SIMENS Benefits: A Breakthrough of the Legal Compensation Limit on Pirate Software Litigation

As reported (note: the link is in Chinese), SIMENS PLC Software won the copyright dispute over its software against Excelstor Technology (Excelsor), a company headquartered in Shenzhen, in Shenzhen Intermediate People’s Court, with a sentence to stop the infringement and compensation of 1.16 million yuan for the infringement. There are two eye catching points in this case: 1) the court aided SIMENS in evidence preservation to detain the computers of Excelsor’ s design department, which are detected of NX Unigraphics copyrighted by SIMENS, and that is rare in the cases of this kind; 2) the judged compensation surpassed the legal limit. The post today mainly focuses on the 2nd point. (the image today is the logo of SIMENS)

The legal limit of the compensation in Copyright Law of China is 500, 000 yuan, while in the case of this time, it’s  judged to 1.16 million yuan, which is higher than the legal limit. For this, we comment as follows:

I. The untimely legal limit on the compensation

By the existing Copyright Law, there are three copyright infringement compensation calculation methods: 1) to compensate the actual losses to the right owner; 2) to compensate as much as the illegal gains; 3) to be judged by the court on the consideration on the case fact, which shall no more than 500, 000 yuan. Actually, the first two methods are rarely adopted in the case hearing for it’s either difficult to prove he losses suffered by the right owner or it’s impossible for infringer to render the data of its gains. And for these reasons, most cases are judged to the compensation of no more than 500, 000 yuan.

What makes it much worse is that, during the past years, the court appears to be reserved in the compensation decision even within the legal scope. And that is more obvious in the infringement cases of video and audio works. According to the report of 2008, the Motion Picture Association of America (MPAA) gained 2 million yuan in total after its 42 lawsuit against piracy, which is averagely 47, 000 for each case. And by our experiences, the average compensation for each film works is 10, 000 to 20, 000 yuan.

To put the judicial practices aside first, from the aspect of legislation, the compensation of no more than 500, 000 yuan as provided in law is obviously out of time. For in the modern society, the investment in a film or software could be huge, and as to some severe infringement like pirated picturing before the official release or software cracking, the compensation of 500, 000 could not make up the losses suffered by the right owner, and also it could not alert the infringer. Then the only consequence could be the flooding of piracy for no fear of the punishment.

II. A revitalized confidence of right owners after the increased compensation

Luckily, with more focus on the protection of culture industry and IPR from the offices, China courts have changed its attitude towards the compensation more or less, at least in the software industry as discussed in the post. For instance, a online game infringement dispute judged by Shanghai No. 2 Intermediate People’s Court sentenced a compensation of 3 million yuan in last October, and in this case the plaintiff took part burden of proof but not all. And also in this case, the compensation surpassed the legal limit.

The cases above no doubt boost the copyright owner, and for the current stage, more conditions are there in the law though the expectation on the court to break through the legal limits, and by our observation, the main obstacles are as follows:

1. the indirect evidence to prove the high losses

Despite the difficulty to prove the direct losses by the right owner, the indirect evidence for the high losses is necessary, like purchase cost of the original software pirated in the case or the commercial chance losses for the widespread piracy.

2. the losses are evidently more than 500, 000 yuan by the common sense

The condition shall take the industry into the consideration, such as the online game industry as discussed in the cases above. And once an online game is a infringing one and sells good, its gain from the illegal conduct could not be 500, 000 or less than it.

Once the infringement case has the above features, the hope for the court’s breakthrough over the legal limit is possible. Despite the above limits, the trend of a higher judiciary decided compensation is emerging, and we believe with the trend, China could say bye bye to the “piracy empire” in soon and becomes a land for IPR protection.

Other recommended posts on our website:
1. The Actual Term of Trademark Registration in China
2. How to Apply for the Trademark Record in China Custom
3. How to improve the success rate of trademark registration in China?
4. Matters for Attention in Trademark Refusal Review in China
5. Introduction of China’s Legal System of Trademark Renewal
6. Introduction on the Regulations concerning the Capital Contribution in IPR or Domain Name in China
7. The Copyright Registration in China Could Be FREE?
8. China Copyright Protection Term Longer than EU’s?
9. Matters for Attention in the Patent Preliminary Injunction Application in China(I)

Author: Mr. Luo Yanjie
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
Email: Bridge@chinaiplawyer.com, Tel: 8621-5213-4900,
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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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