in the underlying data.

Conclusion

As mentioned above, a company’s property interest in data is not yet formally recognized – it is an emerging interest validated by court cases. As such, in addition to creative litigation strategies, to protect their data, companies should rely first on conventional legal and security measures, including technical measures and clear contracts. Still, we expect to see new data protection regulations result from the Opinions on Instituting More Thorough Systems and Mechanisms for Market-based Allocation of Production Factors, which will likely clarify and build upon the data protection principles now being recognized by the courts.