A Case Concerning Tort in Copyright of

The plaintiff: Microsoft Corp

The defendant: Beijing Giant Computer Company (hereafter referred to as Giant Corp)

Cause of action: Tort dispute in copyright of computer software

The series number of initial trial: (1994) Zhongjingzhichuzi No.587 of the former Beijing City Intermediate People's Court

Details of the case:

The charge and defense statement:

According to the Microsoft Corp. it is the legal person in possession of copyright rights for computer software, such as MS-DOS 6.0 and Windows 3.1. In accordance with the provisions in the agreement signed by both Chinese and American Governments on January 17, 1992 concerning mutual protection of the intellectual property rights of the other, this series of software has been safeguarded by Chinese law since March 17, 1992. From the second half of 1993, Microsoft Corp. found the defendant Giant Corp. presumptuously published part of software belonging to Microsoft Corp. without authorization, issued and exhibited them to the public. In this way, Giant Corp. obtained illegal profit, infringed the legal rights and interests, and damaged the reputation of Microsoft Corp. Microsoft Corp. asked the Court to rule that Giant Corp. stop the infringement immediately, and make a public and formal apology; to compensate 40000 US Dollars for the loss Microsoft Corp. suffered in sales income and in commercial reputation; and to undertake the survey and evidence collection fee, agent fee, cost for judicial proceedings and other costs in relation to this case.

The defendant Giant Corp. argues: It is a fact that when selling computers, a few staff members and workers sold the software of Microsoft Corp. without legal permission from Microsoft Corp. with the computers sold, however it was not the behavior of Giant Corp. Moreover the software was sold in response to the requests of customers. If this practice formed infringement against Microsoft Corp., this was the joint behavior of the staff and workers of Giant Corp. and customers. Microsoft Corp. cannot offer any evidence to prove that Giant Corp. knowingly published, copied or issued the computer software of Microsoft Corp., to the public, and exhibited this kind of software or replicas, without the permission of Microsoft Corp. In the evidence preservation made by the Court in response to the application of Microsoft Corp., the software concretely ascertained and scaled up due to suspected involvement in the tort was the software legally held by Giant Corp., Giant Corp. retains the right of counterclaim.

Recognized facts in the initial trial

The former Beijing City Intermediate Court has ascertained via hearing that computer software, such as MS-DOS 5.0, MS-DOS 6.0, MS-DOS 6.2, Windows 3.1, Microsoft Foxpro for Windows 2.5 and others have been registered with the United States Copyright Administration. Microsoft Corp. is the person in possession of the above-mentioned works of computer software. On March 4, 1994, Microsoft Corp. purchased one IPC 386 computer produced in Singapore and sold by Giant Corp. at B13 Haidian Road, Haidian District, Beijing, namely the business site of Giant Corp. The computer software Windows 3.1 testing version and MS-DOS 6.0 version is installed in this computer. The documents of Singapore IPC Corp. indicate that the original sold one set of MS-DOS 5.0 to Lingyi Prefecture Broadcasting and Television Bureau, Shanxi Province on October 21, 1992.

After accepting and hearing the case, in response to the application of Microsoft Corp., the former Beijing City Intermediate People's Court made evidence preservation against Giant Corp. on June 23, 1994. Replicas of computer software including a GAC 486 compatible computer produced by Giant Corp., with Windows 3.1 English version and MS-DOS 6.2 version stored Chinese testing version of Windows 3.1 and MS-DOS 6.2 held by Giant Corp., were detained at the site of B31 Haidian Road, Haidian District, Beijing, namely the business site of Giant Corp.

In response to the behavior of selling replicas of the above mentioned computer software of Microsoft Corp. and the behavior of holding the replicas of computer software of Microsoft Corp., Giant Corp. submitted the invoices for purchasing software of Microsoft Corp. in a company in Shenzhen city. The inquiry made by an agent of Microsoft Corp. showed that there was no such registered company. Giant Corp. did not raise an objection about the conclusion of the inquiry. From examining the invoice, an obvious change of the date could be found. Aside from this, Giant Corp. did not provide evidence regarding legal authorization and possession of the software.

In the process of hearing the case, the agent of Microsoft Corp. succeeded again in purchasing a replica of Windows 3.1 version at the above-mentioned site on December 22, 1994. Beijing Notary Organization did notarized for the above-mentioned purchases by Microsoft Corp. and the sales by Giant Corp.

The Court asked Beijing Tianzheng Accounting Firm to conduct an audit on the business accounts dating from March 17, 1992 to June 23, 1994. The accounting document submitted by Giant Corp. was incomplete and no clear indication could be found for the names of the conduct an audit about the real quantity for copies of the above-mentioned unauthorized computer software sold by Giant Corp.

During the litigation process of the case, Microsoft Corp. submitted a claim request in written form to the Court. The request resulted from a calculation based on the selling price for software of Microsoft Corp. and the quantity of computers sold and Chinese card. Microsoft Corp. had not made clear and definite division between its own loss in sales profit and commercial reputation. Thus the calculated quantity could not really reflect its economic losses. Moreover, Microsoft Corp. said that it had paid more than 34,500 Yuan in total for the auditing fee, survey fee, investigation and evidence-collection fee and other fees, 120,000 Yuan as an agent fee, 7,920 Yuan for international transportation fees, all these fees were asked to be compensated by Giant Corp.

The judgment and related grounds of the initial trial

After the hearing, Beijing City First Intermediate Court concludes that the plaintiff Microsoft Corp. is the owner of the copyright for MS-DOS 5.0, MS-DOS 6.0, and MS-DOS 6.2 (including the testing version), Windows 3.1 (including English version, Chinese version, testing version), Microsoft Foxpro For Windows 2.5 and other computer software. The above-mentioned works of computer software of the plaintiff have been protected by Chinese law since March 17, 1992. The behavior of the defendant Giant Corp. of duplicating and selling the illegal copies of computer software of MS-DOS 5.0, MS-DOS 6.0 and Windows 3.1 and the behavior of illegally possessing replicas of computer software, such as Chinese versions of MS-DOS 6.2 and the MS-DOS 6.2 testing version, Chinese testing version of Windows 3.1 and Microsoft Foxpro 2.5 for Windows etc. took profit-making as the purpose, without the permission of the person in possession of copyright. All of the behavior constitutes infringement against the copyright on the computer software of the plaintiff. Giant Corp. should bear appropriate legal responsibility. The compensation required by the plaintiff in the case tends to be high, and it is difficult to calculate the actual loss and the profit gained by the defendant from illegal sales of duplicated software. Thus the compensation paid to the plaintiff should be determined, in accordance with the facts, circumstances, means and concrete conditions of the defendants infringement.

In accordance with Article 118 of "General Rules of the Civil Law of the People's Republic of China", Item (2) of Article 46 of "Law of Copyright of the People's Republic of China", Item (6) of Article 30 and Article 32 of "Regulations of Protection of Software", Beijing City 1st Intermediate People's Court makes judgment as follows.

I. The defendant Giant Corp. must stop immediately its copyright infringement of computer software of the plaintiff Microsoft Corp.

II. The defendant Giant Corp. must make a public apology to the plaintiff Microsoft Corp. in "Legal Daily" and "China Computer Newspaper", and bear all required costs.

III. The defendant Giant Corp. must compensate for an economic loss of 261,841.42 Yuan to the plaintiff Microsoft Corp.

Other litigation requests by the plaintiff are rejected.

Moreover, in accordance with the tort circumstances of the defendant, especially the fact that after the plaintiff brought the suit, the defendant still illegally sold the computer software with infringing on the copyright enjoyed by Microsoft Corp., and according to the provisions of Article 134 of the General Rules as well as Article 50 and Item (2) of Article 51 for the implementation of copyright law, Beijing City 1st Intermediate Court make the following decision on civil adjudication:

I. To pay a fine of 80,000 Yuan, which must be paid within 15 days from the date when the decision was effective.

II. As for the articles detained by the Court, in accordance with law, such as one unit of Singaporean IPC 386 computer, one unit of GAC 486 compatible computer, and replicas of computer software, such as Chinese systems of MS-DOS 6.2 testing version, Microsoft Foxpro 2.5 For Windows, Chinese testing version of Windows 3.1, MS-DOS 6.2 which were illegally held and sold by Beijing Giant computer Corp., they should be confiscated.

Neither the plaintiff nor the defendant lodged an appeal. The defendant was not convinced the above-mentioned decision on civil sanctions. Within the prescribed period, the defendant presented a reconsideration application to Beijing City Higher People's Court. After the hearing, Beijing City Higher People's Court turned down the reconsideration application, and affirmed the original decision.

Comment:

I. Basis for computer software of the plaintiff being subject to the protection of Chinese law Protecting computer software by use of copyright law has become an international trend. In China, computer software, as written works, can be subject to the protection of copyright law, in addition to being subject to special protection of "Regulations on the Protection of Computer Software".

The protection of the copyright law of the People's Republic of China takes into account the works of foreigners, that is, the works of the foreigners can be protected by the copyright of the PRC only when the works must are first published in China. However, the copyright of the PRC stipulates that the foreign works published outside the boundaries of China should also be subject to protection if the country the foreigner is affiliated with has signed an agreement with China, or has jointly taken part in international treaty. In this case, legal protection should be given to computer software of American nationals, mainly with the following legal basis:

1. "Memorandum of Understanding on Protection of Intellectual Property between Chinese Government and American Government" signed by both Chinese and American governments (hereafter referred to as memorandum of understanding). Item 9 of Article 3 of the memorandum of understanding stipulates that China gives protection to the works published by American nationals outside the boundaries of China before China's joining the Bern Convention and the Geneva Convention, including computer programs and recording works.

2. "The Bern Convention on Protection of Literary and Artistic Works" (hereafter referred to as the Bern Convention). America and China joined the Bern convention respectively in 1989 and 1992. In accordance with the principle of national treatment and principle of automatic whether published or not, protection provided on the lowest requirement in the convention should be given in all members of the convention.

The Bern convention and the memorandum of understanding are the international conventions or agreements stated in Item 2 of Article 142 in General Rule of Civil Law of the PRC and Item 3 of Article 2 of the copyright law. Therefore, the plaintiff in this case can seek the legal protection for its computer software in China.

II. Does the behavior of Giant Corp. constitute tort and should law be applicable.

In the litigation, both reasons for countercharge put forward are untenable:

1. Giant Corp. thought that the behavior of a few employees in the Corp. in violation of stipulations to sell computer paired up with the software with its copyright enjoyed by the plaintiff without its permission is not the behavior of the Corp. This is short of basis for law. In accordance with the general principles of civil law, the behavior of the staff of legal person within the limits of their functions and powers is the behavior of the legal person. As for the harm done to the other persons by the staff of the legal person, the legal person should directly bear civil responsibility to the outside.

2. Giant Corp. felt that the attorney of the defendant used false identity and entrapment in purchasing. This means of collecting evidence is illegal. In connection with the characteristics of the tort case concerning intellectual property rights, sometimes the obligee needs to use the method of "entrapment purchasing" for the purpose of collecting evidence. Provided the obligee does not use such illegal means as coercion and lure with promises of gain at the time of making the "entrapment purchasing". This method of collecting evidence should be legal. The use of false identity by the obligee in collecting evidence is fair and reasonable.