Supreme court upholds Qihoo 360 ruling

China's supreme court upheld a final verdict on Thursday rejecting the lawsuit launched by one of China's biggest anti-virus software providers Qihoo 360 against Tencent Holdings, China's largest Internet company by market value, over alleged market monopoly.

The decision is expected to end a high-profile and drawn-out legal battle between the two companies.

Lawyers said this is China's biggest anti-­monopoly lawsuit in terms of settlement claim in the Internet industry after the anti-monopoly law was released in 2008, and the trial will also become a reference for future lawsuits.

In a verdict handed down on Thursday, the Supreme People's Court (SPC) ruled Tencent was not abusing its dominant market position, in a case which started on November 26, 2013, and upheld an earlier ruling by a court in South China's Guangdong Province, where Tencent is headquartered.

The supreme court said Tencent's stopping of its QQ instant messaging (IM) service on computers that had software provided by Qihoo only lasted one day, and led to more active competition in the IM sector, and also had a limited impact in the anti-virus software industry.

Tencent's combining of its IM software and QQ software, such as QQ Doctor security software, could ensure the security of users' accounts and did not break the nation's anti-monopoly law, which forbids software bundle sales, according to the court.

Tencent said in a reply e-mailed to the Global Times Thursday it was "gratified" about the ruling, "which resolved the battle between the two companies in a legal way."

Meanwhile, Qihoo 360 expressed its "regret" at Thursday's ruling, but said it will "respect" the supreme court's judgment.

"As an anti-monopoly case in the Internet sector, the lawsuit, which lasted for four years, objectively pushes forward the establishment of a new ecological business environment in the Internet sector," Qi Xiangdong, the president of Qihoo 360, said in a statement e-mailed to the Global Times Thursday.

The conflict between the two companies can be traced back to 2010.

Tencent released its QQ Doctor security software (now called QQ Housekeeper) in the beginning of 2010 which was installed automatically when users updated their QQ, the most popular IM software in the Chinese mainland. Because of the large number of QQ users, QQ Housekeeper rapidly gained users, which put it in direct competition for Qihoo's product.

Qihoo launched security software called "Bodyguard" in October 2010 to filter ads promoted by QQ.

The dispute intensified on November 3, 2010 when Tencent announced it would stop the QQ service on computers that had software provided by Qihoo so that users would not be able to use QQ until they had uninstalled Qihoo's software.

Tencent also offered a QQ software package combining IM software and security software to these users, though they could choose to install all the software or only parts of them.

Qihoo sued Tencent in Guangdong Provincial High People's Court in 2012, alleging Tencent was abusing its dominating position in the instant messaging sector and monopolizing the market.

But it lost in a ruling issued by the Guangdong court in March 2013, and launched an appeal in China's supreme court claiming compensation of 150 million yuan ($24.5 million). Tencent also sued Qihoo in the same court for malicious competition during the same period.

"It is the first time the court has defined bundle sales in the instant messaging sector, and the case will become an important reference for future similar lawsuits in the industry," Zhao Zhanling, a lawyer at Beijing­-based Zhilin Law Group, told the Global Times Thursday.

The anti-monopoly law came out in 2008, but as it covers all industries, it does not have clauses customized for the Internet industry, said Zhao, noting that this meant that previously it was hard to define whether companies had monopolized or wrongly utilized their market positions.