Dispute-prone Internet firms favor litigation for settlement

Internet intellectual property is subject to frequent disputes, with some companies facing a surprising level of complaints and conflict, according to a recent study of alternatives in dispute resolution.

The report co-authored by an IP center at the Ministry of Industry and Information Technology and the Beijing Arbitration Commission found that 12 of 49 dotcoms surveyed had more than 100 IP disputes on average annually between 2011 and 2012, with video portals the most on the firing line.

Three of them faced more than 1,000 legal disputes each year.

In contrast, contract disagreements in general business dropped during the period. About 84 percent of the respondents had fewer than 100 contract disputes on average annually and 57 percent had less than 10.

Despite the falling number of contract disputes, Internet companies were again in the fray with some companies facing more than 10 million yuan ($1.6 million) in contract claims. All are involved in the video sharing business, said Pan Yan, director of the IP center.

"Video portals faced increasingly fierce competition in past two years," Pan said. "They gained authorization on films and TV series for use on the Internet and some of the copyrighted products involved pretty high transaction values - this type of copyright contract in part contributed to the high value of disputes."

At the same time, unfair competition cases are also on the rise, with 12 respondents reporting such disputes in the past two years.

Litigation still remains the top choice for dispute resolution among half of the respondents while some 30 percent chose negotiation. The rest turn to arbitration and mediation.

"The dotcoms' preference for litigation is partly because they want to set a landmark court precedent to add weight to future cases," Pan said.

Companies factor in costs, time, legal effect and professionalism when choosing what way to settle a dispute, she noted.

Some 46.9 percent of the Chinese population now has access to the Internet, with 632 million users and 527 million online via smartphones. There are now more than 3.5 million websites in the Chinese market, Shang Bing, vice-minister of industry and IT, told an Internet meeting Beijing in late August.

wangxin@chinadaily.com.cn