Regulation & Law

Tong Fu (Qihoo 360): “Companies need to capitalize on their industrial expertise and work actively with policy makers”

As the number one PC and Mobile Internet security provider in China measured by user base, Qihoo 360 accounted for about 496 million monthly active users as of June 2014. In 2010, Tong Fu was assigned as General Counsel, in full charge of the company’s legal affairs (including IP and risk management) and the research of industry regulations and policies, and has successfully represented the company in cases that have had a significant impact on the Chinese IT industry.

What is Qihoo 360’s general strategy in dispute resolution? How to protect Intellectual Property (IP) in a rapidly-evolving industry like Internet? Ms. Fu sheds light on some hot topics and shares her successful experience with us.

As the number one PC and Mobile Internet security provider in China measured by user base, Qihoo 360 accounted for about 496 million monthly active users as of June 2014. In 2010, Tong Fu was assigned as General Counsel, in full charge of the company’s legal affairs (including IP and risk management) and the research of industry regulations and policies, and has successfully represented the company in cases that have had a significant impact on the Chinese IT industry. What is Qihoo 360’s general strategy in dispute resolution? How to protect Intellectual Property (IP) in a rapidly-evolving industry like Internet? Ms. Fu sheds light on some hot topics and shares her successful experience with us.


 

Leaders League. Since 2010, Qihoo 360 has been involved in disputes with other Chinese IT giants such as Kingsoft, Tencent and Baidu. What is the company’s general strategy in terms of dispute resolution?

Tong Fu. The frequent lawsuits among Chinese Internet giants occur due to a number of factors: the first is specific to the Internet industry, where the low transfer cost of the users of IT products and services is combined with the huge number of conflicts of technology, unfair competition and copyright issues, thus resulting in numerous disputes; secondly, competition is particularly fierce in the market; thirdly, it is difficult to build sound competition and transaction regulations rapidly in such an emerging industry; and lastly, companies in the industry have relatively strong awareness, sensibility and knowledge in initiating legal action to defend their interests.

 

From launching the listing in November 2010 to November 2015, Qihoo 360 has been involved in 525 proceedings in total, winning 377 of them. Our Legal Department is steadfastly committed to drawing up dispute resolution strategies in support of the company’s survival, development and overall interests and strategy.

 

 

Leaders League. Apart from litigation, what Alternative Dispute Resolution (ADR) processes do you consider and in which cases do you consider them?

T. F. I usually resort to mediation before litigation when it comes to cases in which facts are clear and subjects insignificant. For unfair competition practices that would heavily impact our business if not prevented in a timely manner, we also report to administrative authorities for their intervention.

 

 

Leaders League. What role does the Legal Department play in the risk management system of your company?

T. F. We play a multi-functional role: sometimes we need to put out a fire (in other words, defend), other times to take an assault (attack); internally we focus on support and coordination, and externally on attack-defense and communication.

 

The Risk Management Department strives to reduce legal risks during business operations, while monitoring and detecting behaviors that could potentially violate the company’s interests; the Intellectual Property Department lays out strategies in advance in the company’s interests while building the IP line of defense that can take either the offensive or defensive position; the Litigation Department is the last line of defense that tenaciously fights for the company as a whole. We also study in-depth industry regulations and policies to provide institutional protection for the company. In short, we try to establish an inter-linked system among risk control, IP management, litigation and the promotion of the legislation system in the society.

 

For instance, in the case Qihoo360 v. Baidu concerning Robot.txt, we countered our competitor’s attempts to stifle our search business, ensuring the smooth operation of the company's major businesses. In the case Qihoo360 v. the National Business Daily Magazine, we resolved the largest PR and confidence crisis in the history of the company, and won the highest defamation amount in the juridical record in China by far, thereby defending the company’s corporate reputation and reinforcing its business trust.

 

 

Leaders League. Some companies fear that litigation has a negative impact on their performance or image. How do you view this issue?

T. F. As the market economy by nature is based on the rule of law, law is both a powerful weapon for companies to defend their rights and an important tool to compete in the market. At Qihoo 360, we have relatively strong awareness, knowledge and skills to use legal action to protect the company’s interests; well-established risk management and constant victories in litigation can also cast a positive light on the company’s image.

 

I believe that litigation is a conventional tool in modern corporate competition and that a company’s performance and image are formed mainly through the market. Apart from some notorious cases involving moral or ethical issues, general litigation does not significantly affect a company’s image. As such, I pay more attention to risk management in order to ensure our company does not to run important legal risks in business operations.

 

 

Leaders League. What are the missions of the 360 Research Center?

T. F. On the one hand, in spite of the worsening network security situation in China, the public’s awareness of the importance of network security still remains insufficient, which is not conducive to the growth of network security companies and the industry’s development as a whole. In addition, because of intense competition in the industry and lack of users’ understanding of the business model of Internet security companies, some prejudices still exist, so we hope to build Qihoo 360’s brand and reputation through our efforts. On the other hand, as the industry leader we feel obliged to promote the industry’s progress, improve related laws, regulations and industry rules. Consequently, we established the 360 Research Center in 2014.

 

 

Leaders League. How do you promote partnerships between the Legal Department of your company and Chinese law schools?

T. F. We conduct collaborative research on cutting-edge issues with some leading law schools, so that the research results have both strong theoretical basis and practical significance. We also coordinate with universities in organizing academic conferences on some hot topics and take into account strong points from a wide range of opinions in order to jointly solve industry problems.

 

As one of China’s largest Internet companies, we are also actively committed to social responsibility, contributing to the training of Chinese Internet talent through, for example, organizing summer camps in cooperation with universities and setting up scholarships.

 

In short, we adopt a variety of measures to cooperate with law schools of well-reputed universities, including joint research projects, seminars, law school lectures, co-sponsored summer camps, scholarships, joint training of network security talent, to name but a few.

 

 

Leaders League. What is your advice on IP protection for companies in the Internet industry where legislation isn’t as rapid as innovation?

T. F. The Internet industry is indeed developing at an astonishing pace. Instead of a simple combination of traditional industries and the Internet, the field of “Internet Plus”[1] is, rather, a transformation of all the industries with the use of the Internet. Therefore, we need to protect innovation in technology and business models through enforcing Intellectual Property Rights (IPR) and the reduction of disorderly competition.

 

First of all, it is essential to raise our awareness of IP and protect companies’ interests by building full IP capacity.

 

Secondly, we must strengthen our IPR and at the same time work on various domains such as trademarks, patents, copyrights and domain names, holding to the principle of “quantity first, without ignoring quality.”

 

Last but not least, companies need to capitalize on their industrial expertise and work actively with policy makers. For example, with the development of PC and mobile Internet, we have noted that the graphical user interface (GUI) has become an innovation-intensive area for Internet companies, so we have been actively involved in the research project of the State Intellectual Property Office (SIPO) on this subject, inciting it to modify its Patent Examination Guidelines to finally include the GUI in the protection scope of the appearance patent category.

 

 

Leaders League. What is your main challenge as GC?

T. F. I would say it is how to accurately grasp the needs of the company’s development and provide support that best fits these needs.

 

 

[1] Proposed by the Chinese government in March, 2015, this notion refers to the application of the Internet and other information technology in conventional industries.

 

 

Jeanne Yizhen Yin

 

Read more insight regarding international legal services markets in our next Litigation & International Arbitration Report. Publication in February 2016.

Read the full Special Report: China: Game Changing

The growth story of China’s legal and financial industries is both a product and a testimony of this country’s continuous economic transformation: nascent but fast-growing, vastly different from a decade ago and still rapidly changing. The game has started, and faced with various issues, both international and domestic firms are constantly responding, rethinking, reshaping, readjusting… To survive and thrive, they need to master the fine art of balance between growth and profitability, expansion and quality control, opportunities and risks.
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