Data as Property in the AI Era:
How China Formulates Related Rules Incrementally†
Table of Contents
- Beijing Intellectual Property Court’s Judgment
- A Closer Examination of the Judgment
- The State Administration for Market Regulation’s New Rules
Estimated Reading Time
- 8.3 min
Chinese President XI Jinping’s mid-February meeting with founders of China’s innovative companies, such as Huawei, BYD, and DeepSeek, showcases the country’s “new quality productive forces”—a term coined by the president in 2023 to emphasize the role of innovation in driving the country’s long-term development. Despite the apparent collaboration prevailing in the meeting room, behind the scenes there is fierce competition among these and other innovative companies on many fronts, including the use of data, a valuable property in the era of artificial intelligence.
Chinese authorities are acutely aware of the need to regulate the use of data to ensure fair competition in the market. The challenge is how to do so properly, as the characteristics of different types of data emerging from rapidly evolving technologies remain quite unclear. Incremental steps taken by the judiciary and the executive in China provide a glimpse of the country’s exploratory approach to such regulation.
Beijing Intellectual Property Court’s Judgment
In September 2023, merely six months after the Beijing Intellectual Property Court rendered a judgment in an appeal case involving Douyin, a video-sharing app in China (“Douyin app”), the Supreme People’s Court identified the case as a Typical Case to highlight its importance in helping determine how data scraping may amount to unfair competition (for more information about what Typical Cases are, see this article).
The case concerns a dispute between two companies in Beijing, the first of which operates the Douyin app (abbreviated as “Weibo Company”) and the other operates another video-sharing app, the Shuabao app (abbreviated as “Chuangrui Company”). Weibo Company alleged that Chuangrui Company (1) technically or manually obtained, without permission, from the Douyin app more than 50,000 short-form video files, information about more than 10,000 users, and 127 comments (collectively referred to as “the content at issue”) and (2) provided this content to the public through the Shuabao app. Arguing that these acts conducted by Chuangrui Company amounted to unfair competition, Weibo Company requested compensation.
The Haidian District People’s Court in Beijing Municipality ruled against Chuangrui Company and ordered it to pay Weibo Company RMB 5 million as compensation. Chuangrui Company appealed to the Beijing Intellectual Property Court, which upheld the lower court’s decision.
The Beijing Intellectual Property Court’s reasoning is noteworthy. The court first determined that the content at issue was comprised of “non-original data sets”, which were collected, stored, processed, and transmitted via the Douyin app as a result of Weibo Company’s tremendous investments and which “brought huge economic benefits to Weibo Company and formed [the company’s] competitive advantage in market competition”. Although Weibo Company’s legal rights and interests associated with these “non-original data sets” are not provided for in the Copyright Law or other intellectual property laws in China, the court made it clear that they should receive protection under the country’s Anti-Unfair Competition Law.
In the end, the Beijing Intellectual Property Court found that Chuangrui Company had weakened Weibo Company’s competitive advantage by seizing Weibo Company’s competitive resources, i.e., the content at issue, and disrupted the market competition order of the short-form video industry. Chuangrui Company’s acts constituted unfair competition for various reasons, including violations of the principle of good faith and business ethics. The Supreme People’s Court praised this decision in this way:
[…] In this case, the People’s Court explored and clarified the legal nature of non-original data sets, distinguished the rights protected by the Copyright Law from the legal interests under the Anti-Unfair Competition Law, and protected a platform operator’s legal rights and interests arising from its collection, storage, processing, and transmission of data. The adjudication in this case actively explored the application of the Anti-Unfair Competition Law to regulate acts of using data.
[emphasis added]
A Closer Examination of the Judgment
“A closer look at the judgment rendered by the Beijing Intellectual Property Court reveals more interesting analyses than those summarized by the Typical Case, as discussed above.”
A closer look at the judgment rendered by the Beijing Intellectual Property Court reveals more interesting analyses than those summarized by the Typical Case, as discussed above.
In unfair competition disputes involving the Internet, Chinese courts often rely on Article 12 Paragraph 2 of the Anti-Unfair Competition Law as the legal basis for their rulings. Article 12 Paragraph 2 states:
Business operators must not use technical means to carry out, through influencing users’ choices or other methods, the following acts that hinder or disrupt the normal operation of network products or services lawfully provided by other business operators:
(1) […];
(2) […];
(3) […];
(4) Other acts that hinder or disrupt the normal operation of network products or services lawfully provided by other business operators.
[emphasis added]
The catch-all phrase, i.e., Item (4) of Article 12 Paragraph 2, is usually broad enough to cover many circumstances in reality. In this case, however, the Beijing Intellectual Property Court decided that Article 12 Paragraph 2, including its catch-all phrase, was not applicable at all because Chuangrui Company’s acts of obtaining the content at issue and providing such content via the Shuabao app did not “hinder or disrupt the normal operation of network products or services lawfully provided by” Weibo Company.
Since none of the provisions under Chapter Two (i.e., Articles 6 to 12) of the Anti-Unfair Competition Law—which states explicitly different types of acts of unfair competition that a business operator must not carry out—were applicable, the Beijing Intellectual Property Court proceeded to rely on Article 2 of the law to determine whether Chuangrui Company’s acts amounted to unfair competition. The requirement to use Article 2 as the last resort is stated in a judicial interpretation issued by the Supreme People’s Court regarding how the Anti-Unfair Competition Law should be applied by courts in China.
Article 2 of the Anti-Unfair Competition Law provides:
In their production and business activities, business operators should follow the principles of voluntariness, equality, fairness, and good faith, and abide by laws and business ethics.
Acts of unfair competition mentioned in this Law refer to acts of business operators in their production and business activities that violate the provisions of this Law, disrupt the market competition order, and harm the legal rights and interests of other business operators or consumers.
[…]
[emphasis added]
Given Article 2’s expansive approach to defining “acts of unfair competition”, the Beijing Intellectual Property Court comprehensively considered a wide range of factors in its examination of Chuangrui Company’s acts. The court considered, for example, the interests of business operators and consumers, social public interests, the development of the short-form video industry, and the market competition order. Ultimately, as explained above, the court determined that Chuangrui Company’s acts violated the principle of good faith and business ethics and constituted unfair competition.
The State Administration for Market Regulation’s New Rules
Apart from authorizing a business operator to sue another business operator on grounds of unfair competition, as illustrated in the above case involving Weibo Company, the Anti-Unfair Competition Law also authorizes Chinese authorities overseeing market regulation to impose penalties on business operators whose acts constitute unfair competition. For example, if a business operator, in violation of Article 12, “hinders or disrupts the normal operation of network products or services lawfully provided by other business operators”, the relevant market regulation authority is authorized to order the business operator to stop the illegal acts and impose a fine of up to RMB 3 million.
Apparently, the lack of detailed provisions in the Anti-Unfair Competition Law regulating Internet-related unfair competition prompted the State Administration for Market Regulation to issue the Interim Provisions on Anti-Unfair Competition on the Internet (“Interim Provisions”; effective as of September 1, 2024). Articles 7 to 26 of the Interim Provisions identify different types of Internet-related acts of unfair competition that business operators must not carry out, or they will be subject to penalties.
“[…] Article 19 of the Interim Provisions is formulated in such a way that it can avoid the deficiency of Article 12 Paragraph 2 of the Anti-Unfair Competition Law […].”
It is unclear whether the above-mentioned judgment rendered by the Beijing Intellectual Property Court was closely examined when the State Administration for Market Regulation formulated the Interim Provisions. It is, however, worth noting that Article 19 of the Interim Provisions is formulated in such a way that it can avoid the deficiency of Article 12 Paragraph 2 of the Anti-Unfair Competition Law, as illustrated by the judgment. Article 19 of the Interim Provisions provides:
Business operators must not use technical means to illegally obtain or use data lawfully held by other business operators, hinder or disrupt the normal operation of network products or services lawfully provided by other business operators, or disrupt the fair competition order in the market.
[emphasis added]
These incremental steps taken by the Beijing Intellectual Property Court and the State Administration for Market Regulation showcase the challenges facing China in regulating the use of data and their solutions. The Interim Provisions has been in effect for just a few months. When more experiences are accumulated through the application of these provisions, the national legislature may draw on these experiences and useful expressions stated in the Interim Provisions to amend the Anti-Unfair Competition Law.
- The citation of this article is: Dr. Mei Gechlik, Data as Property in the AI Era: How China Formulates Related Rules Incrementally, SINOTALKS.COM®, In Brief No. 53, Feb. 26, 2025, https://sinotalks.com/inbrief/202502-english-data-ai-property.
The original, English version of this article was edited by Nathan Harpainter. The information and views set out in this article are the responsibility of the author and do not necessarily reflect the work or views of SINOTALKS®. ↩︎
