The Court ordered the defendants to immediately cease their infringing activities and pay 30 million yuan ($4.1 million) in damages, plus legal costs.
A Chinese court has ruled in favor of e-commerce giants Taobao, Tmall and Taobao Software in a landmark unfair competition case centered on data rights and trade secrets — marking a significant step forward for judicial data protection under China’s digital economy framework.
In its decision, the Nanjing Intermediate People’s Court ordered the defendants to immediately cease their infringing activities and pay 30 million yuan ($4.1 million) in damages, plus legal costs.
The case represents China’s first comprehensive judicial recognition of layered data protection in a single unfair competition lawsuit.
Initiated in 2023, the case drew widespread attention across the e-commerce industry and was widely dubbed the first major legal battle over data resource governance following the enactment of the Data Security Law.
At issue was whether the plaintiffs held protectable trade secrets and data rights, whether the defendants engaged in unfair competition and how liability should be allocated.
The plaintiffs claimed trade secret and data rights over three categories of Taobao and Tmall platform data: processed datasets derived from lawfully collected raw information, operational data generated from user behavior traces and derivative products like the “Business Advisor” tool along with its data usage model — all of which they argued constitute core competitive assets.
The plaintiffs argued that the defendants’ “Xiaowangshen” plugin and related services unlawfully accessed and commercialized proprietary data, including derivative analytics products like “Business Advisor,” which provides merchants with insights on market rankings, search traffic and industry trends for a fee.
They alleged the tools bypassed security measures to scrape raw data, reverse-engineer internal indexes, offer paid download features and resell packaged data via APIs — actions they said violated their trade secrets and data rights.
The defendants, including Guangdong-based Taoshu, Taishu, Meizhou Tianqin, Guangdong Tianqin and two general managers identified by their surnames Li and Lin, denied wrongdoing and argued their tools did not constitute unfair competition nor warrant punitive damages.
The court, however, dismissed most of their arguments.
The court affirmed that the plaintiffs’ non-public operational data — such as individual product sales and merchant-level transaction data — met the legal threshold for trade secrets under China’s Anti-Unfair Competition Law. Derivative products like “Business Advisor” were also deemed protected assets, stored on secure backend servers inaccessible through normal means.
Beyond non-public factual data, the court found that the publicly disclosed data sets and operational information from the Taobao and Tmall platforms also fell within the scope of the data rights claimed by the plaintiff. It held that this data was created through authorized collection, was protected by technical safeguards, and brought the plaintiffs operating income and competitive advantage.
Crucially, the court emphasized that even publicly visible data is not inherently free for unrestricted use. Misappropriating such data through improper technical means still constitutes a violation.
Unfair competition
The court determined that Taoshu’s practices amounted to unfair competition by ruling that the company’s actions violated both trade secrets and data rights.
In the trade secrets context, the court found that Taoshu’s “Xiaowangshen” plugin illegally employed technical means to reconstruct data from the plaintiffs’ platform. This maneuver not only undercut but also replaced the proprietary analytics product, “Business Advisor.” The plugin diverted users, inflicted commercial harm on the platforms and was judged to be a breach of good faith and commercial ethics.
On the data rights front, the court held that Taoshu’s scraping tools — comprising competitor monitoring, material downloads and API access — used technical means to circumvent the plaintiffs’ protective measures. Unlike standard browser-based data access, these automated tools extracted vast amounts of data in a manner that far exceeded any notion of reasonable and orderly use, thereby disrupting the normal functioning of the plaintiffs’ online services.
The court underscored that, while API technology is neutral in design, its use for infringing activities constitutes unfair conduct. By employing such tools, Taoshu not only harmed the platforms’ services but also jeopardized the rights of merchants and consumers, ultimately running afoul of China’s unfair competition laws.
The verdict
In its ruling, the court determined that Taoshu Technology and Meizhou Tianqin had unlawfully infringed upon the plaintiffs’ trade secrets and data rights through the development and operation of the Xiaowangshen product and its associated infringing features.
The court ordered an immediate cessation of all infringing activities and imposed double punitive damages. Citing the high commercial value of the data, the egregious nature of the infringement, the manifest bad faith and the prolonged duration of the conduct, the court awarded the full 30 million yuan sought by the plaintiffs.
While the court refrained from holding the four additional defendants directly liable, it imposed joint liability against the other defendants, with the exception of Guangdong Tianqin.
Source: MLex
