Qihoo 360 loses suit against Tencent

GUANGZHOU -- Qihoo 360, a leading Chinese antivirus software developer, lost a lawsuit that it filed against Tencent, China's biggest Internet company, over the latter's abuse of its dominant market position, according to a court ruling issued on Thursday.

Tecent did not create a monopoly and all of Qihoo 360's appeals have been rejected, according to a ruling from the Guangdong Provincial Higher People's Court.

Qihoo 360 was also ordered to pay 790,000 yuan ($125,912) in legal fees.

Qihoo 360 sued Tencent in October 2011 for hindering market competition and abusing its market position. It also asked for 150 million yuan in compensation from Tencent.

The trial lasted for nearly a year after the Guangdong Provincial Higher People's Court began court proceedings on April 18, 2012. The court had tried to mediate between the two sides but failed.

The evidence provided by Qihoo 360 was not enough to prove that Tencent had a monopoly on certain products, according to the ruling.

Qihoo 360 claimed that QQ, an online chat program developed by Tencent that has more than 780 million active users, has a 76.2-percent market share.

But the court said users have multiple choices for similar instant messaging products.

A survey from the China Internet Network Information Center showed that 63.4 percent of users had used more than two different types of instant messaging software within six months.

Attorneys from both Qihoo 360 and Tencent said they will consult with their companies first before deciding whether to appeal to the Supreme People's Court.

Suing Tencent is not only in the legal interests of Qihoo 360, but can also help maintain sound competition, said Han Han, director of the legal affairs department of Qihoo 360.

Han said Tencent frequently copies mature business modes from other companies and beats its competitors with its massive number of users.

Xu Yan, an executive with Tencent's legal affairs department, disagreed with Han's criticism.

"Tencent is a company with sustainable innovation. The introduction of new business modes offers more choices for users and is conducive to forming sound competition in the industry," Xu said.

The legal battle between Qihoo 360 and QQ reflects product homogeneity in the Internet industry, said Liu Xingliang, a renowned Internet expert.

Using legal means to safeguard their own interests is good for online companies, said Shi Jichun, director of the economic law research center at Renmin University of China.

Turning disputes among major market players over to authorities or courts for arbitration will gradually improve market rules and prompt the development of the industry, Shi said.

"The Internet should not be a jungle, where the weak are the prey of the strong," said Zhang Xuejun, chief judge in the suit. "Competition in the Internet industry should be orderly and abide by law."

The two companies have been engaged in a long and drawn-out legal war since 2010.

On September 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 October 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 November 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 to stop fighting, the war between the two Internet giants had already triggered public outcry.