Microsoft Wins Copyright Damages from China Web Café

November 24, 2010 Posted by China Briefing Reading Time: 3 minutes

Nov. 24 – Microsoft has won its landmark copyright infringement case against Dongguan-based internet café chain Tonecan for the use of pirated Microsoft software. The company had sued Tonecan for RMB1.5 million in damages 12 months ago, although the award made was for an undisclosed amount. Tonecan also committed to use genuine software in the future and to “protect” original software assets from Microsoft.

Qu Miao, the lawyer for King & Wood handling the case, said the winning of the case would have “considerable social impact” on software users throughout China. The case, the first brought by Microsoft in China against an internet café, was also the first civil case for copyright infringement of leased computer software. Tonecan operates a chain of eight internet cafes in Dongguan and additionally owns 10 companies that provide internet access services.

The Chinese mainland has roughly 138,000 internet cafes with a total of some 1.35 million regular users, many of whom use pirated software. Microsoft approached Tonecan in 2008 to ask them to use original software at its internet cafes, but the company deferred making such changes despite Microsoft offering it a preferential five year program to become compliant, which included preferential pricing and additional incentives to do so. Microsoft then issued a formal complaint, resulting in the Guangdong Province Copyright Administration Bureau raiding Tonecan’s cafes, where they found a total of 1,401 personal computers using pirated software. Microsoft subsequently filed suit against Tonecan in December of last year.

The global trade group Business Software Alliance estimates the amount of pirated software used in China last year was worth US$7.6 billion, an increase of US$900 million over 2008.

Chris Devonshire-Ellis, principal of Dezan Shira & Associates comments: “Microsoft has been relatively lenient with China users possessing pirated software in the past, however they are now becoming far more assertive in pursuing companies, and are conducting checks on offices and other multiple users to examine the extent of pirated software use. The use of pirated software in business is a false economy, and users on the mainland must now start, if they have not already, to become compliant and to switch to genuine products. Microsoft are prepared to be patient to permit companies to phase in compliance over a period of time, however this award shows that if this is ignored, the repercussions can be serious. Both computer service and product suppliers as well as medium-large businesses should plan to become compliant within the next few months if they wish to avoid the type of litigation that has befallen Tonecan.”

The implication behind the award, which follows the successful litigation of Dazhong Insurance, a state-owned company using pirated software back in April, is that the Chinese government is well aware of the dangers of using pirated software and is keen to get Chinese users to upgrade to genuine products. These provide a far more appropriate business and professional platform and China is now going through a period of reforming its commercial identity to embrace the correct technologies. Pirated software may well have helped a lot of Chinese businesses get started, but it is now time to get professional about it is the message being delivered here. This is, of course, great news for all original software companies wishing to sell to the China market.

Microsoft China’s service website, including product support is here.

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