São Paulo State Court of Appeal Issues Precendent-Setting Decision On Apps Unfair Competition War
An unfavorable decision against Chinese Internet giant Baidu was unanimously upheld by the Second Specialized Business Chamber of São Paulo State Court of Appeal in an unprecedented case concerning acts of unfair competition perpetrated by means of mobile applications, in which the leader in mobile security PSafe Tecnologia S.A. was the adverse party.
PSafe and Baidu filed lawsuits mutually accusing each other of unfair competition practices, as, in brief, the Android antivirus apps PSafe Total, from PSafe, and Du Speed Booster, from Baidu, would have been designed to display false alerts targeted at tarnishing adverse party’s reputation.
Caught in a crossfire, the lower court denied Baidu’s claim whereas granted the civil remedies requested by PSafe, in a decision that gave especial deference to the following conclusions of the expert report issued by Routo Terada, a professor at USP – Universidade de São Paulo: (i) Baidu deliberately designed its app Du Speed Booster to deceitfully advise, through alerts exclusively sent in relation to PSafe Total, that such app causes security risks, is a virus, and, thus, should be uninstalled; and (ii) PSafe’s apps displayed truthful alerts pertaining to the privacy risks of Baidu’s apps and those warnings are sent in relation to other apps of the same nature.
In this sense, the lower court judge found that the Chinese company’s behavior would induce consumers to avoid using PSafe’s app as well as impair PSafe’s reputation in the relevant market. As consequence, it was ruled that Baidu’s conduct falls within the hypothesis of unfair competition under article 195 (I) and (III) of the Brazilian Industrial Property Statute (Law n. 9.279/1996) and that damages must be awarded.
When judging the appeal filed by Baidu, the appellate reporting judge Cesar Ciampolini, aside from refusing all arguments towards the nullity of the expert report, settled “O caso dos autos, parece claro, enquadra-se perfeitamente no conceito de concorrência desleal por denegrição (ou denegrimento) diante dos fatos apurados pericialmente, antes expostos. Afinal, não há conduta mais prejudicial à empresa que oferece aos seus consumidores software de segurança que ter seus produtos identificados como vírus, isto é, como vulnerabilidades, riscos à própria segurança que, de fato, é o elemento motivador de sua instalação.” (“This case is a clear example of unfair competition by tarnishment. After all, there cannot be a conduct any more jeopardizing to a company in the mobile security sector – as PSafe – than the very one that directly associates its software with the kind of vulnerability it is marketed to address”).
Thereafter, in view of Baidu’s economic power, relevance and effects of its attitudes, and the need to prevent unjust enrichment, the Court of Appeal confirmed the award of moral damages in the amount of R$ 440.000,00, and compensatory damages, to be calculated in a separate proceeding.
It goes without saying that Baidu was also ordered to modify the app Du Speed Booster in order to assure it will no longer display alerts indicating PSafe Total as a virus or recommending that it is removed. Baidu was further required to publish a retraction statement on its website and social media platforms.
This case definitely sets standards to be followed in future cases of the same nature.
Amanda Fonseca De Siervi and Vanessa Ribeiro, Gusmão & Labrunie, São Paulo