The unique Chinese legal approach to online adblocking: Is it in the right direction?

Bingbin Lu *School of Law, Nanjing University, China

A B S T R A C T

The legal debate around online ad blocking demonstrates a tension between user’s freedom

and online content providers’ revenue-generating business model.This paper aims to analyze

ad blocking from a unique perspective of the Chinese law and practice. Since ad blocking

does not violate copyright law, copyright law cannot be a guardian to the ad-based business

model. China takes a different approach to protect the ad-based business model under unfair

competition law and bans ad blocking software directly by regulation. The Chinese courts

held that providing ad blocking software is anti-competitive under a vague general prin-

ciple of the Anti-Unfair Competition Law. The special policy reason behind these decisions

is that the Chinese government and courts want to maintain this business model and strengthen

intellectual property protection. These decisions are reinforced by the regulatory ban of ad

blocking software in China. However, the Chinese approach is in the wrong direction. The

Chinese courts have applied a principle of “non-interference unless in the public interest”

to ad blocking cases but never analyzed the public interest seriously.This paper argues that

the “public interest” in the Internet context should be the interests of Internet users. The

group of Internet users is large enough to constitute the general public. The public have a

compelling interest of autonomy to justify ad blocking.The right approach to solving the ad

blocking problem should be flexible, easily adjustable and it should not totally fail one side.

Compared to direct regulatory intervention, a flexible judicial approach is better because it

could take into consideration a variety of interests and strike a balance in specific cases.

And, to regulate new technologies, a soft version of guidelines could be easily adjustable

than an immature regulation. The Internet itself is a creative industry developed under the

process of “creative destruction”. Any legal intervention shall be careful and not impede the

emerging technologies, market structure development and autonomous competition.

© 2017 Bingbin Lu. Published by Elsevier Ltd. All rights reserved.

Keywords:

Ad blocking

Copyright

Unfair competition

Governmental intervention

Creative destruction

1. Introduction

With the development of Internet and the shifting from tra-ditional media to digital media, the ad-based business model

has become conventional for online content providers. In recentyears, despite the economic slowdown, online advertisingexpenditures continue to grow and Internet companies flour-ish based on this revenue model.1 The market size of onlineadvertising in China during the first half of 2016 has reached

* School of Law, Nanjing University, Hankou Road 22, Nanjing, Jiangsu 210093, China.E-mail address: lbb@nju.edu.cn.

1 See iresearch, ‘2016 Annual Monitoring Report on China’s Online Advertising Industry’ (1 April 2016). <http://www.iresearch.com.cn/report/2566.html> (reporting “the market size of internet advertising in China continues to grow year over year, from 77.31 billion RMB in2012 to 110.01 billion RMB in 2013, and from 153.97 billion RMB in 2014 to 209.37 billion RMB in 2015”) (in Chinese); See also eMarketer, ‘InChina, Advertising Spend Follows Consumers to Digital’ (11 October 2016). <https://www.emarketer.com/Article/China-Advertising-Spend-Follows-Consumers-Digital/1014584> accessed 10 March 2017.https://doi.org/10.1016/j.clsr.2017.05.0120267-3649/© 2017 Bingbin Lu. Published by Elsevier Ltd. All rights reserved.

c om pu t e r l aw & s e cu r i t y r e v i ew 3 3 ( 2 0 1 7 ) 7 8 6 – 8 0 1

Available online at www.sciencedirect.com

www.compseconl ine.com/publ icat ions/prodclaw.htm

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118.71 billion RMB, increasing by about 27.3% compared to2015.2

However, not all online advertising is effective mainly dueto ad-blockers. Ad blocking on the Internet is ordinarily carriedout by software or a browser extension. Such software or ex-tensions installed at end users’ side can systematically blockonline ads. Recent years have witnessed the proliferation ofad blocking plug-ins. In China, in addition to Adblock Plus andAdBlock, the international famous ones, some varieties of adblocking software are available, such as Adsafe and Ad Assistant.3

These tools are usually developed by individuals or small start-up companies.

The growth rate of people using ad blocking software is rapidand irreversible. Globally, the number of ad blockers has grownby 41% from 2014 to 2015,4 and by 30% from 2015 to 2016.5 TheChinese are among the most enthusiastic adopters of ad block-ing software. According to a comparative study of the UnitedStates, Romania and China, three countries with different cul-tural orientations, consumers in China show the least trusttowards online advertising.6 People do not trust online adver-tising for many diverse reasons. Interruption, too many ads onwebpages, security concerns and privacy concerns are amongthe main reasons behind ad blocking.7 The Chinese tend to bevery cautious and mistrust unexpected events. This adds thefuel to blocking unsolicited ads. Unsolicited and intrusive adscannot earn Chinese consumers’ trust. A study by the PHDnetwork of the Omnicom Media Group found that at least about10% to 12% of ads delivered to end users were being blocked.8

This estimated number is a conservative one because lots ofad blocking activities at the end-user side cannot be identi-fied and discerned.

New business models and new legal issues frequently arise.Although some activities on the Internet, such as unlicensedfile sharing, are undoubtedly illegal, many others’ legality ismoot. Online ad blocking represents a typical example of suchcontroversial issues.

The legal debate around online ad blocking demonstratesa tension between user’s freedom and online content provid-ers’ revenue-generating business model. On the one hand,

the current proliferation of programming and content onlinedepends primarily on the ad-based business model. Advertis-ing is of great significance to provide a stable revenue streamfor online content providers, which also plays a socially im-portant role in the available of free content online. Ad blockingmay jeopardize the incentive to provide free and quality contentand destroy the old revenue model of advertising-supportedprogramming and content. On the other hand, the prolifera-tion of digital ads is at the expense of user experience. Users’primary purpose of installing ad blocking software is to makeInternet surfing more enjoyable.9 Consumers’ skepticismtowards advertisements is growing due to annoying and evenintrusive ads. By using ad blocking software and extensions,users get back their freedom to travel in a clean online world.As one reporter noted, “The Internet has suddenly become aquieter, more civilized, less commercial place.”10 In addition,ad blocking software helps users to speed up access to web-sites and reduce the chance of clicking and picking up malwareand virus.

Despite the rapid growth of ad-blockers, academic re-search on this legal issue is by and large lagging behind. Thispaper aims to fill the gap by providing a legal analysis of adblocking from a unique perspective of the Chinese law and prac-tice. Following this introduction, Section 2 will first survey adblocking legal war worldwide, mainly focusing on what has hap-pened in two noticeable countries, the U.S. and Germany, andlaying the foundation for evaluating the Chinese approach froma comparative perspective. Section 3 will discuss whether copy-right law can be a guardian to the ad-based business model,focusing on the unauthorized derivate work argument and thefair use defense. After concluding that ad blocking does notviolate copyright law, Section 4 will present the unique Chineseapproach of unfair competition and regulatory control. Then,Section 5 will assess the Chinese approach and discuss aboutthe reasons behind it and problems about it. After establish-ing that the current Chinese approach is heading in the wrongdirection, Section 6 will suggest the right direction that is notonly suitable for China, but probably also applicable to othernations.

2. The ad blocking legal war worldwide

2.1. U.S.

In the U.S., online content providers are yet to initiate law-suits against ad blocking software. However, according to asurvey of some high-traffic websites, 48% of the surveyed web-sites indicated they were “somewhat likely to test” and 36%said they were “definitely/very likely to test” the approach of

2 Analysys, ‘A Survey of Digital Marketing Industry in the FirstHalf of 2016’ (7 August 2016). <http://mt.sohu.com/20160807/n463016427.shtml> accessed 16 January 2017 (in Chinese).

3 There have been some legal disputes concerning ad blockingsoftware in China, including the Adsafe mentioned here. For moreinformation on ad blocking software in China, see Table 1.

4 PageFair & Adobe, ‘The cost of ad blocking: PageFair and Adobe2015 Ad Blocking Report’ (10 August 2015) p. 4. <https://pagefair.com/blog/2015/ad-blocking-report/> accessed 16 January 2017.

5 PageFair, ‘The state of the blocked web: 2017 Global AdblockReport’ (February 2017), p. 14. <https://pagefair.com/downloads/2017/01/PageFair-2017-Adblock-Report.pdf> accessed 13 March 132017.

6 See Ying Wang, Shaojing Sun, ‘Assessing Beliefs, Attitudes, andBehavioral Responses toward Online Advertising in Three Coun-tries’ (2010) 19 International Business Review 333, 343.

7 See PageFair, above n. 5, p. 12.8 See Angela Doland, ‘Ad Blocking Is an (Unexpectedly) Big Issue

in China’ (4 December 2015). <http://adage.com/article/digital/ad-blocking-unexpectedly-big-issue-china/301602/> accessed 16 January2017.

9 According to a survey result of 4000+ Internet users, “Interrup-tive ad formats and virus/malware concerns were the leadingreasons given for adblock usage.” See PageFair, above n. 5, p. 4, p. 12.

10 Stephen Manes, ‘Web Ads: A Cat-and-Mouse Game: Overrun byAds? New Software Is Better at Exterminating Them’ (2007) 25 PCWorld 142, 142.

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Table 1 – Overview of ad blocking cases in China (chronologically).

Case name(disputed parties)

Disputed subjectmatter

Court decision Court’s main reasoning Court & Casenumber

Tencent v Qihoo (TencentTechnology CompanyLtd. v Beijing Qihoo 360Technology Co. Ltd.)

[note: one of the top 10Chinese IP cases in 2014,promulgated by theSupreme People’s Courtof the PRC]

QQ is the most popularonline instant messageservice in China. Qihoo360, a leading securitiessoftware company inChina, developed asoftware called “QQGuard” to “protect” usersfrom viruses on QQ, whichcould also block QQ’s ads.

There are five issuesdisputed in this case,including ad blocking.The Supreme Courtmaintained ruling inTencent’s favor,holding among others,ad blocking constituteunfair competition.

Ad-based business model shouldbe protected, and the defendantunfairly interfered the plaintiff’slegitimate business, violated theprinciple of good faith and widelyaccepted business morality, thusviolate Article 2 of the Anti-UnfairCompetition Law in China(AUCL).

Supreme Court ofthe PRC, civil III finalno. 5 (2013), decided18 February 2014.

Baidu v Qihoo (BaiduOnline NetworkTechnology Co., Ltd. vBeijing Qihoo 360Technology Co. Ltd.)

The defendantdisseminated a browserextension “blocking Baidu’sads” on its websitewww.360.cn, andcontinued to do so afterthe plaintiff’s cease anddesist letter.

The defendant’s actof disseminating the“blocking Baidu’s ads”extension constitutesunfair competition.

The browser extension wasintentionally developed to blockBaidu’s ads. The defendantconducts a review process forextensions uploaded by thirdparties and should know theadverse effect of this extensionto Baidu even if it is developedby a third party. The defendantis in breach of the principle of“non-interference unless in thepublic interest” and the principleof good faith.

Beijing DongchengDistrict Court, Dongcivil first instanceno. 08310 (2013),decided 20 April2014.

Heiyi v Kingsoft (HeyiInformation Ltd. vKingsoft SecuritySoftware Ltd.)

[note: one of the top tenIP cases in 2014,promulgated by BeijingHigh Court]

A browser developed andprovided by the defendant,Liebao browser, which hasad blocking function andcan skip the pre-roll ads ofvideos from the plaintiff’swebsite Youku (a renownedvideo service in China).

The defendantconstitutes unfaircompetition.

Ad-based business model shouldbe protected; the defendantinterfered with the plaintiff’slegitimate business operationand took a free ride on theplaintiff’s business interest in anunfair manner.

Beijing FirstIntermediary Court,Civil final no. 3283(2014), decided 10December 2014.

iQiyi v Geek-Geek (BeijingiQiyi Technology Ltd. vBeijing Geek-GeekTechnology Co., Ltd.)

A router call “HiWifi” withan ad blocking feature.

The defendantconstitutes unfaircompetition.

The defendant’s product with the adblocking capacity is in competitionand also directly intervened theplaintiff’s business model thusconstitute unfair competition.

Beijing IP Court FinalNo. 79 (2014), decided13 February 2015.

Sohu v Hualu Tianwei(Beijing Sohu InternetInformation ServiceCo., Ltd. v BeijingHualu TianweiTechnology Ltd.)

“MoreFunTV” (a videostreaming serviceaggregator) which is anend user software inmobile and smart TV, etc.,capable of ad blocking.

The defendantconstitutes unfaircompetition.

The defendant’s software woulddestroy the ad-supported freevideo business model of theplaintiff and adversely affect itsbusiness operation.

Beijing ShijingshanDistrict Court, civil(IP) first instance9291 (2014), decided29 June 29 2015.

iQiyi v Qiansan (BeijingiQiyi Technology Ltd.v Qiansan InternetTechnology Ltd.&Yueguan InternetTechnology Ltd.)

The defendant’s “MoreTV”application provideraggregated video serviceenabling users to viewvarious audiovisual worksoriginated from differentsites through one platform.This application has an adblocking feature.

The defendantconstitutes unfaircompetition.

Video aggregation service is legalbecause it just provides a deeplink to the original address. However,the ad blocking function of thisapplication may jeopardize theplaintiff’s legitimate business modeland further endanger the onlinevideo service industry, thus violatedArticle 2 of AUCL.

Shanghai PudongNew Area People’sCourt, civil law IIIfirst instance no. 143(2015), decided 21August 2015.

iQiyi v Juwangshi(Beijing iQiyi Tech.Ltd. v ShenzhenJuwangshi Tech. Ltd.)

A similar video streamingservice aggregator calledVST with ad blockingfunction.

The defendantconstitutes unfaircompetition.

The VST application would destroyiQiyi’s ad-supported businessmodel of offering free videos thusconstitute unfair competition.

Shanghai IP Court,civil final No. 728(2015), decided 26April 2016.

Leshi v Damo (BeijingLeshi InternetInformation &Technology Co. Ltd. vShanghai DamoNetwork TechnologyCo., Ltd.)

The defendant’s Adsafesoftware which is capableof blocking ads of theplaintiff’s video servicewebsite www.letv.com.

The defendantconstitutes unfaircompetition.

Although the technology itself isneutral, it still could be a tool forunfair competition. Thedefendant’s use of thistechnology violated the principleof good faith and widely acceptedbusiness morality thus violatedArticle 2 of AUCL.

Shanghai IP Court,SH 73 civil final no.75(2016), decided 15July 2016.

(continued on next page)

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legal action in particularly collective legal action through a rep-resentative organization.11

Online content providers’ hatred to ad blocking can also bewitnessed in U.S. newspaper publishers’ challenge to the Bravebrowser. The publicized feature of the Brave browser is that it“automatically blocks ads and trackers” and can make Inter-net surfing “faster and safer”.12 The developer of this browseralso plans to implement an advertising-replacement plan.Afterblocking all ads by its imbedded ad blocking extension, the Bravebrowser plans to replace them with its own ads. In a cease-and-desist letter sent to Brave’s CEO, a group of noticeable U.S.newspaper publishers, including the New York Times Co., theWashington Post,and Dow Jones,argued that Brave’s advertising-replacement plan would constitute copyright infringement,unfair competition, unauthorized access to their sites, a violation

of the publishers’ terms of use and a breach of contract.13 Inthis regard, these publishers threatened the maker of the Bravebrowser with legal action if Brave went ahead with plans toreplace websites’ ads with its own.14 The unique problem ofthe Brave browser is that it does not only block ads, but re-places them with Brave’s for-profit ads. The legal implicationis more complicated for the advertising-replacement plan com-pared to ad blocking only. Despite all this, online contentproviders’ desire to keep their advertisements intact is dem-onstrated in this example.

In the U.S., the legal basis of any challenge in relation toad-blockers by online content providers is yet to be estab-lished. No court has ever directly addressed the legality of adblocking yet. However, prior cases involving commercial skip-ping in television advertising indicate that there probably isa copyright issue in ad blocking.15 In addition to copyright

11 See Lara O’reilly, ‘A Bunch of Big US Websites Say They’re Likelyto Support Legal Action against Ad Blockers’ (Business Insider, 6April 2016). <http://uk.businessinsider.com/medianomics-ad-blocking-survey-finds-publishers-support-legal-action-against-ad-blockers-2016-4?r=US&IR=T> accessed 10 December 2016.

12 See the introduction of Brave on its homepage, <https://brave.com/> accessed 10 December 2016.

13 See Ariel Yosefi, ‘The Legal Questions Surrounding Ad Block-ing Continue to Make Headlines’ (21 April 2016). <http://www.lexology.com/library/detail.aspx?g=f4c80d81-944f-4aff-b388-60dbada24fea> accessed 10 December 2016.

14 Ibid.15 See Section 3.1.

Table 1 – (continued)

Case name(disputed parties)

Disputed subjectmatter

Court decision Court’s main reasoning Court & Casenumber

iQiyi v Damo (Beijing iQiyiTech. Ltd. v ShanghaiDamo NetworkTechnology Co., Ltd.)

The defendant’s Adsafesoftware which is capableof blocking ads of theplaintiff’s video servicewebsite iQiyi.

The defendantconstitutes unfaircompetition.

Id. Shanghai IP Court,SH 73 civil final no.33 (2016), decided 15July 2016.

JuLi Media v Damo(Shanghai JuLi MediaTechnology Co., Ltd. vShanghai Damo NetworkTechnology Co., Ltd.)

The defendant’s Adsafesoftware which is capableof blocking ads of theplaintiff’s video servicewebsite PPTV.

The defendantconstitutes unfaircompetition.

Id. Shanghai IP Court,SH 73 civil final no.34 (2016), decided 15July 2016.

Sohu v Shichang (BeijingSohu InternetInformation Service Co.,Ltd. & Tianjin FeihuInformation TechnologyCo., Ltd. v ShanghaiShichang InformationTechnology Co., Ltd.)

The defendant’s “KankeTV”application for Andoid, IOSand smart TV, which iscapable of blocking ads ofvideos on the plaintiff’swebsite.

The defendantconstitutes unfaircompetition.

The defendant’s use of thistechnology violated the principleof good faith and widely acceptedbusiness morality, infringed theplaintiff’s legitimate interest andviolated Article 2 of AUCL.

Shanghai IP Court,SH 73 civil final no.68 (2016), decided 28July 2016.

Tencent v Baofeng(Shenzhen TencentLtd. v Beijing BaofengTechnology Co.,Ltd)

An end user software called“extremely light model”developed and distributedby the defendant, whichprovides deep links to videosfrom other websites and iscapable of ad blocking.

The defendantconstitutes unfaircompetition.

Deep link is not prohibited.However, the plaintiff’s ad-basedbusiness model should beprotected, and the defendantunfairly interfered with theplaintiff’s legitimate interests,thus violated Article 2 of AUCL.

Beijing IP Court,Beijing IP civil finalno. 2203 (2015),decided 10 August2016.

Xunlei v Baofeng(Shenzhen XunleiNetwork Tech. Ltd. vBeijing BaofengTechnology Co., Ltd.)

Id. The defendantconstitutes unfaircompetition.

Id. Beijing IP Court,Beijing IP civil finalno. 2204, decided 10August 2016.

(Case sources: China Judgment online http://wenshu.court.gov.cn and Pkulaw http://www.pkulaw.cn; the author searched these two databaseswith the keywords “ad & block & business model” in Chinese; last accessed 20 December 2016; translated by author).

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claims, some countries take a different approach to assessingthe legitimacy of providing ad blocking software under the com-petition law.

2.2. Germany

In Germany, the Eyeo company, who produces Adblock Plus, hasbeen taken to court by publishers several times. Courts haverepeatedly ruled that ad blocking software per se does not violatethe law.16 The legality of ad blocking has been upheld in at leastsix court decisions.17 However, in a recent case, Axel Springer vEyeo, decided by the Higher Regional Court of Cologne, AdblockPlus’ whitelisting business model was ruled lawbreaking.18 Thegist of Axel Springer’s argument is that Adblock Plus’ selectiveand price discriminating whitelisting practice is anti-competitive.The court decided that Axel Springer was compelled to par-ticipate in the whitelisting program by “undue influence” whichviolated Section 4a of the Act Against Unfair Competition (§4aUWG).19 It is the first decision on ad blocking taken by anAppellate Court in Germany.20 However, the court never con-sidered ad blocking software per se illegal. The central issuein this case is beyond the legality of ad blocking software. Itis actually a battle between two business models: the ad-supported business model and Ad-block Plus’ business modelof paid whitelisting.

Meanwhile, the German media houses have been lobbyingfor legislative changes to regulate ad blocking. In June 2016,the Federal Government Commission on Media Convergence(Bund-Länder-Kommission zur Medienkonvergenz) released areport,21 finding ad blocking a legal and media-political threatand recommended further investigations to find out whetherregulatory intervention would be necessary to protect thefinancing of online content.22 Is governmental regulationbanning ad blocking desirable? As will be presented later, Chinahas already pioneered to take the approach of regulatory control.But, whether the approach of governmental regulation is inthe right direction needs to be reconsidered. The regulatorycontrol of ad blocking activities probably would be harder to

implement in western developed countries oriented by marketeconomies.

2.3. Other movements in EU member states

In the EU, publishers are divided on how to respond to the crisisof ad blocking: whether to initiate the lawsuit or to unite to-gether to block ad blockers.23

For example, in France, French sports media l’Equipe at-tempts to put pressure on users. On identification of ad blockersbeing used whilst trying to watch programming on its websiteare served a message: “Unauthorised access. L’Equipe.fr is fundedby advertising, which allows us to offer you free content.”24 In Sweden,publishers are joining the collective action to simultaneouslyblock ad blocking software users.25 These publishers are seekingfor self-help remedies rather than officially initiating lawsuits.

However, the approach of self-help is problematic. In EU,detecting and blocking ad blockers cause privacy concern.Article5.3 of the Directive on Privacy and Electronic Communica-tions establishes the rule of “informed user consent”, requiringprior consent of the end user for a website to access informa-tion on user’s side.26 European privacy activist Alexander Hanffeven launched EU-wide challenge to “ad blocker blockers” anda reply from the President of the European Commission hasmade it clear that stopping ad blockers from viewing contentbased on a scan of end user’s devices falls under the umbrellaof the Directive on Privacy and Electronic Communications,which means Internet publishers need to get prior permis-sion before gathering any kind of data.27 This movement mayspark an ongoing war between ad-based business model andprivacy advocates.28The legal controversy of ad blocking is labeledby one commentator as “Europe’s Next Legal Storm”.29

16 See Christoph Wagner, Patricia C. Ernst, ‘Whitelisting ViolatesGerman Unfair Competition Act’ (12 July 2016). <http://www.lexology.com/library/detail.aspx?g=cca2bd47-f55f-4a81-9803-d599f824e15e> accessed 10 December 2016.

17 See Ben Williams, ‘The Lonely Bully: China Issues Edict to BanAd Blockers’ (20 July 2016). <https://adblockplus.org/blog/the-lonely-bully-china-issues-edict-to-ban-ad-blockers> accessed 10December 2016.

18 Axel Springer v Eyeo, Oberlandesgericht Köln (the Higher Re-gional Court of Cologne), 6 U 149/15, decided 24 June 2016.

19 Ibid.20 See Wagner & Ernst, above n. 16.21 Bericht Bund-Länder-Kommission zur Medienkonvergenz

[Federal-State-Commission Report on Media Convergence] (14 June2016). <https://www.bundesregierung.de/Content/DE/_Anlagen/BKM/2016/2016-06-14-medienkonvergenz-bericht-blk.pdf?__blob=publicationFile&v=3> accessed 10 December 2016.

22 See Anthonia Ghalamkarizadeh, ‘Germany: First Inroads againstAdblocking’ (28 June 2016). <http://www.lexology.com/library/detail.aspx?g=5ed1c9aa-74c6-42f7-95bf-fd5a51c9a3f0> accessed 10December 2016.

23 See Lucinda Southern, ‘Europe’s Top Publishers on What They’reDoing about Ad Blocking’ (8 March 2016). <http://digiday.com/publishers/europes-top-publishers-theyre-ad-blocking/> accessed10 December 2016.

24 See ‘First Court Hearing of Broadcasters and Adblock Plus’ (19December 2014). <http://policyreview.info/articles/news/first-court-hearing-broadcasters-and-adblock-plus/347> accessed 10December 2016.

25 See Lucinda Southern, ‘Sweden’s Publishers are Joining Forcesto Simultaneously Block Ad-Block Users’ (14 March 2016). <http://digiday.com/author/Lucinda-southern/> accessed 10 December 2016.

26 Directive 2002/58/EC of the European Parliament and of theCouncil of 12 July 2002 Concerning the Processing of Personal Dataand the Protection of Privacy in the Electronic CommunicationsSector (“Directive on Privacy and Electronic Communications”), Of-ficial Journal L 201, 31/07/2002, Article 5.3.

27 See Duncan Robinson, ‘Privacy Activist Launches EU-Wide Chal-lenge to “Ad Blocker Blockers”’ (Financial Times, 2 May 2016). <http://www.ft.com/cms/s/0/a32fd14e-0e26-11e6-ad80-67655613c2d6.html#axzz4GutBd7r2> accessed 10 December 2016.

28 See Catalin Cimpanu, ‘Blocking Ad-Blockers May Be Illegal inthe EU Thanks to the Cookie Law’ (23 April 2016). <http://news.softpedia.com/news/blocking-ad-blockers-may-be-illegal-in-the-eu-thanks-to-the-cookie-law-503359.shtml> accessed 10 Decem-ber 2016.

29 Josh Townsend, ‘Blocking the Ad-blockers: Europe’s Next LegalStorm?’ (4 May 2016). <http://itsecurity.co.uk/2016/05/blocking-the-adblockers-europes-next-legal-storm/> accessed 10 Decem-ber 2016.

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3. Can copyright law be a guardian to the ad-based business model?

Since the real cases of ad blocking are challenged under unfaircompetition law both in Germany and China, whether copy-right law can be a guardian to the ad-supported business modelis yet to be tested. In academia, it is also a controversial issue.30

Some scholars believe that ad blocking constitutes copyrightinfringement. For example, Hamburger argues that Copyrightlaw should tolerate private use such as time-shifting (record-ing a program to watch at a later time) but not advertisementavoidance.31 Hemmer also claims that ad blocking software vio-lates copyright law.32 However, in practice, copyright holdersare hesitating to bring copyright suits against ad blocking soft-ware providers or distributors probably because they areworrying about adverse ruling on copyright claims.

3.1. Copyright controversies over commercial skipping inthe VCR and DVR era

As there is no copyright case on online ad blocking yet, dis-putes around TV commercial skipping in the VCR and DVR eramay shed some light on it. Several U.S. cases are typical anddeserve to be studied here.

Commercial skipping is not about skipping ads on TV liveprograms. It refers to skipping or avoiding commercials, eithermanually or automatically, when recording TV programs bydigital video recorders. Sony’s Betamax and Dish Network’sAutohop as discussed in the following cases are two typical toolsthat enable commercial skipping.

The earliest well-known case implicating legal contro-versy of commercial skipping is the landmark Sony decisionby U.S. Supreme Court. Sony’s Betamax video recorder has apause control and a fast-forward control which enable its usersto avoid recording advertisements manually.33 Although Sony’sBetamax is capable of commercial skipping, its primary use isfor time-shifting. So the Supreme Court only addressed the le-gality of time-shifting which supported the finding of fair useand then concluded that consumers used Sony’s Betamax ina substantial non-infringing way.34 The Court in Sony did notexplain whether commercial skipping were infringing or notbecause it was secondary to its non-infringing use.

In re Aimster Copyright Litigation,35 Judge Posner cited the Sonycase and commented on commercial skipping. He consideredthe third use of Sony’s Betamax, commercial skipping, as aninfringement of copyright because it “amounted to creating an

unauthorized derivative work . . . namely a commercial-free copythat would reduce the copyright owner’s income from his origi-nal program, since ‘free’ television programs are financed bythe purchase of commercials by advertisers.”36 Following thislogic, a judge might conclude that online ad blocking is copy-right infringing. However, the reasons why ad blocked displayis unauthorized derivative work should be carefully deliber-ated. In addition, even if the ad-blocked version constitutes aderivative work, it is dubious why such a use is not a fair use,especially when it is done by an end user to improve the onlinesurfing experience.

In the DVR era, there was a debate on commercial skipping.In Paramount Pictures Corp. v Replay TV, several television andfilm companies alleged the defendant’s digital video recorder(“DVR”) with commercial skipping function had constitutedcopyright infringement.37 This case, once called “the next bigcopyright battle”,38 is finally dismissed by the Court becausethe defendant was forced to seek bankruptcy protection andits DVR technology was sold to a new owner who gave up thecommercial skipping feature.39 However, a similar case, Fox vDish Network, was tried by court and the court concluded thatcommercial skipping is not copyright infringement.40 In Fox vDish Network, the defendant’s AutoHop enables users to auto-matically skip commercials. Adhering to the U.S. SupremeCourt’s landmark Sony decision, the court found commercialskipping not infringing because Fox only owns copyrights inthe programming, not in commercials, and their skipping doesnot involve Fox’s copyright interest.41 In the court’s opinion,although the user skipped commercials, the program contentis not altered in any way.42 The court concluded that auto-mated commercial-skipping neither violates copyright norprovides a tool effecting the skipping. Losing the ads may wellhave had an adverse economic impact, but the court found thatthe harm did not derive from copyright infringement.43

Online ad blocking is similar to commercial skipping in re-cording TV programs. Both the TV industry and the Internetindustry rely heavily on revenues from advertising, but thereis a difference between their revenue models. TV ads are paidup front. Instead, online ads are paid by click or by view usually.As a result, online ad blocking could have a more serious impacton the profiting of the Internet industry as compared to com-mercial skipping. However, until now, to my knowledge, therehas been no empirical data showing a severe impact on incomesad blocking has on the industry. Instead, the market size ofonline advertising is increasing year over year.44 The cost ofonline advertising is usually less than that on the TV and busi-nesses perceive a value to advertise online. In the digital world,

30 See generally Ethan O. Notkin, Note, ‘Television Remixed: TheControversy Over Commercial-Skipping’ (2006) 16 Fordham Intell.Prop. Media & Ent. L.J. 899.

31 See Bradley Hamburger, ‘Digital Video Recorders, Advertise-ment Avoidance, and Fair Use’ (2010) 23 Harv. J.L. & Tech. 567, 580–584.

32 See generally John L. Hemmer, Comment, ‘The Internet Adver-tising Battle: Copyright Laws Used to Stop the Use of Ad- BlockingSoftware’ (2006) 24 Temp. J. Sci. Tech. &Envtl. L. 479.

33 Sony Corp. of America v Universal City Studios, Inc., 464 U.S. 458(1984).

34 Ibid. at 417.35 In re Aimster Copyright Litigation, 334 F.3d 643,645 (2003).

36 Ibid. at 647–648.37 Paramount Pictures Corp. v Replay TV, 298 F.Supp.2d 921,923 (2004).38 Fred von Lohmann, ‘ReplayTV Zaps Ads and Permits Show Swap-

ping: Get Ready for the Next Big Copyright Battle’, Cal. Law., June2002, p. 29; quoted from Bradley Hamburger, above n. 31, p.576.

39 Paramount Pictures Corp. v Replay TV, 298 F.Supp.2d 921,929–930(2004).

40 Fox Broadcasting Co., Inc. v Dish Network L.L.C., 747 F.3d 1060, 1065(2013).

41 Ibid. at 1068.42 Ibid. at 1065–1066.43 Ibid.44 See above n. 1.

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online advertising revenue is estimated to grow continually.45

There is yet to be a justification in having a different policyorientation and legal treatment for ad blocking as comparedto traditional media. The law is also not a tool to maximizethe profit of an industry. From the copyright law perspective,the acts of TV commercial skipping and online ad blocking areessentially the same because both of them avoid ads whenwatching programs or viewing content. The same act of usinga copyrighted work shall fairly receive the same treatmentunder the copyright law.

3.2. Whether ad-blocked display constitutes anunauthorized derivative work?

Regarding the issue of ad blocking, the only copyright claimthat could possibly be deployed by publishers is the unauthor-ized derivative work argument. One view is that ad blockingresults in an altered version of copyrighted work displayingonline, constituting an unauthorized derivative work.46

The derivative work argument is dubious. There are twostrong counterarguments. First, the simple compilation of ad-vertisement and content does not create a protectable copyrightwork. The derivative work argument is based on the premisethat advertisement is part of the copyrightable work dis-played on the Internet. However, the typical commercial-plus-video compilation is not original enough to get copyrightprotection.47 Second, the pre-roll advertisement and the videoor movie is not sufficiently related to constitute an inte-grated audiovisual work. An audiovisual work by its nature isa series of related images. The U.S. Copyright Act explicitly pro-vides that audiovisual works are works should “consist of aseries of related images”.48 While in China, the definition of “cin-ematographic works and works created by a process analogousto cinematography”, a similar term to “audiovisual works”,49

only mentions “a series of images”, not “related images”.50 Nev-ertheless, the word “series” itself implicates that those imagesshould be related in order to constitute a “series”. Related-ness is satisfied as long as the images deal with the samesubject matter.51 The only relatedness between ad and onlinevideo or movie seems to be in the economic sense.52 For

webpage advertising, website operators will also have diffi-culty asserting that the space reserved for advertising couldbe protected by copyright.53 And, for pop-up advertising, dif-ferent from the pre-roll ads in TV programs or online videos,they are separate web pages. By their nature, blocking thesepop-ups is more difficult to be asserted as constituting unau-thorized derivative works.

To be accurate technically, online ads are not truly deletedor altered by ad blocking software, but only temporarily ob-structed. End users simply skip them. Ad blocking is indeedbeyond the sphere of copyright law which mainly concerns actsof reproduction and different types of dissemination.54 Label-ing any disfavored conduct during use of a copyrighted workas infringement to copyright would allow copyright holders toobtain more rights than granted by copyright law.55

3.3. End users’ fair use defense

Even if we assume the ad-blocked display constitutes a de-rivative work, end users’ ad blocking still has fair use as apowerful weapon.

Ad blocking software itself does not block ads. It is endusers who choose to install it and enable it to unbundle contentand advertisements. The real question here is whether adblocking by end users is considered as actionable infringe-ment or not. If it is, further, software providers could be heldas contributory infringement. The fact that most videos arewatched by individuals at home or other private areas createsan unyielding presumption that the use occurred in a non-commercial sense. Under the U.S. law, there may be someinconsistencies on the fair use analysis, especially with regardsto the economic loss factor.56 However, the private use excep-tion of copyright infringement is very broad in China. UnderArticle 22 of the Chinese Copyright Law, “use of a publishedwork for the user’s private study, research or entertainment”57

is fair use to copyright and is exempted from copyright in-fringement. Literally speaking, any use of a published work ina private place is fair use in China.

End users in China can use fair use as a weapon. Further,there is no way to hold ad blocking software providers con-stitute contributory infringement or indirect infringement. Itis a well-established copyright principle that secondary in-fringement is based on direct copyright infringement.58 One45 Ibid.

46 See e.g., Ned Snow, ‘The TiVo Question: Does Skipping Com-mercials Violate Copyright Law?’ (2005) 56 Syracuse L. Rev. 27,33.

47 See Randal C. Picker, ‘The Digital Video Recorder: UnbundlingAdvertising and Content’ (2004) 71 U. Chi. L. Rev. 205,214.

48 17 U.S.C. § 101 (2000).49 The current Chinese Copyright Law use a long term “cinemato-

graphic works and works created by a process analogous tocinematography”. It is planned to be revised into “audiovisualworks”. See Copyright Law of the People’s Republic of China (Re-vision Draft for Review) (released by the State Council of the People’sRepublic of China, June 2014), Article 5(12) (translated by author).

50 Regulation for the Implementation of the Copyright Law of thePeople’s Republic of China (promulgated by the State Council ofthe People’s Republic of China, 2013 Revision), Article 4(11). (trans-lated by author).

51 See WGN Cont’l Broad. Co. v United Video, Inc., 693 F.2d 622, 623(7th Cir. 1982).

52 See Ned Snow, above n. 46, p.53.

53 See Jilian Vallade, ‘Adblock Plus and the Legal Implications ofOnline Commercial-Skipping’ (2009) 61 Rutgers L. Rev. 823,837.

54 See Bingbin Lu, ‘Reconstructing Copyright from “Copy Centric”to “Dissemination Centric” in the Digital Age’ (2013) 39:4 Journal ofInformation Science 479.

55 MDY Industries, LLC v Blizzard Entertainment, Inc., 629 F.3d 928,941(2010).

56 See Lisa Hasenberg, ‘Fair Use or Unfair Abuse: How CopyrightLaw Should Adapt in The Age of Ad-Skipping Technology’ (2014)52 Hous. L. Rev. 709, 733; see also Jane C. Ginsburg, ‘Fair Use forFree, or Permitted-but-Paid?’ (2014) 29 Berkeley Tech. L.J. 1383,1407.

57 Copyright Law of the People’s Republic of China] (2010 Amend-ment), Article 22 (translated by author).

58 See e.g., MGM Studios Inc. v Grokster, Ltd., 545 U.S. 913, 930 (2005);MDY Industries, LLC v Blizzard Entertainment, Inc., 629 F.3d 928 (2010).

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more point, most developers of ad blocking software in Chinawill promote their new technologies probably by ads or stressthe ad blocking feature in the software description. Althoughthis can be viewed as encouraging users to block ads, they stilldo not constitute indirect copyright infringement because ofthe lack of direct infringement by end users.

3.4. Summary: ad blocking does not violate copyright law

To conclude the copyright analysis, the ad-blocked display doesnot constitute a derivative work. And, even if it was a deriva-tive work, the end user has a powerful weapon, fair use, todischarge any copyright infringement claims against ad block-ing. Since there is no direct infringement of copyright by theend user, it is impossible to charge ad blocking software pro-vider with contributory or indirect infringement.

4. The Chinese approach: unfair competitionand regulatory control

4.1. Judicial protection to the ad-based business model

In China, online content providers, especially video compa-nies, adopted the legal strategy of anti-unfair competition inbattles with ad blocking. The Chinese courts, in general, arein favor of online content providers, and several judgments haveestablished competition law protection to ad-based businessmodel on the Internet.

In the last three years, various Chinese courts have ren-dered a series of decisions on ad blocking. The most influentialone is iQiyi v Geek-Geek,59 which is listed in the top ten inno-vative cases regarding intellectual property law decided byBeijing Courts in 2015,60 also promulgated by the People’sSupreme Court of the PRC as a typical case.61 In this case, BeijingiQiyi Technology Co., Ltd., the leading online video serviceprovider in China, initiated an unfair competition lawsuit, chal-lenging the defendant’s conduct of producing and selling arouter called “HiWifi”. HiWifi has an ad blocking feature, auto-matically blocking pre-roll commercials in iQiyi’s videos. Theplaintiff and defendant are in different business areas, pro-viding different products or services. The Beijing IntellectualProperty Court found that although there is no direct compe-tition between these two companies at first glance, thedefendant’s HiWifi router with the ad blocking feature wouldhelp users to block ads of iQiyi, thus benefiting the defendantyet indemnifying the plaintiff’s commercial interests.62 The court

considered their relationship as a zero-sum game and deemedone party is gaining at the expense of the other party’s loss.By this line of reasoning, the court identified the competitiverelationship between two parties.63 Further, the court ruled thatad-based business model is legitimate and should be pro-tected by the law.64 The court applied a judicially createdprinciple of “non-interference (in another’s business) unlessin the public interest”, which is frequently applied in the In-ternet cases in China. Under this principle, a company is allowedto acquire legitimate interest and competitive advantagethrough technological development or business model inno-vation. However, intervening in existing business activities ofrivals is forbidden unless it is supported and justified by publicinterest.The court concluded that the defendant’s product withad blocking capacity is in competition and directly inter-vened with iQiyi company’s business model, thus constitutingunfair competition.65

Despite the unpredictability of judicial opinions in manyfields, Chinese courts are exceptionally consistent in provid-ing competition law protection to ad-based business models.It is quite easy for online content providers to challenge thelegitimacy of ad blocking software in China, see Table 1.

In these cases, one prominent difference is whether adblocking software are specific in which ads they block. In thefirst two cases involving ad blocking, the software specifi-cally targets another company’s service. In Tencent v Qihoo, the“QQ Guard” specifically targets QQ, the mainstream instantmessage service in China. And, in Baidu v Qihoo, the browserextension in dispute also specifically targets Baidu, the leadingChinese search engine. However, for the rest of cases, suitedby leading video service providers in China, the ad blockingsoftware involved do not target a specific company’s service,i.e., they can block ads from all video service providers. Al-though the copyright analysis would be the same as to a specifictargeting tool or a general applicable tool, there should be adifference in competition law. A more targeting tool could havemore anti-competitive effect than a general one. Neverthe-less, the courts in these cases did not distinguish them andreached the same conclusions. Different subject matters,whether it is a neutral technological tool such as Adsafe or spe-cifically targeting software such as QQ Guard, were all facingthe same result, unfair competition. And, different acts, in-cluding developing ad blocking software or disseminating ituploaded by a third party, were all held to be unfair compe-tition. Ad blocking as unfair competition has been consistentlyaffirmed by courts at different levels, including the SupremeCourt, the Beijing IP Court and the Shanghai IP Court, undersimilar justifications. The Chinese judicial practice presents anunfriendly attitude towards ad blocking technologies.

4.2. Direct governmental intervention

On 4 July 2016, as a response to Baidu’s perceived deceptive prac-tice in online ads which is begat by the notorious WEI Zexi

59 iQIYI v Geek-Geek, Beijing IP Court Final No.79 (2014), decided Feb-ruary 13, 2015.

60 Beijing Higher Court, ‘Top Ten Typical Cases and Innovation CasesDecided by Beijing Courts in 2015’ (13 April 2016). <http://www.cnipr.com/CNIPR/CNIPR4/xcz2016/anli/201604/t20160413_196202.htm> (in Chinese).

61 The People’s Supreme Court, ‘Typical Cases Adjudicated by In-tellectual Property Courts in Beijing, Shanghai and Guangzhou’(released 9 September 2015). <http://www.court.gov.cn/zixun-xiangqing-15370.html> (in Chinese).

62 iQIYI v Geek-Geek, above n. 59.

63 Ibid.64 Ibid.65 Ibid.

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accident,66 the State Administration for Industry and Com-merce in China officially promulgated the Interim Measures forthe Administration of Internet Advertising.67 The regulation cameinto force on September 1, 2016. Article 16 of this regulationexplicitly forbids certain online advertising related acts. Oneof the forbidden acts is, “the offering or use of application and/or hardware etc., to implement restrictive measures such asblocking, filtering, overwriting and fast-forwarding to other peo-ple’s legitimate ads.”68 An authoritative explanation of thisprohibition’s rationale is that “ad blocking in the long term willdestroy the internet advertising industry.”69

Although the word “blocking” is explicitly included in thisprovision, there are still ambiguities, like what is being tar-geted, whether and how much ad blocking could be affectedin practice. One crucial question the public are eager for ananswer is whether end users will be touched by this anti-blocking provision. At first glance, ad blocking is forbidden underthis regulation. It seems that users are forced to watch ads.However, this regulation by its nature is not aimed at end usersor consumers. Nothing in it forbids consumers to use ad block-ing applications. The local Administrations for Industry andCommerce, which is in charge of enforcing this regulation, alsolack jurisdiction to end users. Nevertheless, this regulation, aswritten, can be used against ad blocking software program-mers, distributors and providers. The Administration forIndustry and Commerce has a well-established jurisdiction overbusiness entities. And this regulation, if strictly enforced, mayput ad blocking software within China to an end. If no one couldprovide ad blocking software or application, end users will haveno tool to systematically and automatically block online ads.It will then indirectly affect end users’ freedom to blocking ads.

It is probably the first time in the world for a governmentdirectly intervening ad blocking through a formal regulation.This regulation is a quick response to the highly publicizedWEI Zexi scandal and has not been carefully crafted when issuedto the public. Banning the provision or use of ad blockingsoftware will certainly have an adverse effect on online adblocking in China. A blog post from ad blocking software maker

of Adblock Plus termed this unique Chinese position as “thelonely bully”.70

5. Understanding the Chinese approach

5.1. The reasoning leads to unfair competition

5.1.1. Competitive relationshipChinese courts have developed a comparatively broad defini-tion of the competitive relationship. A company’s currentbusiness scope is not important in assessing and identifyingthe competitive relationship. In determining competitive-ness, Chinese courts would rather consider future possibilities.For example, in iQiyi v Geek Geek, the court reasoned that “op-erators in different businesses or industries are not unlikelyto find themselves in the competitive relationship due to busi-ness expansions.”71 Every company has a potential to expandthe business to an unknown area. This “business expansionpossibility” standard is indeed a weird one.

Apparently, new technologies and new business models willchallenge or even endanger old ones. In other words, they arein competition with each other. However, it is ironic to use thecompetition law as a weapon to shield existing business models.Among the Chinese cases surveyed above, the specifically tar-geted ad blocking software such as QQ Guard could be morepossible to constitute unfair competition. However, for a generalad blocking tool which could block various types of ads on un-specified websites, it is difficult to find its developer ordistributor intended to compete with online content provid-ers. Otherwise, this company would be in competition with thewhole industry, which is a weird conclusion.

5.1.2. Vagueness of Article 2 of the anti-unfair competitionlawIn Germany, the whitelisting business model was ruled illegalunder a specific provision. It is the 2015 amended Section 4aof theActAgainst Unfair Competition (§4a UWG) that was arguedby the plaintiff and applied by the Court.72 Under this provi-sion, competition is deemed unfair if a market player exercisesits commercial power to induce consumers or competitors tomake business decisions they would otherwise not make.73

Differently, the Chinese courts applied an open-endedgeneral provision, Article 2 of the Anti-Unfair Competition Law(AUCL), to ad blocking cases. Unfair completion is deemed tobe “an old doctrine with uncertain boundaries”.74 In the Chinesead blocking cases, the courts uniformly applied a rather amor-phous general provision, adding the uncertainty of unfaircompetition.

Article 2 of the AUCL provides an abstract definition of unfaircompetition. It contains high-level principles of voluntariness,equality, fairness and good faith that shall be followed bybusiness

66 Wei Zexi was a 21-year old college student who received mis-leading online advertising on cancer treatment from a promotedtop-listed result on the most popular Chinese search engine Baiduand take experimental treatment for synovial sarcoma at a hos-pital that paid Baidu for online promotion. After this student’sunfortunate death, public and media extensively condemned thedisgrace role of Baidu in promotion of deceptive information.Chinese authorities investigated Baidu and finally made a legal re-sponse by promulgating a targeted regulation. See ‘Death of WeiZexi’ <https://en.wikipedia.org/wiki/Death_of_Wei_Zexi> ac-cessed 20 December 2016; Austin Ramzy, ‘China Investigates BaiduAfter Student’s Death From Cancer’ (The New York Times, May 4, 2016).<http://www.nytimes.com/2016/05/04/world/asia/china-baidu-investigation-student-cancer.html?_r=0> accessed 20 December2016.

67 The Interim Measures for the Administration of Internet Ad-vertising], Order No. 87 of the State Administration for Industry andCommerce (China).

68 Ibid. Article 16 (translated by author).69 Administration of Advertising Supervision of the State Admin-

istration for Industry and Commerce, Interpretation on the InterimMeasures for the Administration of Internet Advertising (China Indus-try and Commerce Publishing House 2016) 54 (in Chinese).

70 Ben Williams, above n.17.71 iQIYI v Geek-Geek, above n. 59 (translated by author).72 Axel Springer v Eyeo, above n. 18.73 Gesetzgegen den unlauterenWettbewerb (UWG) (The Act Against

Unfair Competition; Germany) (2015 amended), Section 4a <https://www.gesetze-im-internet.de/uwg_2004/BJNR141400004.html>.

74 Randal C. Picker, above n. 47, p. 211.

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operators in China. It also requires business operators to beabided by the generally accepted commercial ethics. A breachof this general clause and interference with others’ legal rightor legitimate interest would constitute unfair competition.75

As many Chinese scholars have criticized it, since the stan-dard of commercial ethics is plural and its concept is uncertain,it is hard for it to assume the task of judging unfair competition.76

Notwithstanding vague and abstract, this provision is fairlyvivid in the judicial practice and has frequently been appliedby many Chinese courts, especially in cases involving the evolv-ing Internet industry.

5.1.3. Principle of non-interference unless in the publicinterestOver time, Chinese courts have developed a judicially createdprinciple of “non-interference unless in the public interest” toelaborate Article 2 of the AUCL.77 Under this principle, a marketparticipant in the Internet industry is prohibited from inter-fering with other’s established business except justified witha compelling public interest.

This judicially created principle is an innovative but flawedone. As one scholar commented, the word “interference” itselfis not value-neutral, and it is improper to describe a legal prin-ciple with such a biased word.78 More importantly, a highlyabstract and vague concept of “public interest” is incorpo-rated in this judicial-created principle, acting as a key criterionto decide the outcome. What is public interest? Who repre-sents it? Public interest is a broad and amorphous concept inChina. Lots of Chinese laws mention “public interest” and wantto promote it.79 But these statutes themselves do not definewhat “public interest” means. The obscurity of public interestadded fuel to the fire, making the vague concept of unfair com-petition more uncertain. In fact, the public are absent in adblocking lawsuits. In ad blocking cases, the courts reason thatad blocking software, in the long run, would make the ad-based free content unsustainable and ultimately hurtconsumers’ interest.80 The Chinese courts envisioned a worstsituation where ads be blocked effectively by everyone andworried the entire economic model on which the Internet isbuilt and operated be destroyed, ruining the future availabil-ity of free, advertisement supported content. Without anyevidence and empirical data, this is highly hypothetical. Thisauthor believes ad blocking is not going to ruin the Internet

industry. If there would be any destruction that would be“creative destruction” and the industry would strike back withinnovating new technologies and business models.81 Forexample, online behavioural advertising (OBA) is better thanannoying and unrelated ads. Currently, the average Internetusers lack the knowledge about how OBA operates and theyseem to fear it.82 This could be gradually solved by improvingconsumer awareness about the operation and benefit of OBA.If Internet service providers collect and use personal data ina legal way and offer funny and interesting personalized ads,that form of advertising probably would be accepted by users.A recent survey by Pagefair shows that “77% of adblock usersare willing to view some ad formats”.83 It also illustrates thatthe ad-based business model can survive with better and at-tractive ads. There is a great chance that the Internet industrywould not be destroyed by ad blocking. Instead of speculat-ing on what would happen in the future, the court shouldconsider more about the public’s real interest – enjoying a cleanInternet environment.

5.2. Special situation in China and policy reasons

Ad-supported content plays a vital role in the Chinese societybecause it conforms to the Chinese culture. The copyrightconcept is absent in the Chinese traditional culture. Copy-right law was not imported from the western countries untilthe last century, and the copyright awareness of Chinese is stillweak. Due to its long tradition of free knowledge dissemina-tion, it is quite difficult to cultivate the general public to respectintellectual property and to obtain copyright by an exchangebefore using it. The Chinese have a strong belief that contenton the Internet should be free. Lots of free software, free moviesand free songs are available online, and people enjoy these freecontent. The consuming public tend to expect and believe thatonline programming and content should be free.The paid onlinebusiness method is not attractive and would not be opera-tive in China. Ad-supported content fills this gap.

China has just walked out the era of piracy. Ad-supportedbusiness model has become a solution to the video or musicpiracy. As there is currently no better business model avail-able, the Chinese government and courts want to maintain thismodel. It explains the main policy rationale behind the Chineseregulation and court rulings.

Rather than conferring property rights to ad-based busi-ness model, Chinese courts protect it under the umbrella ofcompetition law. Competition law is different from propertylaw in nature. However, rules of unfair competition are em-ployed by courts as a means to assign property rights tobusiness models. Chinese courts, in fact, create a category of

75 See Anti-Unfair Competition Law of the People’s Republic ofChina (AUCL) (adopted on September 2, 1993), Article 2 (trans-lated by author).

76 See e.g., Jiang Ge, ‘Application of the General provision of Anti-Unfair Competition Law in the Internet Field’ (2014) No. 10 ElectronicIntellectual Property 44, 44–50 (in Chinese).

77 See e.g., Tencent Technology (Shenzhen) Company Ltd. v Beijing Qihoo360 Technology Co. Ltd., Supreme Court of the PRC, civil III final No.5 (2013), decided February 18, 2014.

78 See Jun Xue, ‘A Criticism on the Principle of “Non-Interferenceunless in the Public Interest’, (2015) No. 1 Electronic IntellectualProperty 68.

79 According to the search result of the Chinese legal database,there are 166 Chinese laws incorporating the term of “public in-terest”. <http://www.pkulaw.cn> accessed March 4 2017.

80 See e.g., iQIYI v Geek-Geek, above n. 59.

81 See Section 6.4.82 See Article 29 Working Party Opinion 16/2011 on EASA/IAB Best

Practice Recommendation on Online Behavioural Advertising WP188, p. 3, 5. See also Desiree De Lima & Adam Legge, ‘The Euro-pean Union’s approach to online behavioural advertising: Protectingindividuals or restricting business?’ (2014) 30 Computer Law & Se-curity Review 71.

83 PageFair, above n. 5, p. 4.

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legal right and interest of “legitimate business model” pro-tected under Article 2 of the AUCL.84 As China is increasing itsprotection on intellectual property, the courts seem to find ad-supported business model worthy of a solid quasi-propertyprotection. The policy to strengthen intellectual property pro-tection also demands such an outcome.

5.3. Is the Chinese approach in the right direction?

Different from the German cases focusing on the whitelistingbusiness model of Ad-Block Plus, the Chinese cases focus onad blocking software per se. In Germany and other countries,the offering of ad blocking software per se is not consideredto constitute unfair competition because it is upon to indi-vidual’s decision to install and use it. The Chinese approachof forbidding ad blocking software is indeed weird.85 It is in thewrong direction.

First, by upholding the current prevailing ad-based onlinebusiness model, the Chinese government and courts provideshelter to the prevailing Internet giants. As a result, it improp-erly intervenes the technological progress and depresses thecreation of new market structures. The adverse rulings for adblocking software could not force small companies or indi-vidual developers to negotiate with large companies offeringonline programming and other content. It is imprudent forcourts and government to intervene the process of techno-logical development in the absence of empirical data about howsevere the harm of ad blocking is.The extreme approach is det-rimental to the social and market development.

Second, the Chinese rule of forbidding ad blocking soft-ware is hard to enforce because ad blocking is ultimately carriedout by end users and these activities are firmly shielded by theright to privacy. One prior research has provided empirical evi-dence to demonstrate that the rules protecting privacy candiminish the effectiveness of online advertising.86 Most im-portantly, the right to privacy would make detecting ad blockingsoftware and blocking ad-blockers questionable. Ad blockingactivity is widely viewed as part of privacy of users that shouldbe safeguarded. Ad blocking detection needs users’ data to de-termine whether software to block ads is installed and effected.Some websites are designed not loading content if ad block-ing software is installed. However, these are problematic. Asnoted earlier, a reply from the European Commission to AlexHanff, a privacy activist in Europe, acknowledged that block-ing ad-blockers breaks the EU privacy regulations.87 In EU, onlineadvertising became less effective due to the privacy law.88

Although the legal protection of privacy is not enough in China,privacy and personal information are in principle protected.Articles 98–105 of the General Principles of the Civil Law of thePeople’s Republic of China provides rights of personality.89 Al-though the right to privacy is not explicitly provided, in thejudicial practice, the concept of privacy was developed and wasprotected.90 Article 2(2) of the Tort Law of the People’s Repub-lic of China (2009) provides a definition of “civil rights andinterests”. “Right to privacy” was explicitly introduced.91 TheChinese approach of banning ad blocking technologies fails toconsider this important competing personal right. The concernof privacy would make forbidding ad blocking basically unen-forceable. In the Chinese legal practice, lots of rules arepromulgated but not well enforced. If a rule would have troublein enforcement, it is dubious to be made especially with regardto emerging technologies. In searching for an ideal solution tothe ad blocking problem, a balance needs to be found betweenuser’s right to privacy and website and advertiser’s desire todiscern and control the effect of their advertisements. Whenconflict arises, the fundamental right to privacy shall prevail.

If ruling ad blocking software providers as unfair compe-tition is bad, the radical approach of the regulatory ban is worse.In short of empirical data of market failure and the demon-stration of a need for governmental intervention, it is unwisefor a government to excise legislative power to decide the fateof an emerging technology. Controversies over emerging orevolving technologies could not be easily solved by making aone-time decision.92 The Internet and business models are pro-gressing through experimentation and innovation. A prematureregulation would either inhibit technological development orfail to keep pace with it.93

The European approach and the Chinese one are in polaropposites in terms of individual versus business protection.The EU data protection regime which has an impact on tar-geted advertising and ad blockers detection has been criticizedfor too restrictive of business.94 The Chinese approach on adblocking is also problematic as it totally fails individuals. In-dividuals’ interests are more fundamental and they shouldprevail in case of conflict. However, if there is proof that busi-ness’s interest would be adversely affected by a law or regu-lation, the law or regulation should also be adjusted. The idealone is to reach a balance between individuals and business.To find a perfect balancing point is surely a quite difficult task,but the right approach to solving the ad blocking problemshould be flexible, easily adjustable and it should not totallyfail one side.

84 See Jun Wu, ‘The Judicial Application Mode of the General Pro-vision of the Anti-Unfair Competition Law’ (2016) No. 2 Chinese Journalof Law 134, 141 (in Chinese).

85 Relevant judgments were also criticized by scholars in China.For example, one scholar analyzed ad blocking and fast-forwardingunder the principle of proportionality and concluded that it doesnot constitute unfair competition. See LAN Lei, ‘Construction of theGeneral Clause of Anti-Unfair Competition Law under the Prin-ciple of Proportionality’ (2015) No. 3 Eastern Law Journal 68, 68–81(in Chinese).

86 See Avi Goldfarb, Catherine E. Tucker, ‘Privacy Regulation andOnline Advertising’ (2011) 57:1 Management Science 57, 57–71.

87 See Duncan Robinson, above n. 27.88 See Goldfarb & Tucker, above n. 86.

89 General Principles of the Civil Law of the People’s Republicof China (adopted April 12, 1986, amended on August 27 2009),Articles 98–105.

90 Liming Wang, ‘Redefining the Concept of Privacy’ (2012) No. 1Jurist 108, 108–119 (in Chinese).

91 See Tort Law of the People’s Republic of China (adopted at the12th session of the Standing Committee of the Eleventh NationalPeople’s Congress on Dec. 26, 2009), Article 2(2) (translated by author).

92 See Peter Dicola, Matthew Sag, ‘An Information-Gathering Ap-proach to Copyright Policy’ (2012) 34 Cardozo L. Rev. 173, 241.

93 See Joseph I. Rosenbaum, ‘Ad Blocking Technology: The Poten-tial Effects and Implications’ (2008) 13 No. 9 Cyberspace Lawyer 1.

94 See Desiree De Lima & Adam Legge, above n. 82, pp. 67–74.

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6. Heading toward the right direction

6.1. Ad-based business model revisited

Before moving to search for the right direction and a better so-lution to the ad blocking problem, it is crucial to rethink whythe ad-based business model should be shielded by law, and,whether we should maintain this business model forever.

As mentioned, among the reasons of advocators for main-taining the current ad-based business models, the strongestis that advertising revenue has become the primary source offunding for online content providers. Advertisements are con-sidered the quid pro quo for freely available content.The ChineseCourts also accept this reasoning and believe that ad block-ing reduces the attractiveness of the Internet and finallyendangers the development of the Internet industry whichmeets both the public interest and national competitiveness.95

They are worried about that, without the subsidy of commer-cial advertisements, the freely available content would probablydiminish, which ultimately harms the end users’ welfare.96

However, do we want to maintain the ad-based businessmodel forever? Shall the law also open the room for develop-ing new business models? Online business model is underevolution. It is imprudent for the law to provide a strong pro-tection for the existing one. Otherwise, technologicaldevelopment and competition would be stifled.

Ad blocking is not evil. Despite some extravagant claims byadvertisers or content providers that ad blocking is unethicaland equals to “theft”97 or even a “sin”,98 it is not true in thelegal sense. In practice, Internet publishers never take legalactions based on theft against ad blocking software provid-ers or users. Chinese government and Courts’ unfriendlyattitude towards ad blocking should be reconsidered.

Ad blocking technology should not be banned without thesupport of empirical data showing its detrimental effect on theInternet industry. It has the potential to foster a more com-petitive Internet industry. The competitive pressure to onlineadvertising industry will stimulate the development of a more

competitive market.99 Blocking ad blockers is not a wise choicefor Internet companies.100 Locking up online content and shift-ing to the subscription model entirely are either a winningchoice in the competitive market. Business models would evolveunder competitive pressure. Instead of considering ad block-ing as an enemy to the Internet industry, we should regard itas a catalyzer for new and better business model.

6.2. Searching for flexible approaches to address the adblocking issue

To emerging technology, an extreme approach of regulatoryban is usually immature and flexible approaches would bebetter. The dispute between content providers and ad block-ing technologies producers is not a simple two-player game.Policymakers shall pay more attention to the broader impli-cation of regulatory intervention.101 But, in the Chinese legislativeprocess of banning ad blocking software, the industry-consumerdialog is entirely absent. There is no room for legislative bar-gaining among producers of new technologies, end users andgiant companies providing online content. If there were anyrepresentation of end users’ view, they would be scholars’ opin-ions and theoretical arguments, varied and sometimesconfusing but not convincing. Internet giants lobbied on behalfof the online advertising industry and triumphed. Ruling en-tirely in favor of online content providers and putting an endto ad blocking technologies could wholly deprive the public’sinterest of enjoying the innovation of ad blocking technologies.

One flexible option is the guidelines approach. The HongKong model of data protection has incorporated this approach.Under the Personal Data (Privacy) Ordinance,102 the Office ofthe Privacy Commissioner for Personal Data has issued severalguidelines concerning data protection, recommending fair andtransparency practice.103 For example, the guidelines on “OnlineBehavioural Tracking” recommend best practices for enter-prises on using cookies and collecting users’ behaviouralinformation.104 The guidelines approach is a more middle ofthe road approach and more flexible. It is a soft law approachin nature. Soft law, such as guidelines, usually provides certainnorms of expected and acceptable codes of conduct,105 and theyare generally criticized for their voluntary character and theproblem of effective enforcement.106 To solve the enforce-ment problem of guidelines, these guidelines can be linked into

95 See e.g., iQIYI v Geek-Geek, above n. 59.96 Ibid. See also Administration of Advertising Supervision of the

State Administration for Industry and Commerce, above n. 69,p. 54.

97 See Randal C. Picker, above n. 47, p. 205 (quoting “any time youskip a commercial . . . you’re actually stealing the programming”from Interview of Jamie Kellner, VOD’s Ad-Skipping Irks Kellner,in Staci D. Kramer, Content’s King, Cable World 32 (April 29, 2002));see also Paul McDougall, ‘Firefox AdBlock Foe Calls For MozillaBoycott’ (Information Week, 12 September 2007). <http://www.informationweek.com/firefox-adblock-foe-calls-for-mozilla-boycott/d/d-id/1059103?>; see also Adam Turner, ‘From AdBlock Plus to Tivo– Is Blocking The Ads Stealing?’ (Itwire, 25 September 2007). <http://www.itwire.com/opinion-and-analysis/seeking-nerdvana/14595-from-adblock-plus-to-tivo-is-blocking-the-ads-stealing> ac-cessed 20 December 2016.

98 Jim Edwards, ‘I used the software that people are worrying willdestroy the web – and now I think they might be right’ (BusinessInsider, 9 July 2015). <http://www.businessinsider.com/adblock-software-how-it-will-change-the-adtech-publisher-market-2015-7> accessed 20 December 2016.

99 See Jesse Haskins, ‘Commercial Skipping Technology and theNew Market Dynamic: The Relevance of Antitrust Law to an Emerg-ing Technology’ (2009) Duke L. & Tech. Rev. 6.100 According to a survey result, 74% of ad blockers leave web-sites with adblock walls. See PageFair, above n. 5, p.4.101 See Peter Dicola, Matthew Sag, above n. 92.102 Personal Data (Privacy) (Amendment) Ordinance, Cap. 486 No.18 of 2012.103 See e.g., Office of the Privacy Commissioner for Personal Data(Hong Kong), ‘Online Behavioural Tracking’ (April 2014); ‘Privacy Man-agement Programme: A Best Practice Guide’ (2014).104 See Online Behavioural Tracking (April 2014), Ibid.105 Rolf H. Weber, ‘Internet of Things – New Security and PrivacyChallenges’ (2010) 26 Computer Law & Security Review 27–28.106 Ibid. See also Leyla Davarnejad, ‘In the Shadow of Soft Law: theHandling of Corporate Social Responsibility Disputes under the OECDGuidelines for Multinational Enterprises’ (2011) Journal of DisputeResolution 351,358.

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a law or regulation.The Hong Kong model of guidelines on dataprotection is not a toothless system because the standards inthese guidelines can be enforced under the Personal Data(Privacy) Ordinance.107 Facing new technologies, where thereis uncertainty, a soft version of guidelines could be better andeasily adjustable than an immature regulation.

One more flexible option is the judicial approach. The flex-ibility in judicial adjudication suggests that the judiciary, ratherthan regulation, is better for solving the ad blocking contro-versy. An ideal solution to ad blocking should consider a varietyof interests and strike a balance between protecting estab-lished business models and market structural and thedevelopment of emerging technologies, as well as between endusers’ public interest and the healthy growth of the Internetindustry. Following the principle of balance of interests, re-serving some space for innovation is critical when dealing withintellectual property and unfair competition cases.108 To balancea variety of different or even conflicting interests is not an easytask, but it is suitable for the judicial bodies to do it. In adju-dicating specific cases, courts could be more flexible comparedto regulatory intervention.

The judicial system should take ad blocking technologiesseriously and avoid the extreme approach to ban ad blockingtechnologies, which is far from reaching a balance among dif-ferent interests. The facts of each ad blocking case are varied,and there could not be a single answer to ad blocking dis-putes. These disputes should be deliberated on a case by casebasis under the guideline of a right direction and a correct policyorientation. One such deliberation is to distinguish the char-acteristic of ad blocking software, i.e., whether it is specificallytargeting. A general ad blocking software should be held legalwhile a particularly targeted one such as QQ guard could beheld illegal. In some cases, while ad blocking software also in-volves decryption of technological measures, the act ofdecryption could be illegal. For example, in iQiyi v Qiansan, theplaintiff contended that all links to its online videos were en-crypted by a unique algorithm and it is impossible to obtainvideos without hacking its technological measures.109 It wasproved that the defendant had decrypted iQiyi’s security keycodes to skip pre-roll ads.110 The act of decryption, but not theact of ad blocking, probably constitutes an infringement to thetechnological measures under copyright law. From the per-spective of competition law, it is also more justified to hold theact of decryption rather than the act of ad blocking to be unfaircompetition.

To sum up, direct regulatory intervention is not an ideal so-lution to the ad blocking problem, and flexible approaches suchas guidelines and judicial approach are better suited to solvethe problem. The guidelines can be linked into a law or regu-lation. If non-compliance of these guidelines amounts to a

breach of the existing law or regulation, these guidelines couldbe enforced under the law or regulation. The effectiveness ofguidelines can also be achieved by the judicial body. In decid-ing concrete cases, judges can take the guidelines intoconsideration when contemplating what fair and reasonablepractice is. A combination of guidelines and judicial ap-proach seems to be better suited to address the ad blockingissue.

6.3. The public interests justifying ad blocking

As discussed, the Chinese courts introduced an innovative prin-ciple of “non-interference unless in the public interest”.However, interestingly, judges in ad blocking cases merely followthe precedents but never analyzed public interest seriously.

It is difficult to construct a meaningful definition for ‘publicinterest’. But public interest is not the interest of an indi-vidual or a relatively small, specific group of people. It is theinterest of a substantial number of people. The term ‘publicinterest’ in the Internet context should be the interests ofInternet users. In the digital era, everyone is or has the po-tential to be an Internet user. The group of Internet users islarge enough to constitute a general public. In the Chinese ju-dicial practice, Internet users’ interest is also recognized as thepublic interest. 111

The current Chinese approach failed to consider Internetusers’ significant and compelling interest of autonomy, a fun-damental right based on liberty. Courts seemed to focus on theinterests of relevant business operators and have neglected theinterest of users.112 The group of Internet users is not repre-sented in these disputes.They nevertheless have countervailinginterest to be respected. Online ad blocking is a typical exampleof users’ desire to have control over what content they wantto watch. The new technology of ad blocking aims to satisfyInternet users’ needs and serves to their interest. The inter-est of Internet users together is indeed a public interest thatshould be preserved.

The general public’s desire to avoid unsolicited commer-cials has its rooted reasons. First, it is people’s fundamentalfreedom to control their bodies, including eyes, to ignore ad-vertisements while enjoying the programming, which they oftendo. No one will condemn a person to walk out of the room,shift channels or simply close their eyes during the TV adver-tising period. Using time-shifting recording technology is alsoa well-established fair use of end users. The opposition to adblocking software, a new way to skip commercials in the en-vironment of Internet, must have some convincing grounds.Second,people are more goal-directed when surfing the Internet.If ads interrupt a user’s goal, it leads to ad avoidance.This per-ceived goal impediment is found to be the most significant factor

107 See Adam Legge, ‘Online Behavioural Advertising: A Compara-tive Study of Regulation between the EU and Hong Kong’ (2015) 31Computer Law & Security Review 428.108 See Guangliang Zhang, ‘Responsibilities of Developers of AdBlocking Plug-In Browsers under Competition Law’ (2014) No.1 In-tellectual Property 8,9 (in Chinese).109 iQiyi v Qiansan, Shanghai Pudong New Area People’s Court, civillaw tribunal III no. 143(2015), decided 21 August 2015.110 Ibid.

111 Baidu v Qihoo, Beijing High Court, civil final no. 2352 (2013). Thiscase is not about ad blocking, but it is the first case introducingthe principle of “non-interference unless in the public interest” intocompetition law.112 See Huijuan Dong, Jie Zhou, ‘Questioning to Browser’s Video Ad-vertising Filtering Function as Unfair Competition’ (2014) No. 12Electronic Intellectual Property 50, 50–57 (in Chinese).

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contributing to online ad blocking.113 Internet users desire tohave a green environment of Internet without the distractionof annoying advertising. But there are so many obtrusive andannoying ads. Intrusion is the main reason that leads to avoid-ance behaviour of Internet users. Ad blocking software helpsto liberate Internet users from annoying or intrusive adver-tisements. Third, as one elementary feature of the Internet,interactivity means users can have a certain degree of controlover the content they accessed. As noted by the U.S. SupremeCourt, the development of new technology “allows a person tobe more active in the control of his or her life”.114 In an age ofinteractivity, different from traditional offline context, con-sumers of the Internet are active users rather than passiveaudience.115 It is the Internet’s inherent nature that threatensthe established ad-supported business model.116 In order toprotect this business model, should the interactivity of the In-ternet also be forbidden?

The public has their autonomy and freedom in determin-ing how to consume online content. Even if the content is undercopyright protection, the range of copyright does not embraceend users’ consumption. Any legal intervention to ad block-ing must balance the interest in protecting existing businessmodels and Internet users’ countervailing interest ofautonomy.117 The way to find an ideal solution to ad blockingis to search and find the consumer–advertiser equilibrium.

On the Internet, users lack bargaining power and arecrammed to a world of commercial advertisements. The resultis disequilibrium – the Internet companies wield too muchpower over users. Ad blocking is a self-adjustment to the un-balanced Internet structure and is an effort to reach theequilibrium. Ad blocking serves public interests and is firmlyjustified by public interest. A tool to help ad blocking also servespublic interests and should be legitimate even under theChinese judicial principle of “non-interference unless in thepublic interest”.

6.4. Progress of technologies and business models under“creative destruction”

If ad blocking should be legal, what about the interests of onlinecontent providers and advertisers? Will they be destroyed byad blocking? If an industry would be in danger, the law shouldalso be adjusted to protect it and reach a fair balance of in-terests. However, for ad blocking, it is not likely to destroy theInternet industry. Even if there would be a destruction, it is a“creative destruction” that would ultimately benefit all playersin the Internet industry. The theory of “creative destruction”is insightful here to find a right direction to solve the ad block-ing dilemma.

6.4.1. Creative destructionAccording to economist Joseph Schumpeter, the fundamen-tal impulse to keep economic progress is “creative destruction”of old commodity or method of production.118 Schumpeter’screative destruction theory reflects a lesson that history hasrepeatedly taught: Obsolete technologies, business models andmarket strategies will finally be destroyed in the process of cre-ative destruction. The exclusion of potential threats to existingbusiness models and market structures often interferes socialprogress by rewarding inefficiency.119 Old technologies and busi-ness models have unceasingly faced destruction by competitionand technological innovation. Railroads have been interfer-ing materially with the profits of the turnpike roads, but it isnot a reason to prohibit railroads.120 It is inappropriate for thegovernment to intervene with the social and technological prog-ress without convincing reasons.

Although the Chinese market is not a capitalist one, thetheory of creative destruction is likewise applicable to theChinese Internet industry. First, the theory of creative destruc-tion is derived from the work of Karl Marx, and the Marxismis the current ideological foundation of China. Marx’s visionof social transformation also incorporates a process of cre-ative destruction and supersession.121 As Elliott points out,despite well-known differences, Marx and Schumpeter’s theo-ries on Capitalism’s creative destruction show strikingsimilarities.122 Second, the theory of creative destruction es-sentially is a theory of economic innovation, supported byhistorical experiences, is universally suitable for the innova-tive industry of Internet. Essentially, the Chinese Internetindustry is a quasi-capitalist market.

The emergence of new technologies is always disruptive toold ones. However, development of ad blocking technologiesis both a challenge and an opportunity to existing technolo-gies and business models. Before the destruction, newtechnologies also discipline existing ones with the threat ofdestruction.123 It will stimulate the development of new andbetter technologies. It will force online content providers to tryand test ideas and business models that would otherwise neverbe contemplated. A progress from cruel competition towardsa better future is inevitable.

6.4.2. Technological developmentAd blocking is a problem caused by technology, and it prob-ably would be solved by technological development itself. Inprinciple, innovation and development shall be encouraged.Ad blocking technologies could catalyze the process of tech-nological innovation by exerting pressure on content providersand advertisers. This competing process may advance inno-vative technology to counteract ad blocking.

113 See Chang-Hoan Cho, Hongsik John Cheon, ‘Why do People AvoidAdvertising on The Internet?’ (2004) 33:4 Journal of Advertising 89,89–97.114 Sony Corp. of Am. v Universal City Studios, Inc., 464 U.S. 417, 445n. 27 (1984).115 See Louisa Ha, Kim McCann, ‘An Integrated Model of Advertis-ing Clutter in Offline and Online Media’ (2008) 27:4 InternationalJournal of Advertising 569, 576.116 Matthew Scherb, ‘Free Content’s Future: Advertising, Technol-ogy, and Copyright’ (2004) 98 Nw. U. L. Rev. 1787,1788.117 Ibid.

118 See Joseph Schumpeter, Capitalism, Socialism, and Democracy (firstpublished 1942, Routledge 1994) 84, 96; See also Raymond Shih RayKu, ‘Grokking Grokster’ (2005) Wis. L. Rev. 1217, 1276.119 See Jesse Haskins, above n. 99, para. 10.120 See Charles River Bridge v Warren Bridge, 36 U.S. 420, 551–52 (1837).121 See John E. Elliott, ‘Marx’s Grundrisse: Vision of Capitalism’s Cre-ative Destruction’ (1978) 1:2 Journal of Post Keynesian Economics 148.122 See John E. Elliott, ‘Marx and Schumpeter on Capitalism’s Cre-ative Destruction: A Comparative Restatement’ (1980) 95:1 TheQuarterly Journal of Economics 45.123 See Joseph Schumpeter, above n. 97, p. 85.

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One starting point for developing counter-tech is to findbetter technological measures to protect the ad-plus-contentcompilation. Although this compilation could not be consid-ered as a protectable derivative work under copyright law, itstill could be protected by technological measures. One straight-forward measure is to encode their programming to preventad blocking. Under the pressure of ad blocking, content pro-viders probably could find a better technological solution tocounter it.Time and market force may finally solve the ad block-ing problem and provide the consumer–advertiser equilibrium.124

6.4.3. Business models evolutionEven if technological response itself is not satisfactory, contentproviders still have one more important option to develop newbusiness models to secure their revenues.

Two historical events may be insightful here. First, the tele-vision industry had also been violently opposed to technologicaldevelopment, including commercial skipping functions in VCRand DVR, threatening its advertising revenue. History has provedthat both VCR and DVR are not terminators of TV commer-cials. Second, the music industry also had encountered a threatto its traditional business model by new technologies such asfile-sharing. However, it has solved it by innovating businessmodel, for example, the Apple-iTunes service.The threat of file-sharing forced it to formulate new innovative distributionsystems. Solution to the file-sharing crisis could provide a usefulmodel to the ad blocking problem.125

Once a technology goes prevalent, it is hard or even im-possible to convince people not to use it. It is not a good ideato disobey the public’s will. Online content providers shallexplore alternative means to maintain revenues. The threat ofad blocking technology can be turned into an inspiration tocreate new alternatives. Finally, new business models may comeinto the scene to provide sustainable income for online contentproviders. A win–win outcome to both copyright holders andconsumers may appear. Ad blocking is not only a threat butalso an opportunity to the birth of new business model for theInternet industry.

To solve the ad blocking problem, online content provid-ers and advertisers should renovate attractive and efficientways to induce users to watch ads. First, one fundamental wayis to make better and appealing ads. Advertisers should rethinktheir methods of commercial promotion and make ads moreinteresting and entertaining, thus increasing its drawing power– the key to the success of promotion.126 Second, advertisersshould search for more effective ways of advertising. Com-pared to “pre-roll” commercials, integrating advertising directlyinto content, inserting them into the screen of streaming videosand native advertisements can make advertising more effec-tive. Third, personalized advertising based on informed userconsent provides one more alternative. OBA is fast-growingin practice and has become a controversial issue.127 Many

consumers find it unsettling to be targeted on the Internet.China has already introduced the principle of informed userconsent for collecting personal data into regulation and law,128

but these rules are not well enforced. Lots of websites andbrowsers gather personal information secretly in practice. Asthe protection of personal information is not satisfactory inChina, the Chinese generally dislike behavioural targeting. Indefault, OBA is in violation of privacy protection rules and isannoying, and it should not be promoted. However, if in-formed consent was got from users, users might be willinglyto watch commercials exclusively tailored to their wants andneeds.129 Targeted advertising, in a friendly way, would be wel-comed by users. OBA based upon informed consent are notannoying but would provide personalized and useful infor-mation to users. Personalization would make advertising muchmore effective, and in a competitive market, more effectivecommercials should mean fewer commercials.130 Fewer, butmuch more related, advertisements reduce the search costsof consumers, and further, reduce the society cost.

Although we cannot foresee all possible solutions now andcontemplate an ideal business model for the Internet indus-try, but we can ensure that ad blocking technology would notlead to the death of online advertising. Online content pro-viders will ultimately find new technical and business solutions.Development of alternative business model and future incometo supplant decreasing advertising revenue could probably solvethe ad blocking challenges.131 To let that happen, legislators andcourts should reach a balance between old business modelsand new technologies, and further incentivize the develop-ment of new technologies and business models, rather thanshield the old revenue models firmly.

The Internet itself is a creative industry which would adjustto different situations in its evolution process. Business andtechnological solutions may be able to fill in the gap, so anylegal intervention shall be careful enough to not impede theemerging technologies, market structure development and au-tonomous competition. Development of technologies and newbusiness models, rather than threatening legal actions, mayrepresent the right direction for the Internet industry andadvertisers.

124 See Metro-Goldwyn-Mayer Studios, Inc. v Grokster Ltd. 380 F.3d 1154,1167 (9th Cir. 2004), rev’d, 545 U.S. 913 (2005).125 Bradley Hamburger, above n. 31, p. 570.126 Jesse Haskins, above n. 99, para. 20.127 See e.g. Adam Legge, above n. 107; Kate Mathews-Hunt, ‘CookieConsumer: Tracking Online Behavioural Advertising in Australia’(2016) 32 Computer Law & Security Review 55–90.

128 Provisions on Protecting the Personal Information of Telecom-munications and Internet Users (promulgated by the ChineseMinistry of Industry & Information Technology, 2013), Article 9 (pro-viding “Without the consent of users, no telecommunications serviceoperator or Internet information service provider may collect anduse users’ personal information.”); Cybersecurity Law of the Peo-ple’s Republic of China (2016), Article 41(1) (providing “To collectand use personal information, network operators shall follow theprinciples of legality, rightfulness and necessity, disclose the rulesfor collection and use, explicitly indicate the purposes, means andscope of collecting and using information, and obtain the consentof the person whose information is collected.”)129 See Andrew W. Bagley, Justin S. Brown, ‘The Broadcast Flag: Com-patible with Copyright Law & Incompatible with Digital MediaConsumers’ (2007) 47 IDEA 607, 632.130 See Randal C. Picker, above n. 47, p. 207.131 See Steven S. Lubliner, Note, ‘I Can’t Believe I Taped the WholeThing: The Case Against VCRs That Zap Commercials’ (1992) 43 Hast-ings L.J. 473, 480.

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7. Conclusion

The battle between online content providers’ desire to main-tain the current profitable business model and users’ desireto have their autonomy and liberty on the Internet will con-tinue in the digital era. Ad blocking is not an enemy to theInternet industry. Instead, it will inspire and lead the Inter-net industry to a new round of autonomous competition. Theobstacle of ad blocking could be transformed into an oppor-tunity to form a better business model. Finally, all players inthis game would be better off.

In short of empirical evidence of demonstrating the harmcaused by ad blocking, it is unwise and improper for govern-ment and courts to ban ad blocking software. Ad blockingconforms to the individual sovereignty and serves the public

interest. Forbidding ad block software is an unfitting inter-vention in the process of technological and business devel-opment. If technologies and market would finally solve theproblem and reach the anticipated equilibrium, the law shallnot intervene. The Chinese approach of banning ad blockingsoftware is not desirable and should not be followed by othernations.

Acknowledgement

I gratefully acknowledge the valuable comments and sugges-tions from the anonymous reviewer. I would also like to thankYahui Song and Yuehua Zhuang for their help during my re-search. All errors remain mine.

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