CHINESE WINDOWSTM 95 PROJECT AGREEMENT ON SPECIFICATION AND STANDARDS

(SUPPLEMENTARY MEMORANDUM OF Cooperation)

MICROSOFT WINDOWSTM95 PROJECT AGREEMENT ON SPECIFICATION AND STANDARDS

SUPPLEMENTARY MEMORANDUM OF UNDERSTANDING FOR CHINESE1

 

                                                            1 To any mild student of English and Chinese languages, it is amazing to witness the creative translation of Chinese into English by Microsoft. Microsoft’s deft translation is scarier than Orwellian doublespeak. The strange construction of the title of this agreement in English as crafted by Microsoft was done for a singular purpose. Microsoft was determined from the outset to defraud the Chinese Government and the software developers. Microsoft could not bring itself admit that the scope of the agreement being documented herein is about “Chinese version of Windows™95”.   Microsoft’s intent to defraud is proved by the following: 1.  Microsoft intentionally changed “Chinese Windows™ Project Agreement” to “Microsoft Windows™ and thus changing the 

scope and purpose of this agreement. 2.  Microsoft intentionally added “for Chinese” to the end of title to avoid arousing suspicion about the difference in translation.  This agreement is not only an agreement on specification and standards. It is also the definitive agreement in which the Chinese Government spelled out for Microsoft on how to engineer its Chinese Version of Windows™95 with the help of local software vendors. The Chinese Government provided a short list of Chinese software vendors to provide the necessary fonts and the Input Method Editors for use in the Chinese version of Windows™95. This is also the definitive agreement in which the Chinese Government stated that CITS, a Chinese Government entity, instead of the individual Chinese software vendors is the licensor and will manage the copyright and royalties on behalf the Chinese software vendors. According to the Chinese Government, “CITS will license to MS technologies in a reasonable way, at reasonable price and in accordance with the provisions of the relevant departments of Chinese Government” The Chinese software vendors listed in this agreement would then be selected by Microsoft to enter into a Licensing agreements for either fonts or Input Method Editors, but the terms and conditions as well as fee and royalties would have already been determined in this agreement.  The substantive negotiation for the fonts and Input Method Editors were conducted between Microsoft and the Chinese Government with the recommended Chinese software vendors sitting quietly on the sideline. This agreement stipulated that the three‐way licensing agreement between Microsoft, Chinese software vendors and CITS must conform to this agreement. 

In accordance with the Memorandum of Cooperation for Chinese Windows™ 95 Project (“MOU”) entered into by and between the Ministry of Electronics Industry of the People’s Republic of China (“MEI”) and Microsoft Corporation (“MS”) on December 8, 1994, the Standardization Department of China State Bureau of Technical Supervision (“CSBTS”) and the Computer and Information Advancement Department of MEI have jointly engaged in consultations with MS and reached an agreement as follows on matters regarding the specifications and standards for the Chinese language version of Microsoft Windows™95 and the Chinese partners:

Whereas, in accordance with the Memorandum of understanding for Chinese Windows 95 Project (the “MOU”) entered into between the Ministry of Electronics Industry of the People’s Republic of China (the “Ministry”) and Microsoft Corporation (“Microsoft”) on December 8,1994. The parties have engaged in further discussions regarding the specifications and standards for the Chinese language version of Microsoft Windows 95 (the “Software”);

 

And Whereas the Computer and Information Advancement Department of the Ministry, the Standardization Department of China State Bureau of Technical Supervision(“CSBTS”) and Microsoft, following extensive discussion have agreed on standards and specifications for the software, and have identified certain Chinese development partners who shall work with Microsoft in completing research and development projects relating to the software. These partners include the China system Platform Standardization Technical Committee (“CPTC”), and the Committee on information Technology Standards (“CITS”).

 

1 CSBTS and MEI will ensure the specific performance of this Agreement by the Committee on Information Technology Standards (“CITS”) and the China System Platform Standardization Technical Committee (“CPTC”). MS respects2 Chinese Government’s standard management of Chinese information fundamental technology market and the technology license procedures 3agreed upon by both Parties (see Appendices A and B for details).

1. CSBTS and the Ministry will ensure the performance by CPTC and CITS of all responsibility attributed to them in this Supplementary MOU.

MS respects Chinese government policy on Chinese information technology standardization and the technology transfer method agreed upon mutually by MS, CSBTS and the Ministry. For detail, See Appendices A and B.

 

2 CSBTS and MEI designate CITS and CPTC to organize the formulation of corresponding Chinese National Standards or Industry Standards and Specifications with reference to the specifications and requirements proposed by MS and its Chinese partners regarding the functions of Chinese version of Windows™ 95. MS complies with such standards and

                                                            2 Chinese Government wants Microsoft to respect its “standard management of Chinese information technology market.” No such luck!  Microsoft could not bring itself kowtow to the Chinese Government and concede to the Chinese Government a role in managing the information technology market, such as setting the prices of licenses and royalty fees. The English version of the agreements omitted the word “market” and completely ignores the ideas expressed in the Chinese version of the agreement!  No consensus ad idem. 3 Microsoft is piqued by Chinese Government’s involvement in the IT market. 

specifications once approved and promulgated by CSBTS or MEI. The standards and specifications shall include the technical details such as Chinese language, fonts, device drivers as well as application program interfaces.

2. On the basis of the specifications proposed by Microsoft and its Chinese development

partners, CITS and CPTC shall formulate corresponding National Standards or Industry Standards and shall submit such draft National standards or industry standards to the Ministry for approval. The Ministry shall submit approved National standards to CSBTs for promulgation in accordance with the Standardization Law. The Ministry shall promulgate approved Industry Standards and shall file them for the record with CSBTs in accordance with the Standardization Law. The said National Standards or Industry Standards will include standards related to Chinese-language related functionalities, fonts, device drivers, application program interfaces and other technical details. Microsoft shall comply with such standards once promulgated in accordance with the terms of this section.

 

3 The Character Sets supported by the Chinese version of Windows™95 shall include all characters available in GB2312 and Chinese characters in GB13000 (CJK Chinese character set). The plan proposed by the Chinese Party for extension of Chinese characters regarding the coding structure and code assignment shall be used as the basis for formulation of the relevant standards. The plan shall be applicable to all software companies relating thereto including foreign companies and the Chinese version of Windows™ ™. See Exhibit 1 for the plan proposed by the Chinese Party for extension of Chinese characters regarding the coding structure.

3. The Software shall support all Chinese Characters available in the Chinese Character Code Sets GB2312 and GB13000 (CJK Chinese character set). The coding structure and code assignment of the Software shall conform to the proposal by CITS for extending the GB2312 standard. The CITS plan of character set. Coding scheme and code assignment will be used as the basis for the future GB extension standard to be submitted to the CSBTS for approval as the National standard or to the Ministry for approval as the Industry standards. The Ministry, CPTC, CITS and CSBTS shall publicly endorse and promote these code standards within standards organizations, the software Industry and in respect of any software development undertaken in the People’s Republic of China. These code standards shall be applicable to all software companies in relevant fields of development, including Microsoft. CITS’ initial commitment to this standard is expressed in Exhibit 1.

 

4. In respect of the Chinese fonts incorporated by the Chinese version of Windows™ 95, MS shall accept the standardized True Type Chinese fonts as recommended by CITS; CITS will license to MS technologies in a reasonable way, at reasonable price and in accordance with the provisions of the relevant departments of Chinese Government. See Appendix A for the list of recommended development partners for fonts and terms of agreement.

4. Microsoft acknowledges4 the recommendations made by CITS, of the Chinese development partners listed in Appendix A. and, with the assistance of CITS5. Microsoft shall enter into agreements with one or more of such companies to acquire rights in respect of certain True Type Chinese fonts in accordance with Appendix A.

 

5 In respect of the input methods for Chinese language incorporated by the Chinese version of Windows™ 956, MS shall accept the standardized input methods for Chinese language as recommended by CITS; CITS will license to MS technologies in a reasonable way7, at reasonable price and in accordance with the provisions of the relevant departments of Chinese Government. See Appendix B for the list of recommended development partners and terms of agreement.

 

  

5. Microsoft acknowledges the recommendations made by CITS, CPTC and the Ministry of Chinese Development Partners listed in Appendix B, and, with the assistance of

                                                            4 Microsoft’s aversion for Chinese government’s intervention is palpable throughout this document. Starting with Clause 4, “Microsoft 

shall accept” in Chinese becomes “Microsoft acknowledges” in Chinese. Microsoft is reluctant to accept the dictum of Chinese Government. 5 Another important fundamental philosophical difference between Microsoft and the Chinese Government also surfaced in this clause. 

Microsoft detested the idea that it has to enter into a licensing agreement with the Chinese Government. The Chinese Government’s view as stated in the Chinese version is that “CITS will license to Microsoft in a reasonable way, at a reasonable price and in accordance with the provisions of the relevant departments of Chinese Government.” Microsoft, on the other hand, believes that it is entitled to enter into agreement with individual Chinese company with the “assistance of CITS”.  The inconvenient wordings, such as “reasonable way”, “reasonable price” and “in accordance with the provision of … Chinese Government” were not part of Microsoft’s vocabulary. 6 The clause in the Chinese version of the agreement limited the scope of the agreement to “the Chinese Version of Windows 95”, and once again Microsoft deliberately omitted it in the English Version. Microsoft’s sudden penchant for brevity is rather moving. In an agreement about Chinese version of Windows 95, Microsoft goes out its way to avoid mentioning it. What subterfuge, what dark machination, could possibly be motivating these IT wizards? Microsoft and the Chinese Government are clearly at odds about who is in charge in the whole licensing process. Chinese Government believed that it is in charge while Microsoft believed that the Chinese Government has little or no business in a licensing agreement and is only a source of assistance in the matter. As far as the individual Chinese software company is concerned, the Chinese Government has negotiated a “reasonable price” to license the technology to Microsoft in a “reasonable way.” The license fee and royalty for its fonts and input methods incorporated in the Chinese version of Windows 95 are already stated in the Supplement to the Memorandum of Understanding. 7 The sentence, “CITS will license to MS technologies in a reasonable …”, in the Chinese version of the Supplementary Agreement, which described CITS as the licensor and in charge of pricing the license fee and royalties, was omitted in its entirety in the English version. 

CITS, Microsoft shall enter into agrements with one or more such companies to acquire rights in repect of input method editors (including non-keyboard input method editor) in accordance with Appendix B.

 

6. CSBTS and MEI will designate their testing agency to verify compliance of the Chinese language portions of Chinese version of Windows™ 95 with relevant Chinese Government standards and requirements. CPTC will propose the testing outlines and criteria and MS will render the necessary support. CITS will be entitled to the testing fees from MS in a reasonable way, at reasonable price and in accordance with the provisions of the relevant departments of Chinese Government and recognize the Chinese version of Windows™ 95 passing the test. CITS will recognize the fonts and input methods used by the Chinese version of Windows™ 95 as recommended by CITS. See Appendix C for testing fees and terms of agreement.

7. CSBTS and the Ministry shall designate a testing agency to verify compliance of all Chinese language portions of the Software with relevant written Chinese Government standards and requirements. CITS shall propose the testing plan criteria to be used by the designated testing agency. Fonts and input method editors acquired by Microsoft from an agree Chinese Development Partners as set out in this

Supplementary MOU shall be deemed to be approved by the Ministry, and CITS. Microsoft shall provide necessary technical support for testing of the Software. The designated testing agency, under the direction of CITS, shall issue nationally recognized certification documentation in respect of compliance of the Software with all applicable mandatory National Standards or mandatory Industry Standards. CITS shall be entitled to an agreed upon reasonable fee from Microsoft for the services that it performs under this Clause, following final certification of the software, in accordance with Appendix C, which fee shall be inclusive of all fees charged by the designated testing agency.

 

7. MEI and CSBTS agree to recommend to users the Chinese version of Windows™ 95 complying with the standards and specifications in Chinese as preferred product.

8. The Ministry and CSBTS agreed to recommend Chinese Windows 95 complying the relevant standards on Chinese as preferred product to Chinese users.

 

8. MEI and CSBTS represent that they have the authority to approve and permit Chinese citizens to license the copyright in computer software developed in the People’s Republic of China in accordance with Article 28 of the Regulations for the Protection of Computer Software. MEI shall approve the assignment and licensing of copyright in computer software stipulated in the agreements entered into by and between MS and Chinese development partners in accordance with Clause 4 and 5 above.

6. The Ministry represents that it has the authority to approve the assignment and licensing of copyright in computer software developed in the people’s republic of China by Chinese citizens in accordance with Article 28 of the Regulations for the Protection of computer software. The Ministry shall approve the assignment and licensing of copyright in computer software stipulated in agreements entered into between Microsoft and Chinese Development Partners in accordance with Clauses 4 and 5 above.

 

9 In respect of the contracts for license of technologies of True Type fonts and input methods signed by MS and Chinese companies, in the event that contents licensed under the contracts are consistent with those recommended by CITS, CSBTS and MEI will support the performance of such contracts, provided however that this does not cover the cases of the technologies such as extending GB2312 to GB13000 and modified versions.

 

 

9. CSBTS and the Ministry will support the continuous execution of the contracts MS signed with Chinese companies in the case where truetype fonts and IME are in the recommendation list by CITS. This does not cover the cases such as extending GB2312 to GB13000.

 

 

10 This Supplementary MOU and its appendices will form an integral part of the MOU.

10. This Supplementary MOU and its appendices shall form an integral part of the MOU.

 

   

 

Both Chinese and English versions of this Agreement shall be executed with each version having the same legal effect in ascertaining both Parties’ intentions.8

<Missing in the English version>  

                                                            8 The differences between the two versions of the agreement are not due to linguistic or cultural nuances or errors in translation. It is 

simply that the parties signing these agreements had not or perhaps never would have reached a meeting of the minds or consensus ad idem, a necessary part of any commercial contract. Perhaps it would have been more intellectually honest to refer to the Chinese version of the agreement as the “Understanding of Chinese Government …” and the English version as the “Understanding of Microsoft …”  The Chinese Version is a bit more honest since it does contain a clause conceding that both version of the agreement have the same legal effect in ascertaining both parties’ intention. The Chinese Government at least conceded the possibility that either party may have different intents. Curiously the English version of the agreement failed to even mention the existence of the Chinese version of the agreement.  Just like the Chinese Government, Microsoft was keenly aware of the substantial differences in either party’s views. By deliberately omitting the clause stating the equal validity of both Chinese and English version, Microsoft was trying to plant its version, i.e. the English version, as the whole truth in the future legal proceedings outside of China.   A benign interpretation of this “Non‐Agreement” is as follows. Microsoft’s negotiating team at the time realized that it has reached an impasse with the Chinese Government. Chinese Government’s insistence that it has sole authority over the licensing and royalty concerning fonts and IME did not bode well for Microsoft’s intent to steal the fonts and IME for a song with a simple cap in license fee. Instead of reaching a real agreement, Microsoft’s negotiation team simply decided to hide the inconvenient truth, i.e. the Chinese version of the agreement” from its corporate headquarter.   A lesser benign interpretation of the events would show that Microsoft’s negotiating team, staffed with oversea‐Chinese and Taiwanese compatriots all with competent bi‐lingual skills, negotiated hard with the Chinese Government in Chinese and the agreement reached with the Chinese Government is substantially and correctly recorded in the Chinese version of the contract.   While the Chinese Government was mainly concerned with mildly admonishing Microsoft for having the audacity to try to engineer the Chinese version of Windows 95 in Taiwan and getting about setting important standards in regards to the 30 thousands hieroglyphs and methods of inputting them into the modern day PC, Microsoft was eager to get pass what it viewed as unnecessary and unhelpful meddling by the Chinese Government. In Microsoft’s opinion, it is a classical case of Adam Smith vs. Karl Marx. In the opinion of the Chinese Government, it is a case of nerdy Harvard dropout ignorant of China’s six thousand years old history fumbling his way to the China market and thus requiring some gentle nudging.  Having failed to extricate the Chinese Government out of a commercial licensing agreement with Chinese firms and failed to reach an agreement on a cap in licensing fee beyond the Chinese version of the Windows 95, Microsoft simply wished away the Chinese version of the agreement by omitting its existence and took the battle to the next round, i.e. the three‐way licensing agreement between CITS, an entity of Chinese Government, Microsoft and the software vendor. Instead of respecting “Chinese Government’s standard management of Chinese information fundamental technology market and the technology license procedures” as stated in the Clause 1 of Chinese version of the agreement, Microsoft deviated from the licensing and royalty terms agreed in the Supplement to the Memorandum of Understanding by expanding the scope of license beyond Chinese version of Windows 95. Microsoft expanded the scope of license agreement beyond “Microsoft Windows95 PRC version” by adding “or any other Microsoft Product.”  As far as the Chinese Government and the individual software companies were concerned the copyrights and royalties were already uniformly negotiated by the Chinese government with Microsoft. The individual licensing agreement was supposed to conform to the Supplement to the Memorandum of Understanding. 

<Missing in the Chinese version>

<Missing in Chinese Version>

IN WITNESS WHEREOF, the parties have caused this Supplementary MOU to be executed by their respective duly authorized representatives as of the date indicated below.

 

STANDARDIZATION DEPARTMENT CHINA STATE BUREAU OF TECHNICAL SUPERVISION Signature: (sign) Date: September 20, 1995

COMPUTER AND INFORMATION ADVANCEMENT DEPARTMENT MINISTRY OF ELECTRONICS INDUSTRY Signature: (sign)

Date: September 20, 1995

MICROSOFT CORPORATION Signature: (sign) Date: September 20, 1995

 

   

APPENDIX A

APPENDIX A  

 

1. List of Recommended Development Partners for Fonts GB13000 (in the order of Chinese phonetic alphabet):

Song: Beijing Stone Computer Development Center Beijing Zhong Yi Electronics Company China Institute of Printing Science Technology Hei: Beijing Zhong Yi Electronics Company China Institute of Printing Science Technology Kai: Institute of Computer Science of Peking University

GB2312 (in the order of Chinese phonetic alphabet): Song: Institute of Computer Science of Peking University China Great Wall Computer Group Corp. Hei: China Great Wall Computer Group Corp. Kai: Beijing Zhong Yi Electronics Company China Great Wall Computer Group Corp. Fang Song: Beijing Stone Computer Development Center Beijing Zhong Yi Electronics Company

China Great Wall Computer Group Corp.

 

2. The following terms shall be complied with in the adoption by the Chinese version of Windows™ 95 of such Chinese fonts as recommended by CITS:

 

B. Standard Terms of Font License Agreements9

Each Font License Agreement with an agreed Chinese Development Partner shall include the following:

 

 

                                                            9 The title, “The Standard Terms of Fonts Licensing Agreements”, has no counterpart in the Chinese version, which attributed the terms to apply narrowly to “Chinese Version of Windows™95” and nothing more. Microsoft sought to expand the scope of the agreement by deliberate fabrication and omission. The Chinese version carefully limited the scope of the terms to the Chinese version of Windows 95. Microsoft’s deliberate omission of term “Chinese version of Windows 95” is a proof of Microsoft’s intent to defraud the other parties by expanding the scope of the agreement. 

 

A. The Chinese fonts development partners recommended by CITS shall provide all Chinese fonts available in GB13000 Chinese code sets. CITS shall be uniformly responsible for managing the copyright and royalties in respect of such font library as recommended by CITS.10

 

 

 

8. The fonts provided by vendors recommended by CITS should cover all the Chinese characters in GB13000.

 

MS, CITS and the partners recommended by CITS for development of Chinese fonts will jointly enter into a contract for license of Chinese fonts technology.

The contract shall include a license to MS to use the relevant technology in MS products designated by MS.

The contract shall contain a sufficiently license to permit MS to have necessary use of the relevant technology, including but not limited to the right to license to end-users, original equipment manufacturers and computer peripheral manufacturers, and create improvements based on such technology. The contract shall include warranties and indemnities from the Chinese development partners regarding functions and ownership of intellectual property rights of the relevant technology.

 

  

1. The agreement shall be a three-party agreement between CITS, Microsoft and the Chinese

                                                            10 Microsoft intentionally omitted the sentence “CITS shall …”, which described CITS’s authority in managing the copyright and royalties. Chinese version of the Supplementary Agreement described CITS as the licensor of the fonts and IME’s. Microsoft refused to recognize that position and intentionally omitted all references CITS’s claim. 

Development partner. The payment will be made to a bank account nominated by both CITS and font vendor.11

2. The agreement shall include a license to Microsoft to use the relevant technology in all

Microsoft products designated by Microsoft. 3. The agreement shall contain a sufficiently broad license to permit Microsoft to have all

necessary use of the relevant technology, including. But not limited to the right to license to end-users. Original equipment manufacturers and computer peripheral manufacturers, and create improvements and derivative works based on the licensed technology.

 

5. The agreement shall include warranties and indemnities from the Chinese Development partners regarding functionality and ownership of intellectual property rights of the relevant technology.

 

B. Prior to the distribution of the Chinese version of Windows™ 9512, the Chinese fonts development partners recommended by CITS shall provide MS with all the data and necessary technical materials relating to the Chinese fonts, and be responsible for correction of errors in the fonts provided by them and program errors, and for amendment and supplementation to the necessary fonts. MS shall render necessary materials, software tools and technical assistance to CITS and the development partners.13

 

  

6. The agreement shall oblige the Chinese Development partner (a) to deliver to Microsoft all source code, object code and documentation of the relevant technology: (b) to correct all deficiencies and errors in the relevant technology, and repair any errors, and amend any characters in the font set.

 

                                                            11 There is no equivalent wording in the Chinese version of the agreement. 12 “Prior to the distribution  ...” was omitted in the English Version to fraudulently expand the scope of the terms beyond Chinese version of Windows™95. 13 This sentence appeared in part in Section 8 of English version of the agreement.

8. The agreement shall oblige Microsoft to provide technical assistance and software tools to the Chinese Development partner and CITS. Microsoft shall complete the acceptance before the Software is launched.

 

C. MS shall complete acceptance of the font product provided by the development partners before the Chinese version of Windows™ 95 is officially launched.

 

<Missing> 

<Missing> 

 

  

D. MS shall accept at least two fonts (Song and Hei) in the Chinese version of Windows™95. MS will pay USD1.20 as royalties for each font of each legitimate copy of the Chinese version of Windows™ 95 or other MS product (including the updated version) incorporating such font which is distributed by MS, subject to a maximum total sum of USD500,000 for each font. MS will pay a down payment of USD96, 000 in respect of each font upon official distribution of the Chinese version of Windows™ 95, representing the royalties in respect of the first 80,000 copies of MS products. MS will pay a minimum royalty of USD96,000 for each font.

 

 

4. The agreement shall cap the license fee to the amounts set out in this section,14 and shall terminate if the Software and all other Microsoft products in which the relevant technology have been included are withdrawn from the market.15 Microsoft shall acquire at least two fonts. Song and Hei, and Microsoft shall pay US$1.2 in respect of each copy of the software or other Microsoft product incorporating the relevant technology which is distributed by Microsoft, up to a maximum of US$500.000. Microsoft shall pay a non-refundable down payment of US$96.000, on shipment of the Software, or first Microsoft product incorporating the relevant technology16, representing the royalties in respect of the first 80.000 copies of the relevant technology.

 

 

E. MS’s obligation to pay royalties in respect of fonts recommended by CITS terminates upon cessation by MS of distribution of the Chinese version of Windows™ 95 and other MS products incorporating such fonts.17

   

   

 

   

                                                            14 The highlighted phrase, “The agreement shall cap”, in the English version of agreement has no counterpart in the Chinese version of the agreement. 15 The termination of the licensing fee is described in a separate and independent section in the Chinese version of the agreement. Microsoft intentionally combine the Section regarding Fee and Royalties and the Section describing the Termination to fraudulently introduce “license fee cap”. 16 The highlighted phrase, “or first Microsoft Product …” has no counterpart in the Chinese version and was added to fraudulently expand the scope beyond “Chinese version of Windows™95”. 17 Microsoft deliberately merge this entire section with the section regarding fee and royalties to falsely create the appearance of cap in license fee. 

 

 

  APPENDIX B  

 

  APPENDIX B  

 

  1. List of Recommended Development Partners for Input Methods (in the order of Chinese phonetic alphabet):

Pictograph Code: Hieroglyphic Code – Aiwen Computer Company

Zheng Code – Beijing Zhong Yi Electronics Company Phonetic Code: GW ABC – China Great Wall Group

Tianli Code – Tianli Company New Pinyin – Suntendy Company Natural Code – Chaoxiang Company

 

  

  A. List of Recommended Partners and details of license fees18

                                                            18 The English version of the Agreement for a reason which will be known shortly decided to reduce the actual list of recommended 

development partners for input methods to a sentence fragment “List of Recommended Partners, and details of license fees”. What 

could be so objectionable about an actual list of Chinese companies that Microsoft is supposed to do business? Without referring to the 

Chinese version of the agreement how would such as list be even legally established in a court of law? How can Zhongyi even prove that 

it is one of the recommended development partners for input methods? 

 

The answer to these questions may be not so sinister. By omitting the actual list of recommended development partners, Microsoft’s 

negotiation team cleverly pared Appendix B to fit within a single A4 or Letter size page just like the Chinese version. If an actual list were 

to be included, the English version of the Appendix B would have overflow to a second page and arouse suspicion on the part of Chinese 

Government. This explanation may seem completely implausible and asinine, but unfortunately it may be the real truth. The body of the 

agreement was two pages long. The signature page was a single page. Appendix A was two pages long. Appendix B had to fit into a single 

page. Microsoft negotiation team made sure that the number of pages in the English version of the agreement conforms to that of the 

Chinese agreement.  

 

 

 

  1. The following terms shall be complied with in the adoption by the Chinese version of Windows™95 of such input method editor (IME) for Chinese language as recommended by CITS:

 

 

  

  B. Standard Terms of Input Method Editor license agreement19

Each input method editor license agreement with an agreed Chinese Development Partner shall include the following:

 

 

  CITS is uniformly responsible for managing the copyright and royalties in respect of such input methods for Chinese language as recommended by CITS.20 

                                                            19  “Standard Terms of Input Method Editor License agreements” has no equivalent in the Chinese version of the agreement. Microsoft is 

attempting to impose the form of a software licensing agreement without really reaching a consensus ad idem with the Chinese 

Government. As far as the Chinese Government is concerned, this entire supplement is about Chinese version of Windows 95. The 

Chinese version of section is a simply a declarative sentence, “The following terms shall be complied with in the adoption by the 

Chinese version of Windows™95 of such input method editor  (IME) for Chinese language as recommended  by CITS:” This sentence 

clearly spelled trouble for Microsoft Negotiators for it demonstrated Chinese Government’s intent that the agreement is about licensing 

the adoption of Chinese IME in the Chinese version of Windows 95. Microsoft created a fictitious title “Stand Terms of Input Method 

Editor License agreement” and delete the inconvenient reference to “Chinese Version of Windows 95” 

 20 The depth of deception employed in the translation of a simple Chinese sentence points to the heart of the problem. The Chinese 

Government is trying to resolve the impasse it has with the Chinese version of Windows 95, while Microsoft was focused on creating a perpetual license for fonts and input methods for the Chinese version of Windows and everything else beyond. My suspicion is that Microsoft is not only motivated by sheer greed but also by its discernable displeasure for having been singled out by the schoolmaster and been given a proper thrashing. Microsoft may just avoid the pain of having to negotiate with the Chinese Government for every major version of Microsoft Windows such as Windows 98 and Windows XP.  As someone who has represented major US hi‐tech companies in similar negotiation back in 1980 and 1990, I can certainly sympathize with the daunting tasks faced by Microsoft’s team facilitating between Microsoft’s legal department and the Chinese Government. The body of law governing copyrights and software license must have been scant at the time. The Chinese officials across the table were most likely not familiar with the rigor demanded in a Western legal contract. The mandarins in Redmond were most likely equally uninformed about difference between politics and commerce, the East and the West.  The wrangling with a single Chinese sentence by the Microsoft negotiation team depicted its dire situation of being caught between Microsoft’s mandarins in Redmond bent on a commercial edge and a team of Chinese officials set about a political task of chastening Microsoft.  

 

  <Missing in English Version> 

  <Missing in English Version> 

 

 

 

  MS, CITS and the partners recommended by CITS for development of Chinese IME will jointly enter into a contract for license of Chinese IME technology. The contract shall include a license to MS to use the relevant technology in MS products designated by MS. The contract shall contain a sufficiently license to permit MS to have necessary use of the relevant technology, including but not limited to the right to license to end-users, Original equipment manufacturers and computer peripheral manufacturers, and create Improvements based on such technology. The contract shall include warranties and indemnities from the Chinese development partners regarding functions and ownership of intellectual property rights of the relevant technology.

 

                                                                                                                                                                                                              The all‐encompassing, blanket licensing agreements that Microsoft’s legal department filed away under Chinese fonts and IME may be the worst Pyrrhic victory in Microsoft’s history. The Licensing Agreement crafted by Microsoft’s negotiating team was grounded in deceits. The deceits were made against the Chinese Government that had relied on Microsoft to pen the English version of the agreement. It is not an unusual practice for the Chinese official to skip a line by line comparison of the two versions of the agreements. The knowledge of English was far from universal in China and these officials thought most of time correctly that the English version would never see the light of day in China. The same deceits were also made against Microsoft’s senior management and legal department. Bill Gates and Microsoft’s General Counsel most likely reviewed the English version of the agreement and believed it as the singular truth. Microsoft’s department most likely believed that its bi‐lingual negotiation team had manhandled the Chinese Government into submission and Microsoft is safe to use the fonts and IME royalty free perpetually. Like the Chinese officials, no one in Redmond ever conducted a due diligence review of the two versions of the agreements.  It is also plausible that the intent to deceive may have come from high places in Redmond. It is hard to imagine that Microsoft’s legal department let a set of bi‐lingual agreements to be signed without addressing the existence of two linguistic versions and their equal validity. The omission of bi‐lingual agreement clause is most likely deliberate on the part of Microsoft’s legal department for the purpose of gaining an advantage in potential litigation in the US.  If Microsoft was indeed successful in reaching an agreement with the Chinese to license the Chinese fonts and IME for all current and future versions of Microsoft Windows, there would not be so many discrepancies between the Chinese and English version of the agreement. Microsoft, most likely, took a calculated risk thinking that the Chinese government and the Chinese companies would never sue. 

 

  1. The  agreement  shall  be  a  three‐party  agreement  between  CITS, Microsoft  and  the Chinese Development partner. The payment will be made to a bank account nominated by both CITS and font vendor.21 

2. The agreement shall include a license Microsoft to use the relevant technology in all

Microsoft products designated by Microsoft. 3. The agreement shall contain a sufficiently broad license to permit Microsoft to have all

necessary use of the relevant technology, including but not limited to the right to license to end-users, Original equipment manufacturers and computer peripheral manufacturers, and create improvements and derivative works based on the licensed technology.

 

 

  

  5. The agreement shall include warranties and indemnities from the Chinese Development partners regarding functionality and ownership of intellectual property rights of the relevant technology.

 

 

 

                                                            21 The sentence “The payment will be made to a bank account nominated by both CITS and font vendor” has no counterpart in the 

Chinese version of the agreement. Instead of conceding the leading role taken up by CITS, which according to the Chinese version of the 

agreement manages copyright and royalties on behalf of the individual companies. Apparently that management responsibility includes 

collecting money from Microsoft and then dividing it out to the individual Chinese companies. 

 

Since Microsoft consistently omitted CITS’s claim for the leadership role, this sentence about the bank account is the only place in the 

English version of the agreement where Microsoft acknowledge the role played by CITS. Microsoft may also had been uncomfortable with 

the implication of CITS taking money from individual development partners and its implication with the Foreign Corrupt Practices Act 

(FCPA) of 1977. It stated something that was agreed between the three parties to the licensing agreement and yet was not written out in 

the Chinese version of the contract. Microsoft just wanted to make sure that it is covered. 

 

  The Chinese IME development partners recommended by CITS shall provide MS with all the data, source codes and necessary technical materials relating to IME, and be responsible for correcting omissions in IME provided by them, program errors or other IME errors. MS shall render necessary materials, software tools and technical assistance to CITS and the IME development partners.

 

 

  6. The agreement shall oblige the Chinese Development partner (a) to deliver to Microsoft all source code, object code and documentation of the relevant technology: (b) to correct all deficiencies and errors in the relevant technology.

 

 

   

 

 

  MS shall accept at least two IMEs (phonetic code and pictograph code) in the Chinese Version of Windows ™ 95. MS will pay USD0.50 as royalties for each IME of each legitimate copy of the Chinese Version of Windows™ 95 or other MS product incorporating such IME which is distributed by MS, subject to a maximum total sum of USD250,000 for each IME. MS will pay a down payment of USD25,000 in respect of each IME upon official distribution of the Chinese version of Windows™ 95, representing the royalties in respect of the first 50,000 copies of MS products. MS will pay a minimum royalty of USD25,000 for each IME.

 

 

  

  4. The agreement shall cap the license fee to the amounts set out above22, and shall terminate if the Software and all other Microsoft products in which the technology have been included are withdrawn from the market. Microsoft shall acquire at least input method editors. Stroke based and phonetic and Microsoft shall pay US$10.5 in respect of each copy of the software or other Microsoft product incorporating the relevant technology which is distributed by Microsoft, up to a maximum of US$250.000. Microsoft shall pay a non-refundable down payment of US$25.000, on shipment of the Software, or first Microsoft product incorporating the relevant technology, representing the royalties in respect of the first 50.000 copies of the relevant technology.

 

 

 

                                                            22 In the Chinese Version of this section， the translation of this clause starts with “Microsoft in Chinese version of Window 95 shall 

accept”.   Nowhere is the phrase “The agreement shall cap the license fee to the amount set out above” to be found in the Chinese 

version of the agreement. By introducing the phrase “The agreement shall cap the license fee to the amounts set out above”, Microsoft’s negotiation team is simply trying to bamboozle the Chinese and unilaterally declared a victory when there was none.  It could be argued that the IME development partner does not have a free will in entering into this agreement with Microsoft. 

 

  MS’s obligation to pay royalties in respect of IME recommended by CITS terminates upon cessation by MS of distribution of the Chinese Version of Windows™ 95 and other MS products incorporating such IMEs.23

 

  <Missing> 

  <Missing> 

 

   

                                                            23 According to the Chinese version of the agreement, Microsoft’s obligation terminates only when Microsoft ceases to distribute the Chinese Version of Windows 95 and other MS products incorporating such IMEs. No other conditions were set forth for the termination of Microsoft’s obligation to pay royalties. If the Chinese Government had agreed to a cap in license fee, additional wordings would have been added here.  This one sentence clause is so horrible for Microsoft to countenance that it made it disappeared. Microsoft created the phrase, “The agreement shall cap the license fee to the amounts set out above” to tag onto this one sentence.   Instead of reaching a real mutual understanding with the Chinese Government on the end of the royalty payments, Microsoft tried to create a license fee cap cutting and pasting sentence fragments from the Chinese version of the agreement to fashion license fee cap clause that Microsoft failed to obtain from the Chinese Government. Once again, there is no consensus ad idem. 

 

 

  APPENDIX C  

 

   

 

  Testing Fee  

 

  Testing Fee

 

 

  After the Chinese version of Windows™ 95 passes the compatibility testing conducted by the testing agency designated by CSBTS and complies with the requirements of the Chinese Government regarding standards and specifications, MS will pay to CITS a fee of USD10,000 as the testing fee for the Chinese version of Windows™ 95, such fee to be inclusive of all charges relating to the testing of the Software.

 

 

 

   

 

 

 

 

 

 

   

 

  CODE ASSIGNMENT SKETCH ON EXTENSION OF INTERNAL CODE OF CHINESE VERSION OF WINDOWS™ 95