(By Luo Yanjie)Our previous post How does Microsoft Settle Its Problems of Software Copyright Infringement in China introduced the difficulties of protecting its rights and interests in China. However, in today’s post, the court decided the trade practices constituted copyright infringement and ruled in favor of Microsoft, thus boosting confidence for all software owners.

Introduction to the Case:

Appellant (defendant at first instance): Beijing UniStrong Science & Technology Co., Ltd (“UniStrong”)

Respondent (plaintiff at first instance): Microsoft

Court of first instance: Beijing No.1 Intermediate People’s Court  No.: (2011)一中民初字第12617号

Court of second instance: Beijing Higher People’s Court  No.: (2013)高民终字第2263号

Microsoft is the computer software copyright holderand manufacturerof “WindowsCE6.0”, the sixth major release of the Microsoft Windows embedded operating system targeted to enterprise specific tools such as industrial controllers and consumer electronics devices. In 2011, Microsoft found that UniStrong’s navigation products were not labeled with copyrighted software in line with Microsoft’s customs and thus they were considered to use “WindowsCE6.0” without Microsoft’s authorization. As such, Microsoft brought UniStrong to the court.

In the court, UniStrong proved that it commissioned CHENG UEI Precision Industry Co., Ltd to purchase its WindowsCE6.0 from HON HAI Precision Industry Co., Ltd. HON HAI Precision Industry Co., Ltd purchased the WindowsCE6.0 from Synnex Technology International Corporation, the agent of Microsoft in Taiwan. UniStrong affirmed the purchase order on April 2, 2010 with CHENG UEI Precision Industry Co., Ltd but there was no signature or stamp on the purchase order. Furthermore, UniStrong argued that Microsoft’s rule requesting labeling copyrighted software is an internal policy and therefore not binding. For these reasons, UniStrong insisted that its WindowsCE6.0 was legally sourced, thus not infringing the copyright of Microsoft.

Beijing No.1 Intermediate People’s Court heard the case and held that, by virtue of no signature or stamp on the purchase orders, the evidence provided by UniStrong would not be accepted. As such, Beijing No.1 Intermediate People’s Court determined that UniStrong had constituted copyright infringement and shall make a compensation of more than 1 million RMB.

Dissatisfied with the judgment made by Beijing No.1 Intermediate People’s Court, UniStrong appealed to Beijing Higher People’s Court. Beijing Higher People’s Court decided the following upon the hearing:

1. Microsoft has copyright over WindowsCE6.0 and thus shall be protected by laws.
2. UniStrong provided a certificate from CHENG UEI Precision Industry Co., Ltd, which says that the 248040 pieces of MicrosoftWinCELabel sent by CHENG UEI Precision Industry Co., Ltd were legally purchased from HON HAI Precision Industry Co., Ltd, the Microsoft’s agent in Taiwan. This demonstrated that CHENG UEI Precision had already provided copyrighted labels for UniStrong. During the first instance, UniStrong also affirmed that CHENG UEI Precision Industry Co., Ltd had already provided copyrighted labels. However, the involved software was not tagged with any copyrighted label.

Therefore, Beijing Higher People’s Court held that thejudgment of Beijing No.1 Intermediate People’s Court was correct and upheld the verdict.

Lawyer’s Comment:

1. The infringer in good faith may be exempted from liability in the case of computer software infringement.

Article 30 of the Regulations on Computer Software Protection stipulates that, “a holder of copies of a piece of software that neither knows nor has reasonable grounds to know that such copies are infringing ones does not bear liability of compensation but shall cease the use of, and destroy, the infringing copies. Nevertheless, if the cease of use or the destruction of such copies is likely to cause heavy losses to him, the holder of such copies may, after paying reasonable remuneration to the software copyright owner, continue to use such copies.” In this case, the defendant tried to make use of Article 30 to exempt from its liability but in the end did not provide sufficient evidence, leading to the judgment that they infringed copyright.

Based on the above stipulations, we suggest that enterprises in business be sure to purchase software through the formal channels and keep all relevant documents, such as receipts, to avoid unnecessary disputes.

2. Business practices may also be a legal basis for the judgment.

Generally, it is the explicit stipulations that shall be the legislative basis for the court to determine the case. However, because the law, in practice, often lags behind actual trades, in most countries, business practices and customs are acknowledged as one of the sources of law. For example, the United Nations Convention on Contracts for the International Sale of Goods stipulates that “the parties are bound by any usage to which they have both agreed and by any practices which they have established between themselves”.

In this case, Microsoft provided its standard contract to prove that the embedded operating system of Microsoft shall be owned with a copyright label that must not be removed from the products. Even though UniStrong kept doubt over its trueness, legitimacy and relevance of the customs, through its readme and other evidences, this indicated the existence of this ‘custom’. The court acknowledged such a practice being a key fact basis to decide that UniStrong had constituted copyright infringement.

Lawyer Contacts

You Yunting：86-21-52134918  youyunting@debund.com/yytbest@gmail.com

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