Is Microsoft Involved in Corruption in China in Genuine Software Trend?

According to the report of local media in China (note: the link is in Chinese), the genuine software trend led by China authority has aroused corrupt, and the officers of Shenyang copyright department, a city in North China, have been punished for their misfeasance in the introduction of genuine software, and Microsoft Inc and its local sales agents are also involved in the scandal.

The Discipline Inspection Committee of CPC in Shenyang City and Shenyang Monitor Department recently investigated a case of forced purchase by cybercafé owner with the pressure from Shenyang Culture and Broadcast Administration. And the investigator claimed the scandal is the inharmonious sound in the construction of software environment, and also an unwise measure damaging the interests of enterprise and social public. The chief office of copyright office of Shenyang Culture and Broadcast Administration Pan Hai Long failed to follow the local regulation “Program on Promoting the Genuine Software Using in Cybercafes” in the administrative act, which demands the group buying, central purchasing and public bidding, and negotiated the purchase price directly with Microsoft accompanied with staffs from the industry association.

And the transaction was finally done through a company at a high price. By the conclusion of Shenyang Discipline Inspection Committee, it’s a negligence of duty and has made bad influence. Not single, the captain of enforcement team of a district culture and broadcast office Wang Xiao Dong and section chief Lin Fan also demand the company to purchase the appointed software with the threat of no annual examination and administrative punishment.

The background of the event is the genuine software campaign carried out in China since 2010, when the General Office of State Council issued the Notice for Further Works on Using Genuine Software in Administration (the “Notice”). The Notice demands the using of genuine software in the administration of each level from 2011, and after that local departments also promulgated its regulations or arranged the work accordingly, by which the scope covers the enterprises. The biggest beneficiary is Microsoft. For the cybercafés, no genuine free software could replace its operating system like those for game software or office software, and with a long history of popularity, Windows monopolized the system used in cybercafés. For the trend of genuine software using, the business man of cyber café could only purchase the software from Microsoft.

The case also reveals the defect of Microsoft’s operation—against the widely accepted commercial discipline. The higher purchase price after the negotiation also contains the risk of corruption. In our opinion, the conduct of Microsoft may also has violated the Foreign Corrupt Practices Act.

Last, we believe the observance to the commercial ethics and a fair commercial competition is more important than the IPR protection, though the protection is also necessary in operations. We wish a reply from Microsoft on the event.

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Author: Albert Chen
Attorney-at-law of DeBund Law Offices
Co-author: Mr. You Yunting
Founder & Editor-in-Chief of Bridge IP Law Commentary
Partner & Attorney-at-law of Shanghai DeBund Law Offices
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Bridge IP Law Commentary is a website focus on the introduction of commercial laws in China, especially the intellectual property laws. All the posts here are our original works. And all news or cases referred here are from public reports, and our comments or analysis are of due diligence, neutrality and impartiality, representing our own opinions only and are our original works. You may contact us shall you have any opinions or suggestions.

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