Verdict against Qihoo 360 upheld

The country's supreme court upheld a verdict on Monday that Qihoo 360, a major Chinese antivirus software provider, was guilty of unfair competition, a decision that ends a high-profile and long-drawn-out legal battle between Qihoo 360 and Tencent Holdings, China's largest Internet company by market value.

In a verdict handed down Monday, the Supreme People's Court (SPC) rejected Qihoo 360's appeal and upheld an earlier local court ruling, ordering Qihoo 360 to pay 5 million yuan ($819,921) in damages to Tencent for unfair competition.

Qihoo 360 induced or provided tools to help users change the operating mode of QQ software in order to promote Qihoo 360's security software and increase its market opportunities and competitive advantage, the SPC said in its verdict.

Qihoo 360 should be held legally liable for unfair competition, the court said.

On April 25, 2013, the Guangdong High People's Court had found Qihoo 360 guilty of unfair competition practices, and ordered it to pay 5 million yuan in damages to Tencent.

In a statement e-mailed to the Global Times on Monday, Tencent said the rulings by the SPC and the Guangdong court have drawn a clear boundary for lawful competition and will help promote orderly development of the Internet industry.

"We believe that the ruling by the Supreme People's Court is a new start," the statement said.

Meanwhile, Qihoo 360 expressed its regret at Monday's ruling, saying the legal battle had been provoked by Tencent plagiarizing Qihoo 360's security software and bundling it with QQ's software.

"Monopolies have appeared in China's Internet market. [This] confines free competition and innovation and also damages the legal rights of the consumers," Qihoo 360 said in a statement e-mailed to the Global Times Monday.

Guangdong-based Tencent sued Beijing-based Qihoo 360 in August 2011 for unfair competition after Qihoo 360 offered its users Koukou Guard software it developed, which could cause Tencent's QQ software to malfunction, according to Xinhua News Agency.

The Guangdong High People's Court began proceedings in the case in April 2012.

"The case is typical of malicious competition in the Internet industry," Wang Yong, a lawyer with Beijing-based JT&N Law Firm, told the Global Times on Monday.

"The high compensation ruled on by the court sent a clear signal that the malicious practice of unfair competition cannot be tolerated," Wang noted.

Tencent has roughly 816 million active QQ users monthly while Qihoo 360 has around 465 million active PC users monthly.

"Although Qihoo's practice of developing software to protect its users' privacy against QQ has gained support from its users, it has altered the Internet business model and harmed other companies' interests," Wang Jun, an analyst at Beijing-based IT consultancy firm Analysys International, told the Global Times on Monday.

"It helped Qihoo gain greater influence and increased its user base. But such a practice is not a win-win solution and also violates laws," Wang said.

The high-profile legal war between the two companies dates back to September 2010, when Qihoo 360 accused Tencent of invading its users' privacy through QQ Doctor, a program developed by Tencent for use with its QQ instant messaging service.

In October 2010, Qihoo 360 launched its own software called -Koukou Guard, which it said could protect the privacy of QQ users.

The Ministry of Industry and Information Technology later ordered the two companies to apologize to Internet users and cease their conflict.