intellectual property rights protection for software

Intellectual Property Rights Protection for Software

Domestic Lawsuits

Appendix: Relevant Chinese Laws, Regulations And Judicial Interpretations (Excerpts)

Civil Liability Reproducing or partially reproducing software, with-out permission or a license from the copyright holder, can result in civil liabilities such as injunction, rectifying any adverse effects, making a public apology and payment of damages. The infringer shall compen-sate the actual losses suffered by the copyright holder; if the actual losses are difficult to calculate, then the damages may be assessed according to the infringer’s illegal gains from the infringement. If both the actual losses of the rights holder or the illegal gains profited by the infringer are impractical to ascertain, the People’s Court can grant stat-utory damages to the rights holder after assessing the circumstances of the infringement. The amount of damages shall also include any rea-sonable expenses paid by the copyright holder to halt the infringement.

Administrative Liability If public interest is harmed by the illegal reproduction of software, partially or entirely, without permission or a license from the copyright holder, the administrative authority in charge may order a stop to the infringement, expropriate the illegal income, confiscate or destroy the illegal copies, and impose a fine of not more than three times the illegal income. If the illegal income is difficult to calculate, a fine of not more than RMB100, 000 (~USD15K) may be imposed. If the damages are serious, the administrative authority may also confiscate the materials, tools, equipment and other assets that were used to make the infringing copies.

Moreover, The Implementation Plan for Promoting Use of Legal Soft-ware in Enterprises, issued by the National Copyright Administration (NCA), the Ministry of Information Industry (MII), the Ministry of Com-merce (MOC), the Ministry of Finance (MOF), the State-Owned As-sets Supervision and Administration Commission of the State Council (SASAC), the All-China Federation of Industry and Commerce (AFIC), the China Banking Regulatory Commission (CBRC) , the China Securi-ties Regulatory Commission (CSRC) and the China Insurance Regula-tory Commission (CIRC), requires the creation of a blacklist to expose enterprises with a history of serious violations. Opinions on Several Issues Concerning the Overall Intellectual Property Trial Serving the Overall Objective under the Current Economic Situation issued by the Supreme People’s Court specifically states that judicial protection of intellectual property rights must be strengthened and improved instead of being weakened or relaxed.

Intellectual Property Rights Protection for Software

1BUSINESS SOFTWARE ALLIANCE

The new laws, referred to as Unfair Competition Acts, in the U.S. states of Washington and Louisiana are designed to ensure that the products that are sold in these two states have not been manufactured by using counterfeit or pirated IT products (including hardware and software) in the manufacturers’ production process and business operations.

Manufacturers from any country who fail to comply with the new laws will put themselves at such risks as paying high damages, their goods being seized, and losing the US market, while those that use legitimate IT products will benefit greatly from the new laws. For those manufacturers who used to be at competitive disadvantage due to their competitors’ unlawful use of counterfeit or pirated IT products (e.g., pirated software), the new laws will create a fair competitive environment.

Effects of the New Laws on China's Manufacturing Industry

As a champion of fair competition, the U.S. has long been actively promoting and maintaining fair competition in the marketplace. The new laws are designed to ensure that products sold to consumers have been manufactured in accordance with principles of fair competition - and specifically have not been the product of manufacturers’ business operations that involve the use of unlicensed IT products. The new laws will severely punish those manufacturing organizations that don’t compete fairly, and forbid their products from entering the marketplaces of the U.S. states of Washington and Louisiana.

The promulgation of the new laws will greatly improve the competitive landscape. A growing number of businesses rely on IT to improve their efficiency and gain a competitive edge. For some manufacturers, IT costs can be a significant part of their total capital expenditures. They are bound to be at a competitive disadvantage when they are forced to compete against companies that use counterfeit or pirated IT products - just as if their competitors were to pay their employees less than minimum wage or violate environmental laws. Third parties, such as retailers, may also undertake corresponding legal liabilities if they fail to take necessary measures as required by the new laws to warn their suppliers of and regulate their unfair competition behaviours.

The new laws will help to address unfair business practices, level the playing field, and improve the competitive landscape for the manufacturers who do business in the U.S. states of Washington and Louisiana. In addition, these principles can also apply in other states under their unfair trade practices laws.

For developing countries like China, it could mean a great opportunity to increase their exports to the U.S. Manufacturing organizations in China shall take timely measures to show that they use legally authorized IT and respect intellectual property, thereby they shall have the ability to increase their market share of US imports simply through IT legalization and certification.

Compliance with legal IT use can be a competitive differentiator in the global marketplace. Successful global companies are increasingly focused on doing business with their supply chains and other companies (and countries) that are governed by high standards of legal and ethical compliance. Organizations that are able to certify to legal IT use will enhance their global reputation, safeguard their businesses, and have a competitive advantage.

Consequences of violations of law: manufacturers located anywhere in the world who use infringing IT products in their operations and whose products or components are then offered for sale in the U.S. states of Washington or Louisiana put their companies at risk of no longer being able to sell their products in these states. In some cases, there is also a risk that their products could be seized. Failure to comply with these new laws could result in legal consequences including high damages and may result in injunctions against sales in Washington.

Manufactures Using Pirated Software May Be Exposed To Foreign Legal RisksA Brief Introduction to the U.S. Unfair Competition Act

2 BUSINESS SOFTWARE ALLIANCE

DOMESTIC LAWSUITS


DOMESTIC LAWSUITS Case 1

An equipment technology company in Qingdao used pirated software in its operations, only to find itself sued by three US companies: Microsoft, PTC and Autodesk. After the trial, the Qingdao Intermediate People’s Court held that this Qingdao equipment tech-nology company had infringed on the intellectual property rights of the three companies and ordered it to pay com-pensation totalling over RMB1.7 million (~USD250K). This is the first time a Qingdao court has completed the trial of a copyright infringement case involv-ing foreign interests concerning illegal use of pirated software by an end user.

Inspection by the Copyright Administration Resulted in an Infringement Case

On December 9, 2005, the Qingdao Copyright Administration lawfully in-spected the computers at a Qingdao equipment technology company. Law enforcement officers randomly inspect-ed 10 of the company’s 47 computers and discovered that 8 copies of Pro/E Wildfire, 9 copies of AutoCAD 2002, 4 copies of AutoCAD 2004, 1 copy of Au-toCAD 2005, 9 copies of Windows 2000, 7 copies of Office XP and 2 copies of Office 2003 had been installed on them. It was confirmed that the developers of these software did not grant installation authorization to the company. “When we found out about this, we negotiated with the company hoping to resolve the issue through compensation. However, they clearly were not acting in good faith.” The outside counsel for the three

US companies told reporters that, af-ter the consultations failed, the three companies simultaneously started pro-ceedings at the Qingdao Intermediate People’s Court requesting the company to pay compensation for economic losses totalling over RMB1.9 million (~USD280K) and to make a public apology in the People’s Daily.

Reporters also realized that this was the first case that PTC filed in China against a software end user for infringement of intellectual property rights, as well as the first time that Microsoft had sued a software end user in Qingdao.

Qingdao’s First Piracy Case Concluded Yesterday. Three US Companies Including Microsoft Seek Damages from a Qingdao Company Using Pirated Software.Qingdao Intermediate People’s Court Awards the Three Companies Damages of over RMB1.7 million


Compensation of over RMB1.7 million to Be Paid for Using Pi-rated Software

After the trial, the court held that the plaintiffs were legitimate proprietors from the US and that the copyright law-fully held by them was protected under Chinese copyright law pursuant to the Berne Convention for the Protection of Literary and Artistic Works, of which both China and the USA were signato-ries, and pursuant to the Copyright Law of the People’s Republic of China; and the defendant’s actions, unauthorized installation of the software on comput-ers at its premises and using this soft-ware for business purposes, constituted an infringement of the copyright held by the plaintiffs.

In its final ruling, the court ordered the Qingdao equipment company to im-mediately halt its infringement of the software copyrights held by the three plaintiffs, to immediately delete the soft-ware reproduced on the defendant’s

computers without a license from the plaintiffs, and to pay over RMB1.7 million in economic compensation. However, the court dismissed the plaintiffs’ other claims, including their request for a pub-lic apology from the defendant.

Enterprises Should Improve Their Awareness of Intellectual Property Rights

“The outcome of this case should make domestic enterprises take intellectual property rights seriously and include software costs in their production costs.” Yan Chunguang, a deputy presiding judge at the intellectual property rights trial division of the Qingdao Intermediate People’s Court and the presiding judge for this case, said that this was the first time a Qingdao court had tried a case involving foreign interests concerning the illegal use of pirated software by an end user. Previously, the ceiling on com-pensation for infringement of software copyrights was RMB500, 000 (~~US-D74K). By comparison, one Pro/E basic

package, one advanced assembly pack-age and one tool design package cost approximately RMB190,000 (~~USD28K ) . The court determined that the amount of compensation should be based on factors such as the price of the software, the quantity of software used and the reasonable expenses incurred by the plaintiffs to halt the infringement.

Yan Chunguang explained that the spec-ificity of this case was that civil liability for infringement of copyright of the com-puter software was borne by the end user of the computer software. The trial of this case also showed that copyright holders under the Copyright Law would receive equal protection under Chinese law regardless of whether they are Chi-nese or foreign.

Source:http://zaobao.qingdaonews.com/html/2008-04/17/content_642541.htm (Qingdao Morning Post April 17, 2008; photos and report by Zhao Yalin, Zeng Xianquan and Ji Xiaoxin.)

Accurately Defining Points of Conflict andSeeking Common Interest Coordination of aTrans-national Copyright Dispute in Foshan


“We thank the court for its efficient and equitable conduct, and we are grateful to the Chinese officials for their patience and meticulous work. We experienced the dignity of the law.” Microsoft recently sent a letter of acknowledgment from the U.S. to the Foshan Nanhai District People’s Court in Guangdong Province, expressing its sincere appreciation for the court’s skillful and responsible han-dling of the case regarding a copyright dispute lodged against a Guangdong glass company. The case was eventu-ally resolved and the involved parties reached an agreement on business co-operation.

In July 2008, the Guangdong Provincial Copyright Administration discovered that the defendant had installed 92 cop-ies of Windows operating system and 96 copies of Office without authorization from Microsoft. On September 2, 2008, the Copyright Administration imposed

administrative punishment on the de-fendant for its unauthorized actions in accordance with the law. On March 4, 2009, Microsoft filed a case requesting that the defendant delete the software involved, pay RMB616, 290 (~USD91K) for damages, and make a public apol-ogy in the media. This case also be-came the first case for Microsoft against software piracy in Guangdong Province.

“One party is a top international software company which hopes for sustainable expansion of its business operations in Chinese market; the other is an ex-panding private enterprise. The dispute between the copyright protection claim by the plaintiff and the infringement by the defendant can be considered as the conflict of interest between the two, but it also implies a convergence of their long-term interests.” Deng Chunyan, the presiding judge for this case, pointed out the core issue in this case. During

the trial, the judge also discovered that the defendant, as a private enterprise with influence, admitted the infringement throughout the proceeding, but desired to minimize the effects of this case for the sake of its corporate reputation. This discovery suggested and supported the judge to solve this case by combining the infringement compensation with the defendant’s need for legal software, and to resolve the dispute through media-tion.

At the beginning of the mediation, both parties held rather different opinions in the scope and method of mediation, and the mediation stalled. The court patiently steered the discussion, and worked repeatedly to close the gap be-tween the two parties. Under the judge’s efforts, both parties eventually made concessions; the defendant promised to make a software procurement worth RMB1million (~USD147K) within the designated period to satisfy the require-ment to convert to legal software, while the plaintiff adopted the judge’s sug-gestion to reduce the amount of com-pensation to RMB 500,000 (~USD74K) and offered to bear the court costs of this case to express its good faith. The parties have essentially reached a settlement, and signed a non-disclosure agreement. This case was successfully resolved through mediation at this point.

Source:http://rmfyb.chinacourt.org/public/detail.php?id=132388(People’s Court Daily, October 9,2009. Authors: Lin Jinbiao, Zhang Shangqian and Liu Wei.)



Recently, Adobe, Altium and Micro-soft jointly sued a Taiwan-invested, Shenzhen-based electronics company claiming that it had infringed their com-puter software copyright. After media-tion by the Shenzhen Bao’an District People’s Court, the Shenzhen company agreed to delete the Photoshop, Acro-bat, Protel 99se, Windows and Office software copies that infringed on the copyrights of the three companies. The Shenzhen company also paid a total of RMB780, 000(~USD115K) in damages and promised to respect the intellectual property of the proprietors.

Adobe, Altium and Microsoft jointly initiated proceedings regarding the Shenzhen company’s infringement with the Bao’an District Court at the end of 2008. As requested by the proprietors, the court conducted evidence preserva-tion during the litigation. In April 2009, the Bao’an District Court held public hearings on the case. The Shenzhen company actively expressed its willing-ness to bear the responsibility for the relevant infringements. After mediation by the court, the three software com-panies eventually reached the above agreement, and a Mediation Settlement was signed under the supervision of the Bao’an District Court.

As early as in June and August 2007, the Shenzhen Intellectual Property Ad-ministration discovered infringements of the company and awarded administra-tive penalties against it in January 2008, including a fine of RMB100, 000 and deletion of unlicensed software.

During the interview with the reporter, Fanney Tan, an attorney from Microsoft

(China) Co., Ltd. stated that this case was Microsoft’s first in southern China to effectively resolve a copyright infringe-ment case involving an end user via liti-gation, which increased their confidence in the copyright market environment in Shenzhen.

An Altium officer pointed out that this case told corporate users that the only appropriate path in the new economic environment was to strengthen software asset management and improve pro-ductivity.

Adobe’s personnel-in-charge recog-nized that Shenzhen was an important window for economic and scientific development in southern China, and its protection of intellectual property was an important factor in creating a positive market environment and promoting the rapid development of the knowledge industry, and was closely watched by

right holders. He also added, “From this case, we can see that the Shenzhen Bao’an District People’s Court did tre-mendous work to protect the legitimate rights and interests of the rights holders, and thereby strengthened our confi-dence in Shenzhen’s market environ-ment.”

To conclude, Danny Ye, outside counsel from GFE Law Office, which acted for the three plaintiffs, reminded corporate users that the use of pirated software products not only seriously hurt the interests of the software proprietor, but also cost the infringers major economic losses and damaged their reputation. Enterprises should pro-actively use legal software to avoid legal risk.

S o u r c e : h t t p : / / i p . p e o p l e . c o m . c n /GB/9654880.html (www.people.com.cn online IP channel, July 15, 2009; re-porter Yang Cheng)

Shenzhen Enterprise Uses Pirated Softwareand Ruled to Pay Three Companies includingMicrosoft Compensation of RMB 780,000



On September 8, 2009, Changsha Intermediate People’s Court, Hunan Province, rendered the judgment in the case against a Hunan pharmaceutical company concerning the use of pirated Microsoft software, ruling that the de-fendant should immediately cease its infringement, delete the unlicensed copies of Windows 2000, Windows XP, Office 2000, Office 2002 and Office 2003 and pay the plaintiff RMB100, 000 (~USD15K) in damages.

From February to March 2009, the phar-maceutical company was suspected of reproducing and using a large quantity of pirated software for business pur-poses, thus infringing on Microsoft’s copyright. Microsoft’s outside counsel contacted the company regarding the conversion to legal software, which was unfortunately ignored by the company.

On April 28, 2009, Microsoft began litigation at the Changsha Intermedi-ate People’s Court over the copyright infringement, requesting that the phar-maceutical company halt its infringe-ment, delete the illegally reproduced and installed Microsoft software copies, and compensate for economic losses. In May 2009, the Changsha Intermedi-ate People’s Court conducted evidence preservation at the defendant’s prem-ises, and discovered unlicensed use of many Microsoft software copies.

On September 8, 2009, the court ren-dered the judgment mentioned at the beginning of this report. The court also imposed civil sanctions upon the phar-maceutical company for fabricating evidence and destroying preserved evi-dence during the litigation.

The pharmaceutical company was dis-satisfied with the first instance judgment and appealed to the Hunan Higher Peo-ple’s Court. During the second instance trial, the pharmaceutical company with-drew its appeal. The withdrawal was ap-proved by Hunan Higher People’s Court.

This case is the first litigation that Micro-soft engaged in and won in Hunan. It is also the first litigation in which the de-fendant was levied with a civil sanction by the court for destroying and forging evidence. This case rings the alarm for those infringers who intend to destroy or forge evidence to cover up their viola-tion.

Hunan Pharmaceutical Company Uses P i ra ted Mic rosof t So f tware – Changsha Intermediate People's Court Awards Damages and Imposes Civil Sanction



A case involving intellectual property of Microsoft (China) was successfully mediated by the Chengdu Intermediate People’s Court.

Two large Chengdu companies with the same shared shareholder installed and used a large quantity of Microsoft’s Of-fice software copies without authoriza-tion. Microsoft contacted both compa-nies for many times, but they persisted in their infringement and failed to rectify the situation.

Consequently, Microsoft initiated pro-ceedings against these two large com-panies with the Chengdu Intermediate People’s Court, claiming the legitimate copyright in the Off ice software in suit, and asking for protection under

Chinese law. Microsoft requested that the two defendants be ordered to halt their infringements, jointly compen-sate the plaintiff for economic losses, pay the reasonable costs to halt the infr ingement in an amount total ing RMB200,000(~USD30K), and make a public apology.

After accepting this case, Chengdu Intermediate People’s Court immedi-ately proposed minor compensation to strengthen the infringers’ awareness of copyright protection, and suggested the defendants to accomplish their software legitimization using this litigation as a pivot.

The plaintiff and the defendants even-tual ly reached an agreement. The

defendants agreed to destroy within 30 days any unauthorized copies of Mi-crosoft software reproduced and used by them, and to pay compensation of RMB100,000 (~USD15K) to show re-spect to Microsoft’s intellectual property. They voluntarily chose Microsoft open license as the authorization approach and made software procurement worth RMB400,000 (~USD60K) to fulfill their legitimate needs.

Source:h t tp : / /www.wccda i l y.com.cn/epaper/hxdsb/html/2010-07/14/content_211928.htm (Huaxi Chengdu News Network. July 14, 2010. Wang Xin, Chen Zhi, Xie Hui, Reporter Li Huan)

Compensation of RMB 100,000 for Microsoft Office Software Illegally Installed byTwo Chengdu Companies



Four Infringement Cases in Longgang Settled through Court Mediation

Shenzhen Special Zone Daily (Report-ers: Cai Peiqiong; Correspondent: Zhang Jianguo) - Recently, the Long-gang District Court of Shenzhen suc-cessfully mediated four infringement cases involving unl icensed use of computer software of the US Micro-soft and German Siemens PLM Soft-ware (“Siemens”) with an agreement reached between plaintiffs and the de-fendant. The defendant, a Shenzhen-based precision industry company, purchased complete software pack-ages of the plaintiffs and promised to immediately cease infringement.

On January 25, Microsoft and Sie-mens, the world’s software giants, found their copyrighted software was i l legal ly reproduced, instal led and used by the defendant for business

purposes on its office and produc-tion computers without any l icense obtained from plaintiffs. They autho-rized an outside counsel to file an ac-tion with the Longgang District Court claiming RMB1.4 million in damages on account of the defendant infringing upon their copyright and their right to get paid for copyright license. It was the f irst t ime that the two software vendors with global reputation lodged a copyright infringement lawsuit at the Longgang District Court.

Both pla int i f fs requested property preservation after Longgang District Court took in the case. The court con-ducted on-site preservation of com-puter software used by the defendant for office and production purposes using its proprietary “TSA Electronic

Evidence Preservation System”, evi-dencing the fact that the defendant used pirated software in its business activities. With strong evidence pre-sented against it, the defendant admit-ted infringement.

Taking into account protecting inter-ests of copyright proprietors, purifying the market economy environment and possible heavy blows to enterprises, the judge spared no effort to mediate between the two sides and resulted in a settlement agreement recently. The defendant paid Siemens RMB500, 000 for purchase of its UG series software and paid Microsoft RMB150, 000 for damages, in addition to the promise of immediate cessation of infringement.

In recent years, world’s famous soft-ware companies found their software products pirated and illegally used by individuals, businesses and institu-tions in China because of its imperfect IPR protection regime and caused huge financial losses to these copy-right holders. Longgang District Court has handled a rising number of cases regarding infringement of computer software copyrights.

Source :h t tp : / /sz tqb .sznews.com/html/2011-03/26/content_1496333.htm (Shenzhen Special Zone Daily; authors: Cai Peiqiong and Zhang Jian-guo)



Guangzhou Steel Structure Maker Settled Dispute with Three Software Vendorsby Paying RMB1.3 million for Royalties

A steel structure maker in Guangzhou arrived at a settlement package on March 7 with software vendors including Adobe to close three disputes over computer software infringement. It represented another copyright protection move of the Busi-ness Software Alliance and its three members Adobe, Autodesk and Microsoft in south China. According to the settlement agreement, the steel maker would pay the three software makers a total of RMB1.3 million for damages and licensing fees for Photoshop, AutoCAD, Windows and Office.



Director and Chief Representative of BSA China, Yao Xin, said, “We are happy to see the steel structure maker close the dispute with copyright own-ers th rough amicab le se t t lement procedures. Only by recognizing the commercial value of legal software can businesses build their respect for intellectual property rights in software and eventually protect themselves from legal risks.” He added that “the Nansha District People’s Court of Guangzhou City played a positive role in mediating the case, a strong sign of local authori-ties’ determination and efforts to protect software intellectual property.”

In May 2010, Nansha District People’s Court of Guangzhou accepted the lawsuit filed by Adobe, Autodesk and Microsoft and conducted evidence preservation over software installed on computers of the defendant. In August, as required by Chinese regulators, a listed steel space frame company disclosed three software copyright law-suits against one of its subsidiaries, a steel structure maker, in the “Significant Events” section of its semiannual report. A settlement was reached between the two sides after the steel structure maker communicated proactively and thoroughly with the Business Software Alliance promising to use legal software and tighten management of software assets.

The steel structure maker is a subsid-iary of a Zhejiang-based steel space frame company, whose shares are traded publicly. Its parent stated that “it is necessary for a company to use legal software and establish a software asset

management system, which helps im-prove productivity and operate in com-pliance with laws and regulations of the country. We support the shift to legal software, and are happy to establish longstanding cooperation with software makers, and apply dynamic manage-ment to our and our affiliates’ software assets in a comprehensive, systematic manner to meet internal control and compliance requirements imposed upon listed companies.”

China’s laws and regulations have pro-vided increasing clarity on the use of le-gal software by listed companies in re-cent years. China Securities Regulatory Commission stated in its Announce-ment No. 37 of 2010 that the board of directors of listed companies shall, in addition to ensuring the accuracy, authenticity and completeness of infor-mation disclosed in the annual report, use legal software during release of the annual report and make XBRL-based information disclosure authentic, accu-rate, complete and consistent with the information disclosed in public. Listed companies involved in any software pi-racy lawsuit shall perform the obligation of information disclosure as required by disclosing basic details, amounts involved and anticipated liabilities in the “Significant Events” section of the an-nual report.

Using pirated software has posed con-siderable legal and integrity risks to listed companies. Mr. Zou Bian, execu-tive vice president of China Software Alliance and an expert at the Office of the National Inter-ministerial Joint Meeting on Promoting the Use of Legal

Software, said that “respecting one’s own and others’ intellectual property rights is critical to the development of a company. The steel structure maker has advanced local shift to legal software by cooperating with the court in mediation and purchasing software licenses from the perspective of sustainable develop-ment. We hope to see more businesses, especially listed companies, accelerate their shift to legal software on their way to international markets. ”

Source:http://data.chinaxwcb.com/epaper/2011/2011-03-10/8738.html (China Press and Publishing Journal; author: Guan Tao)



On August 8, 2011, Microsoft reached a settlement with a technology firm and a tool company based in Hangzhou after the In-termediate People’s Court of Hangzhou tried and mediated a case which attracted industry-wide attention. The two defendants were suited for infringing upon computer software copyright of Microsoft. The two defendants promised to use licensed software, take adequate measures to manage software assets and compensate Microsoft for previous infringements.

Weidong Yu, IP General Manager of Microsoft (China) expressed:“ it was a great effort that Microsoft made to push the legaliza-tion of big firms. The result showed Microsoft’s willingness to solve IP infringements in multiple ways and its decision to promote

Technology Firm in Hanzhou Reached Settlement with Microsoft in Software Infringement CaseProtect IP, Create Innovation Based Economy Hand in Hand



legal software experience together in cooperation with enterprises.”

Weidong Yu also thanked the Intermedi-ate People’s Court of Hangzhou for its valuable efforts in protecting software intellectual property in this case, saying that “in recent years, in particular since October 2010 when the State Council launched a fight against intellectual property infringement and production and sale of counterfeit, all levels of Chi-nese governments have been taking ef-fective measures to promote the use of legal software, raise public awareness of intellectual property protection and creak down on piracy. We are excited to find that more and more businesses and institutions have realized the im-portance of respecting and protecting intellectual property. Microsoft will, as it did and does, work closely with local governments and industries to advance intellectual property protection and cre-ate an environment conducive to the growth of information industry and in-novative economy. We expect that more Chinese enterprises, especially listed companies, will play an exemplary and driving role in the shift to legal software use.”

The technology firm is one of the larg-est tool makers in China that lists on Shenzhen Stock Exchange. The tool company is a wholly-owned subsidiary

of the technology firm. Microsoft started to approach the technology firm in 2009, but no agreements have been reached for various reasons. Microsoft initiated civil proceedings in November 2010 with the Intermediate People’s Court of Hangzhou against the technology firm and the tool company for illegal use of Microsoft software. With efforts from both sides and court mediation, a settle-ment was finally reached this year on the shift to legal software.

The technology f i rm said, “We are pleased to reach a settlement with Mi-crosoft. We will establish a long-term partnership with Microsoft and establish a sustainable mechanism of software asset management. This mechanism will help us achieve dynamic management of software licenses, optimize allocation of software assets and enable them to serve us better.”

Commenting on the settlement between Microsoft and the technology f irm, Professor Li Yongming of Zhejiang Uni-versity Guanghua Law School says that intellectual property is the centerpiece of businesses’ competitiveness, or even countries’ core competencies, in the knowledge era. Respecting and protect-ing intellectual property are in fact to inspire innovation, stimulate business competitiveness and sharpen national core competencies. In recent years, for

increased protection of intellectual prop-erty, China introduced national intellec-tual property strategies to improve the capability of creating, applying, protect-ing and managing intellectual property. In this context, Chinese enterprises, in particular listed companies and large-sized enterprises, should answer the country’s call to enhance self-discipline and respect, protect intellectual prop-erty.

Source: http://www.cnetnews.com.cn/2011/0808/2051249.shtml(CNETNEWS.com.cn Author:cnetnews.com.cn)



Appendix:

R e l e v a n t C h i n e s e L a w s ,

R e gu l a t i o n s And J ud i c i a l

Interpretations (Excerpts)


Copyright Law of the People’s Republic of China(Revised in 2010) (Extracts)

Article 10 “Copyright” shall include the following moral rights and property rights:

(5) the right of reproduction, that is, the right to produce one or more copies of the work by means of print-ing, Xeroxing, rubbing, sound recording, video recording, duplicating, or re-shooting, etc.;

(6) the right of distribution, that is, the right to provide the public with original copies or reproduced copies of works by means of selling or donating;

(7) the right of rental, that is, the right to nongratuitously permit others to temporarily exploit a cinemato-graphic work, a work created in a way similar to cinematography or computer software, unless the com-puter software is not the main object under the rental;

A copyright owner may permit others to exercise the rights provided in Items (5) through (17) of the pre-ceding paragraph, and may receive remuneration as agreed upon in the contract or in accordance with the relevant provisions in this Law.

A copyright owner may wholly or partially transfer the rights provided in Items (5) through (17) of Paragraph 1 of this Article, and may receive remuneration as agreed upon in the contract or in accordance with the relevant provisions in this Law.

Article 47 The person who commits any of the following acts of infringement shall bear the civil liability for such remedies as ceasing the infringing act, eliminating the effects of the act, making a public apology or paying compensation for damages, depending on the circumstances:

(7) exploiting a work of another without paying the remuneration;

(8) without the permission from the copyright owner or obligee related to the copyright of a cinematograph-ic work or a work created in a way similar to cinematography, computer software,sound recordings or video recordings, leasing his work or sound recordings or video recordings,except where otherwise provided in this Law;

(11) committing other acts of infringement upon copyright and upon other rights related to copyright.

Article 48 The person who commits any of the following acts of infringement shall bear the civil liability for such remedies as ceasing the infringements, eliminating the effects of the act, making a public apology or paying compensation for damages, depending on the circumstances; where the person damages public interests at the same time, the copyright administration department may order ther person to cease the act of tort, may confiscate his illegal gains, confiscate and destroy infringing copies, and impose a fine on the person; if the case is serious, the copyright administration department may also confiscate the materials, instruments and equipment, etc.mainly used to make the reproductions of infringement; where the person’s act has constituted a crime, the person shall be investigated for criminal liabilities in accordance with the law:

(1) without the permission from the copyright owner, reproducing, distributing, performing, projecting, broadcasting, compiling, disseminating to the public through information network his works, except where otherwise provided in this Law;


Regulations for the Implementation of the Copyright Law of the People’s Republic of China (2002 version)

(Extracts)

Regulations on Computers Software Protection (Extracts)

Article 36 Where any act of infringement is committed as enumerated in Article 48 of the Copyright Law, which also prejudices the social or public interests, the administrative department for copyright may impose a fine of not more than three times the volume of the illegal business; where the volume of illegal business is difficult to calculate, a fine of not more than 100,000 yuan may be imposed.

Article 24 Except where otherwise provided in the Copyright Law of the People’s Republic of China, these Regulations, or other laws or administrative regulations, anyone who, without the authorization of the software copyright owner, commits any of the following acts of infringement shall, in light of the circumstances, bear civil liability by means of ceasing infringements, eliminating ill effects, making an apology, or compensating for losses; where such act also prejudices the public interest, the copy-right administration department may order to cease infringements, confiscate illegal income, confis-cate or destroy the infringing copies, and may impose a fine concurrently; where the circumstances are serious, the copyright administration department may confiscate the material, tools and equip-ment mainly used to produce infringing copies; and where the act violates the Criminal Law, criminal liability shall be investigated for the crime of infringing upon copyright or selling infringing copies in accordance with the provisions of the Criminal Law:

Article 49 The infringer shall, when having infringed upon the copyright or the rights related to copyright, make a compensation on the basis of the right holder’s actual losses; where the actual losses are difficult to be calculated, the compensation may be made on the basis of the infringer’s illegal gains. The amount of compensation shall also include the reasonable expenses paid by the obligee for stopping the act of tort.

Where the right holder’s actual losses or the infringer’s illegal gains cannot be determined, the people’s court shall, on the basis of the seriousness of the act of tort, adjudicate a compensation of 500,000 Yuan or less.


The Interpretation of the Supreme People’s Court Concerning Several Issues on Application of Law

in Hearing Correctly the Civil Copyright Cases (Extracts)

Article 21 In case the users of computer software make commercial use of the computer software without permission or beyond the scope of permission, civil responsibilities should be undertaken according to the provisions of Article 48 (1) of the Copyright Law and Article 24 (1) of the Regulation on Protection of Computer Software.

Article 26 The reasonable expenses paid for stopping the infringing acts as specified by Article 49 (1) of the Copyright Law include reasonable fees occurred from investigating on the infringing acts and obtaining evidences.

The People’s Court may calculate in the compensations the attorney’s fees according to the provi-sions of the relevant state departments in consideration of the proceeding claims and specific cir-cumstance of cases of the parties concerned.

Article 29 In case of the infringing acts specified by Article 48 of the Copyright Law, the People’s Court may issue civil punishment [against the infringer] according to the provision of Article 134 of the General Principles of Civil Law, in addition to prosecuting infringing party with civil liabilities as per the claim of the parties concerned, with the amount of fine to be determined by reference to the relevant provisions of the Regulations on the Implementation of the Copyright Law of the People’s Republic of China. In case the administrative department of copyrights has accorded the same in-fringing acts with administrative punishment, the People’s Court shall not accord civil punishment.

(1) to reproduce, wholly or in part, a piece of software of the copyright owner;

(2) to distribute, rent or communicate to the public through information network a piece of software of the copyright owner;

……

(5) to transfer, or authorize another person to exploit, the software copyright of the owner.

Article 25 The compensation paid for infringing upon software copyright shall be determined in ac-cordance with Article 49 of the Copyright Law of the People’s Republic of China.


Circular of the Supreme People’s Court on the Issuance of Opinions on Several Issues Concerning the Overall Intellec-tual Property Trial Serving the Overall Objective under the

Current Economic Situation

IV. Improving the intellectual property litigation system, focusing on improving the trade and investment environment, and actively promoting the rise of the level of opening up

16. Increasing the indemnity, punishment and deterrent effects of compensation for damages, reduc-ing the cost of IPR protection and raising the price paid for infringement. [The judges] shall, when determining the compensation for damages, make good use of the evidence rules, comprehensively and objectively examine the evidence for calculating the amount of compensation, make full use of logical reasoning and daily experience to comprehensively examine and determine the authenticity, legitimacy and probative force of the relevant evidence, and find the facts for damage compensa-tion under the standard of preponderant evidence. [The judges] shall actively direct the parties concerned to calculate the compensation amount by adopting the method of losses incurred from infringement or profits derived from infringement, and avoid as much as possible the simple applica-tion of statutory compensation. Where the specific amount of losses incurred from the infringement or profits derived from infringement is difficult to prove but there is evidence that the aforesaid amount is obviously greater than the upper limit of statutory compensation, the court shall reasonably deter-mine the amount of compensation over the statutory upper limit by considering all the evidence in the case. Unless otherwise provided for by law, in the application of statutory compensation, the reason-able cost for rights protection shall be calculated for compensation separately. In the application of statutory compensation, [the judges] shall, as much as possible, expound the various discretionary factors which are actually considered to make the final compensation results reasonable and cred-ible. When estimating the amount of profits gained from infringement in accordance with the claim of the right holder and the unjustified refusal of the defendant to provide evidence held, there must be reasonable basis or reasons, and the amount determined shall be fair and reasonable and fully con-vincing. [The judges] shall note the comparability when calculating compensation for damages by referring to licensing fees, fully consider the distinctions between normal licensing and infringement in terms of manner, time and scale of implementation, and reflect the tenet that the amount of compen-sation for infringement shall be appropriately higher than the normal licensing fees. [The judges] shall pay attention to giving play to the auxiliary role of auditing, accounting and other professionals in de-termining the compensation for damages, and direct the parties to obtain professional assistance in calculation, explanation and cross-examination. [The judges] shall actively explore the issue of pro-fessional assessment of compensation for damages to intellectual property, and when conditions are ripe, properly introduce a mechanism of determination of compensation for damages through special assessment conducted by professional institutions.

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