Time sharing rental of video membership accounts is not uncommon in practice, and companies such as iQiyi, Tencent, and Youku have long suffered from infringement. However, not only online video network platforms, but also some film and television terminal equipment companies have been targeted, resulting in serious losses. Recently, Zhou Xueteng's legal team from Gaopeng Law Firm successfully represented Beijing Xiaomi Electronic Products Co., Ltd. (hereinafter referred to as Xiaomi Electronics), a subsidiary of Weiquan Xiaomi Group, in a case of unfair competition in renting and selling VIP member accounts.

1、 Xiaomi Electronics v. Guangzhou Zhinian Unfair Competition Dispute Case

（1） Case Introduction

Xiaomi Electronics is the operator of Xiaomi TV, Xiaomi Box and other film and television terminal devices. Its main business includes providing video playback services to users through terminal devices. Users can pay to purchase "Xiaomi Film and Television VIP Members" and "Xiaomi Children's Growth VIP Members" products, and enjoy VIP privilege services during the validity period. The "Membership Agreement" signed between Xiaomi Electronics and users sets restriction rules, clearly stipulating that VIP member accounts cannot be resold, rented, lent, transferred, etc.

Guangzhou Zhinian Technology Co., Ltd. (hereinafter referred to as Guangzhou Zhinian) has opened a "Blue Heart Language Digital Flagship Store" on the Tmall platform to sell or rent various membership cards such as "Xiaomi Film and Television VIP Members" and "Xiaomi Children's Growth VIP Members". This allows two users to share a single account and offers various product combinations such as 2-day cards, 5-day cards, monthly cards, quarterly cards, annual cards, and "Film and Television+Children". Xiaomi Electronics believes that Guangzhou's insistence on renting and selling Xiaomi VIP member accounts violates its normal membership rules, disrupts market order, and reduces the business benefits that Xiaomi Electronics should have obtained. Therefore, Xiaomi Electronics has filed a lawsuit with the Xicheng District People's Court in Beijing to demand that it stop infringing.

In the litigation process of this case, after Xiaomi Electronics notified Tmall platform to take down the product, Guangzhou Zhinian still did not stop and only re listed it for sale within 2 days after receiving the notice by modifying the product name, product image, etc., to evade punishment, which has obvious malicious intent.

（2） Judgment result

The People's Court ruled that Guangzhou Zhinian constituted unfair competition and ordered it to immediately cease infringement and compensate Xiaomi Electronics for economic losses.

（3） Key points of the judgment

1. There is a competitive relationship. As the operator of film and television terminal equipment, Xiaomi Electronics should be protected by law by providing VIP membership services to paying users through the internet to obtain business benefits. Guangzhou Zhinian's use of selling or renting Xiaomi Film and Television VIP membership accounts for profit will inevitably lead to a decrease in the number of Xiaomi Electronics network users and damage to their interests. Therefore, there is a competitive relationship between the two parties.

2. Violation of business ethics and integrity principles constitutes unfair competition. According to Article 12 of the Anti Unfair Competition Law of the People's Republic of China, operators using the internet to engage in production and business activities shall comply with the provisions of this Law. Operators shall not use technological means to engage in any other behavior that hinders or disrupts the normal operation of network products or services legally provided by other operators by influencing user choices or other means. In this case, the VIP membership service launched by Xiaomi Electronics is an important business for it to gain a competitive advantage in the market. Guangzhou Zhinian, despite being aware of restrictions such as not selling, renting, transferring, gifting, or lending accounts to third parties, still sells or rents the purchased VIP membership account to the outside world, which damages Xiaomi Electronics' legitimate rights and interests, violates the principle of good faith and business ethics, and has obvious subjective malice, constituting unfair competition. It should bear corresponding legal responsibilities.

2、 Focus on relevant legal issues

（1） Competitive relationships are not limited to same industry operators

According to Article 2 of the new Judicial Interpretation of the Anti Unfair Competition Law (hereinafter referred to as the Interpretation) issued by the Supreme People's Court in 2022, market entities that may compete for trading opportunities or damage competitive advantages with operators in production and business activities can be recognized by the people's court as "other operators" as stipulated in Article 2 of the Anti Unfair Competition Law. The integration of the Internet and industries or industries has made the competition for traffic from the competition among industry operators to the competition among non industry operators. Under the Internet economy, the determination of competitive relationship is not limited to whether or not it is in the same industry. The judgment of the competitive relationship between operators should focus on whether there is a competitive relationship between the two parties in terms of specific business behavior and ultimate interests, rather than being limited to operators in the same industry. In this case, Xiaomi Electronics is mainly the operator who produces Xiaomi TV, Xiaomi Box and other film and television terminal equipment. Its revenue model is different from general video websites. The target customers are Xiaomi users who have purchased the aforementioned terminal equipment, which is irreplaceable. The revenue obtained from the membership management model and paid membership model is the main source of revenue for its video business. Although Guangzhou Zhinian does not affect the sales of terminal devices by Xiaomi Electronics, its behavior directly leads to some users skipping advertisements by renting accounts, resulting in a decrease in traffic and advertising revenue, or directly leads to some users not purchasing Xiaomi Electronics' official VIP accounts, resulting in a loss of membership fee revenue. Therefore, both parties have a direct competitive relationship in terms of ultimate interests, which the court in this case believes "will inevitably lead to a decrease in the number of network users of Xiaomi Electronics and damage their interests. Therefore, there is a competitive relationship between the two parties."

（2） Identification of Unfair Competition Behavior on the Internet

The Internet Article adopts the legislative model of "generalization+enumeration+disclosure" to regulate unfair competition in the network. Article 12, Paragraph 1 of the Anti Unfair Competition Law stipulates that online business activities are subject to anti legal regulations, that is, operators who use the internet to engage in production and business activities shall comply with the provisions of this Law. The first part of the second paragraph makes a principle provision prohibiting operators from using technological means to influence consumer choices and hinder the normal business behavior of other operators; The first to third items of the second paragraph list three types of online unfair competition behavior; The fourth item is a bottom line provision, which refers to other behaviors that hinder or disrupt the normal operation of network products or services legally provided by other operators. The people's court, when applying the "Internet Special Article" of Article 12 of the Anti Unfair Competition Law to identify acts of unfair competition, should judge whether the sued act meets the following four conditions: first, the sued act is the act of using technical means to interfere with the normal operation of other people's network products or services; Second, the sued behavior does not belong to the Internet unfair competition behavior explicitly listed in this article; Thirdly, the legal benefits protected by the Anti Unfair Competition Law are actually damaged due to the sued behavior; Fourth, the sued behavior is improper based on Internet business ethics. [2] When using the "Internet Clause", we need to follow the logic from special to general, that is, first judge whether the behavior can be covered by the types specified in the Internet Clause; Secondly, if the new type of behavior cannot be included in the three types of items 1 to 3 of paragraph 2, attempt to use fallback clauses for analysis; Finally, if the application of the "Internet Clause" alone still cannot be regulated, the anti law general clause shall be used for evaluation.

（3） Application of Article 2 of the Anti Unfair Competition Law

Article 2, Paragraph 1 of the Anti Unfair Competition Law stipulates that operators shall follow the principles of voluntariness, equality, fairness, and good faith in their production and business activities, and abide by the law and business ethics. Article 3 of the Interpretation stipulates that the behavior norms generally followed and recognized in specific commercial fields can be recognized by the people's court as "business ethics" as stipulated in Article 2 of the Anti Unfair Competition Law. The people's court shall, based on the specific circumstances of the case, comprehensively consider factors such as industry rules or commercial practices, the subjective state of the operator, the willingness of the counterparty to the transaction, the impact on consumer rights, market competition order, and social public interests, and judge in accordance with the law whether the operator has violated commercial ethics. When the people's court determines whether an operator has violated commercial ethics, it may refer to the industry regulatory authorities, industry associations, or self-discipline organizations that have formulated professional norms, technical norms, self-discipline conventions, etc. Based on practical experience, this article mainly considers the following aspects: 1. Whether there is a competitive relationship between operators. This includes both direct competition within the same industry and indirect competition across different industries as in this case. 2. Whether the business behavior is legitimate. It is difficult to confirm in practice whether behaviors that are not explicitly prohibited by law violate the principles of good faith and business ethics. The essence of the adopted behavior should be examined whether it encourages or restricts competition, as well as whether it conforms to the industry's business models and practices. 3. Whether the operator has subjective fault. 4. Whether the business behavior has caused harmful consequences. The consequences of damage include the loss of trading opportunities, reduction of competitive advantage, and inability to operate network products or services normally for other operators; There are also legal protections for consumer rights, such as increasing the cost of obtaining consumer information and infringing on their right to know.

3、 How to curb the industrialization of renting virtual account infringement?

In this case, Guangzhou Zhinian's "Blue Heart Language Store" not only rents and sells Xiaomi members, but also sells mainstream domestic film and television audio, network storage tools, knowledge reading and payment services and products such as cloud audiovisual members, Mango TV members, and keep members, with the main profit method being the sale of infringing products. In addition, in judicial practice, there are also infringers who set up specialized rental websites, mini programs, etc., gradually giving rise to "agent platforms" that specialize in renting various software accounts. In recent years, shared accounts have formed a black and gray industry chain, and these organizations or individuals resell or dismantle member accounts on third-party platforms (selling multiple accounts on one account). On some e-commerce and second-hand trading platforms, this service can be found using the terms "VIP" and "sharing". [3] . The court's attitude towards such behavior is to affirm that the rights holder provides paid membership services to users based on their honest and lawful operation, or collects advertising fees through advertising placement, in order to obtain relevant legal rights and interests. Therefore, the judicial system holds a negative attitude towards renting virtual accounts, and in order to curb this negative development trend, more rights holders like Xiaomi need to actively take up legal weapons to defend their rights and maintain integrity!

References and comments (slide down to view)

[1] Civil Judgment of Xicheng District People's Court of Beijing (2023) Jing 0102 Min Chu 25894.
[2] Xu Jun, Xu Hongtao: Exploring the Application of the "Internet Clause", published on the WeChat official account "China Trial", August 6, 2021.
[3] "Shared member 'Black Grey Production' is surrounded by video platforms: with agents earning 10000 yuan per month", published on NetEase News App, January 8, 2023.