Determination of Indirect Tort Liability under the Circumstance that the ISP Gains Economic Benefits from Advertisements in Infringing Works in China

According to Chinese law, “directly obtaining any economic benefits” from the works of network users cause network service providers to bear a “higher duty of care” for the infringement acts. However, the standards of “directly obtaining any economic benefits” and “a higher duty of care” have triggered a series of controversies in theory and practice. In terms of theory, this article compares the provisions regarding “direct economic benefits” under the PRC law with the Safe Harbor Rules of the U.S. Digital Millennium Copyright Act (DMCA), pointing out the cognitive bias existing in the PRC interpretation of the DMCA. Meanwhile, this article analyzes the determination of tort liability when the ISP gains economic benefits by placing advertisements in infringing works in Chinese judicial practice. The author finds that the standard for determining “direct economic benefits” is relatively vague, and there are issues concerning the direct presumption of fault on network service providers who are found to gain “direct economic benefits” from advertisements in infringing works. These problems often lead to Chinese network service providers being deemed to be liable for damages even though they are doing the normal business of advertising. This article explains the important role of “direct economic benefits” in determining the indirect tort liability of the ISP and how to optimize the rules for determining the indirect tort liability of the ISP in China.