Say No to the Named "Fact-Based" Business Slander

Company B filed a lawsuit against Company A on the infringement of trade secrets, and the court of the first instance ruled in the favor of B. Whereat, B released a piece of news on its website, said that A might bear a huge amount of compensation for the infringement of trade secrets, and uploaded the verdict of the first instance. Then A‘s sales dropped heavily. Shortly, in order to obtain the project of Company C, B sent the verdict to C by email, after internal discussion, C notified A on the termination of negotiation. A filed a lawsuit against B on unfair competition.

Whether B’s action shall be deemed as the business slander as stipulated in Article 14 of “Anti-unfair Competition Law” (“Article 14”)? If the answer is negative, whether such action can be regulated in accordance with the principle stipulated in Article 2 of “Anti-unfair Competition Law” (“Article 2”)?

Article 14 has stipulated that a business operator shall not fabricate or spread false information to injure his competitors’ commercial credit or the reputation of his competitors’ commodities. From the view of literary interpretation, the false information shall be the precondition for a business slander. In other words, if the information is true, it shall not be deemed as a business slander. For a long time, this literary interpretation has been applied in the judicial practice, and the relevant parties could not obtain legal remedies based on Article 14. The courts are seldom apply Article 2 on dealing with such cases, in fact, this article has not been applied to any similar cases till now.

The World Intellectual Property Organization has promulgated “Model Provisions on Protection Against Unfair Competition” in 1996, which covers “irrational statements” (means unfair, inaccurate or one-sided statements) into the scope of a business slander. The experts in the field of competition law have studied the laws and judicial regulations of US, Japan, EU and other countries and regions, most of them called to expand the interpretation of Article 14, which says that with the aim of unfair competition, if the business operator spread unfair, inaccurate or one-sided statements, this action shall be deemed as a business slander.

Due to the burst of similar cases recently, there are some changes in the judicial practice. This year, in the anti-unfair competition dispute between Beijing Qihoo Technology Co., Ltd., and Tencent Technology (Shenzhen) Co., Ltd., the Beijing second intermediate people’s court stated: the core element on identifying a business slander shall be the the infringement to the competitors’ reputation or credibility by misleading. For the one-sided statements which injury others reputation, ……, just like the false propaganda, such one-sided statements would also mislead the public, which may lead the consumers’ recognition on the relevant goods in a negative way, effect the consumers’ purchase decision, and finally injury the interests of the competitors. …… such actions shall be regulated in accordance with Article 14 of “Anti-unfair Competition Law”. This verdict brings some hope for those who are suffered the named “fact-based” business slander to apply for the protection of anti-unfair competition.

Another phenomenon shall also be taken into consideration. Due to the rapid development of internet, the method to spread the business slander has changed from distributing one-sided statements’ leaflets to the public in the traditional exhibition, or sending one-sided statements to the relevant parties in a bidding, to spread on the internet, which will bring more negative effect to the other party by the faster and border spreading method. The newly issued “Provisions of the Supreme People’s Court on Several Issues concerning the Application of Law in the Trial of Civil Cases Involving the Use of Information Networks to Commit Tortious Acts”, Article 11 has specified that if a network user or network service provider brings negative effect to the public evaluation and creditability of a business operator or its products or services by slander and libel, such network user or network service provider shall undertake the infringement liabilities. For those business operators who are suffered from such business slander, this Article 11 is an important weapon on dealing with such cases.

In summary, it is possible for the business operators who are suffered from the named “fact-based” business slander, to seek legal remedies in accordance with the Anti-unfair Competition Law, and the regulations on the protection of information network.