Court rules in favor of Tencent against Qihoo

A court in Guangzhou, the capital of Guangdong province, on Thursday turned down all the charges from Qihoo 360 against Tencent Holdings in a high-profile online monopoly dispute.

Guangdong High People's Court ruled that 790,000 yuan ($125,800) in legal costs would have to be paid by Qihoo 360.

Tencent, China's largest instant messaging service provider, was accused of abusing its dominant market position in the case filed by Qihoo 360, an anti-virus software company.

Qihoo 360 accused Tencent of violating the country's anti-monopoly laws by taking steps such as introducing bundled sales to prevent its users from installing Qihoo 360's software.

The defendant had damaged the principle of fair competition, said Qihoo 360, which asked for 150 million yuan in compensation .

But the court ruled in favor of the defendant on Thursday.

Zhang Xuejun, the presiding judge, said the defendant did not break the country's anti-monopoly laws or related rules and regulations.

"The anti-monopoly law aims to protect competitors and consumers, instead of the monopoly itself," Zhang told reporters.

"Those who gain a dominant market position through technological innovation, better operation and management, and price advantages are not the targets of the country's anti-monopoly law," she said.

"The anti-monopoly law only disallows any companies to abuse their dominant market position to wipe out competition and damage consumers' interests," she added.

Zhao Ye, an attorney for Qihoo 360, expressed regret at the court's verdict.

"Qihoo 360 has yet to decide whether or not to appeal to a higher court," he said.

Zhang Jun, assistant manager of Tencent's publicity department, said his company respected the court's verdict.

The case is the first time a court on the Chinese mainland has made a ruling on an alleged online monopoly.

Industry experts said the ruling will have a far-reaching impact on the development of the Internet, especially for instant messaging services.

Feng Xiaoqing, an intellectual property rights professor at China University of Political Science and Law, said the case was a common online commercial dispute.

"I think the court has heard and ruled on the case according to facts and laws," he said.

"Now it is normal for a company to bring another company to court to fight for its own interests, challenge its competitors and protect its intellectual property rights," he said.

"Such cases will become more prevalent as more companies step up their efforts to protect their intellectual property rights," Feng said.

He urged government departments and companies to pay more attention to cracking down on IPR infringements.

The case attracted attention both at home and abroad when a public hearing was first held at Guangdong High People's Court on April 18, 2012. The hearing attracted more than 300 observers, including experts, industry insiders, and local legislators.

Tencent was brought to court by Qihoo 360 in November 2011, and the Internet giant was also required to publicly apologize for having misused its dominant market position.

Tencent denied the accusation and argued that many other applications with instant messaging services, including Windows Live Messenger and Sina Weibo, also have major market shares.

Bundling sales is designed to protect Tencent's intellectual property rights, said Xu Yan, one of Tencent's lawyers.

QQ, an instant messaging software from Tencent, has a 76 percent market share, according to consulting company iResearch.