Tencent wins third suit against Qihoo 360

GUANGZHOU - Tencent, China's biggest Internet company, has won its third lawsuit against Qihoo 360, a leading Chinese antivirus software developer, over the latter's unfair competition, according to a court ruling issued on Thursday.

Qihoo 360 was accused of breaching faithfulness as well as equal competition and was obvious in malicious competition against Tencent, a Guangdong Provincial Higher People's Court ruling said.

Qihoo 360 seriously disturbed the Internet business order and set down the roots of a long and drawn-out legal war between the two companies, it added.

Qihoo 360 was also fined 5 million yuan ($802,568) as compensation to Tencent and was asked to apologize on its official website and via several major portal websites and newspapers.

The compensation sum is the highest that has ever been ordered in Internet competition lawsuits in China, said Zhang Xuejun, the chief judge.

Qihoo 360 held a press briefing in Beijing on Thursday afternoon immediately after the trial, saying it will appeal to the Supreme People's Court.

Zhou Hongyi, CEO of Qihoo 360, said that the ruling showed a tendency of regional protectionism and his company will file the suit to the end.

Tencent is based in the coastal Shenzhen city of south China's Guangdong province.

While Xu Yan, assistant general manager of Tencent, hailed the ruling as it stipulated the competitive rules of the Internet industry and sent a strong signal of protecting the faithful management of enterprises.

"Our biggest feeling is that the technology and management models of the Internet update too quickly and the legislation lags behind the market performance," said chief judge Zhang Xuejun.

Consequently there are loopholes and gaps in laws concerning the operation of Internet business as the current regulations do not have specific stipulations of certain market behaviors, Zhang said.

The trial of a series of similar cases in recent years provides a boundary for unordered Internet competition, said Wang Guanxiong, a renowned IT manager.

"I firmly believe the war between Tencent and Qihoo 360 is positive for the Internet industry," said Wang.

The debate between the two sides and the trial helps improve the supervision of the Internet industry, he said.

The two companies have been engaged in a drawn-out legal war since 2010.

Qihoo 360 lost a lawsuit that it filed against Tencent over the latter's alleged abuse of its dominant market position on March 28 this year and was ordered to pay 790,000 yuan in legal fees, according to a ruling from the Guangdong Provincial Higher People's Court.

It also lost a lawsuit over its unfair competition in September 2011 and was ordered to pay 400,000 yuan in compensation to Tencent, according to a ruling from the Beijing No. 2 Intermediate People's Court.

The origin of their feud began on September 27, 2010 when Qihoo 360 accused Tencent of invading the privacy of its users through the use of QQ Doctor, a security program developed by Tencent for use with its popular QQ instant messaging service. Qihoo 360 claimed that Tencent has used the software to scan and monitor its users' personal information.

Following the complaint, Qihoo 360 released its own security software called "Koukou Guard" on October 29, 2010, claiming it could speed up QQ and offer more privacy to its users. However, Tencent responded by warning its users that the "Koukou Guard" could cause QQ to malfunction.

The dispute escalated when Tencent said on November 3, 2010 that it would shut down the QQ instant messaging service on computers that had security software created by Qihoo 360 installed on them.

Although both companies apologized to Internet users after being ordered by the Ministry of Industry and Information Technology to stop fighting, the war between the two Internet giants had already triggered public outcry.