Microsoft Applies Doctrine of Landlord Liability To Software Piracy

Peter Ollier has an interesting article for Managing Copyright about Microsoft's alleged first landlord liability case to tackle rampant software piracy.

Microsoft is suing Beijing Chaoyang Buynow because two of retailers, Beijing Hongguang Century Trading and Beijing Zhuojue Elements Trading were selling computers with pre-installed counterfeit Microsoft Windows and  Office. 

The other case, whereby Microsoft is suing retailer Shanghai Gome at Shanghai Huangpu District People's Court seems to be a traditional case (at least when Shanghai Gome is a subsidiary of Gome Electrical Appliances Holding Limited)

Read Mr Ollier's article here.

Landlord liability in tort law 

Article 2 Tort Law 2010: Those who infringe upon civil rights and interests shall be subject to the tort liability according to this Law. “Civil rights and interests” used in this Law shall include the right to life, the right to health, the right to name, the right to reputation, the right to honor, right to self image, right of privacy, marital autonomy, guardianship, ownership, usufruct, security interest, copyright, patent right, exclusive right to use a trademark, right to discovery, equities, right of succession, and other personal and property rights and interests.

Article 9 Tort Law 2010: One who abets or assists another person in committing a tort shall be liable jointly and severally with the tortfeasor. One who abets or assists a person who does not have civil conduct capacity or only has limited civil conduct capacity in committing a tort shall assume the tort liability; the guardian of such a person without civil conduct capacity or with limited civil conduct capacity shall assume the relevant liability if failing to fulfill his guardian duties. 

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Smartphone Patent War 2012: Chinese Alliance vs International Brands

The battlefield of patents are more and more the place where competitors are vying for market share. China has become the world's largest market for smart phones in the third quarter of 2011, according to Strategy Analytics. Some Chinese smartphone makers, including Lenovo, ZTE, TCL, Coolpad and Konka joined forces to protect themselves against the rising number of claims of patent infringement by international smartphone manufacturers, such as Apple, Nokia and Microsoft, and to dominate China's domestic market.
Huawei has around 65,000 patents and also ZTE has a substantial number of patents for wireless communication technologies. According to Erica Yen and Steve Shen of Digitimes many Chinese smart phone makers develop localized interfaces and even operation systems, see here.

Chinese smartphone manufacturers also launch their products via China-based telecom carriers and social networking websites operators, via dual branding. HTC and Sony Ericsson grew rapidly because their Android models were popular in major cities of east and south China, according to Linda Sui of Strategy Analytics. If China Telecom will launch the CDMA iPhone 4S early next year, Ms Sui expects Apple's market share to peak. Globally Nokia is still number one, closely followed by Samsung and Apple.

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IPR elasticity of FDI is back in China?

The last years there seemed to be no relation between the level of protection and enforcement of intellectual property rights and foreign direct investments (FDI) in China. Most companies did not let them scare by the intellectual property related challenges in China and invested massively. Of course one can argue that if China had a higher level of protection and enforcement of intellectual property rights it would attract even more FDI. So because of this China faces some opportunity costs. But China is not complaining, it is doing economically much better than the rest of the world.

Businesses always have to make the decision whether the opportunities really weigh up against the risks. Let us apply the 'price elasticity of demand' formula on this topic. In this case the level of intellectual property rights protection and enforcement is like price a more or less endogenous factor. And the outcome; the amount of FDI is just as the demand an exogenous factor. One can compare quality of a product with the opportunity of investing in China. Therefore the intellectual property rights elasticity of FDI in China might have worked all the time, but the perceived opportunities in China were just too high to show any negative impact of the IPR protection and enforcement level on the FDI in China.

For Microsoft the tipping point might just happened. It is complaining that it has a market share in China of 15 to 20 percent but which is only good for 1 percent of the revenues. All thanks to copyright piracy.

Microsoft is considering focussing more on India and Indonesia, according to Steve Ballmer, CEO of the software manufacturer from Redmond, Washington, U.S.A. Then again, Mr Ballmer's expesses himself sometimes a bit dramatic, see here. Read Alex Kennedy's article about it for the Associated Press.

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Shanghai Court Awards Microsoft 318,000 US dollar Damages For Copyright Infringement

Kathrin Hille wrote for the Financial Times that a Shanghai court ordered Dazhong Insurance, "a Shanghai-based insurer backed by Chinese state-owned and listed companies" to pay 318,000 US dollar to Microsoft for use of illegal copies of its software. The Global Times reported that the court was the Shanghai Pudong New Area District Court, read here.

Stan Abrams of China Hearsay has a lot to say about the case, he gives a disclaimer because there was limited information on a case that was just decided. "Even without details, I thought it was worth making a series of assumptions so I could discuss some general points. I undoubtedly made some incorrect assumptions about this specific case, so please keep that in mind." Mr Abrams' analysis is interesting as always, read here.

In August four men who ran the website Tomato Garden were given prison sentences and fines for distributing counterfeit Microsoft software. Read Chris Buckley's article for Reuters about it here.

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Nexocial, Dutch Copycat in China

Hugo Leijtens, an ex-Microsoft employee, went two years ago to Chengdu, he describes as the new Silicon Valley. There he became the Chief Technical Officer of Nexocial, a company that came up with an iPad clone in just three months: the nPad, which works on Microsoft Windows C. The nPad will be launched April 3, while the iPad will be launched next summer.

Presenter Jort Kelder of the Dutch television programme about entrepreneurs 'Bij ons in de BV' (With us in the private company) asked Mr Leijtens the following question: "Are you not a petty thief, in the best Chinese tradition?"

Mr Leijtens reply: "I believe Apple has said once 'Good artists borrow. Great artists steal.' "

IP Dragon is wondering whether Apple will sue Nexocial. If they do, let's see if Mr Leijtens will repeat that one liner in court.

The Nexocial site http://www.nexocial.com is not in the air. Don't know what that means.

Read also Willemien Groot's article about Nexocial for Radio Netherlands Worldwide here.

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Microsofts' MSN Juku Infringes Plurk and Apologises

MSN Juku, Microsoft's micro-blogging site in China, admitted that that it has infringed the copyright of Plurk, which is popular in Taiwan and the Philipines but is blocked in the PRC.

Read relevant articles at the Plurk's blog:
- Microsoft China rips off Asia's No. 1 Microblogging Service
- Plurk's official response to Microsoft's apology

Read the Financial Times article by David Gelles about it here. Head tip to McGill's CIPP Jeff Robert's IP News This Week.

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Microsoft Anti-Piracy: Are Your Eyes Shining Because of China's IPR Enforcement Efforts or Shenzhen's Efforts?

Xinhua reported that the Shenzhen Futian Court on 7 January 2009 sentenced 11 people who violated Chinese criminal and copyright laws to make pirated Microsoft software and distribute copies to Australia, Canada, Germany, the United States and other countries.

Brad Luo of China Business Law Blog observes that the article generalises Shenzhen's success, which probably was influenced by the external pressure of the US Federal Bureau of Investigation, to "China's sincerity in implementing intellectual property law enforcement". Besides, the case only involves Microsoft's software. Read Brad's article here.

Wang Jun , an IPR scholar at Fudan University said according to Xinhua: "Our eyes shone as we heard the verdicts. I and my fellow researchers sensed that China meant business this time." Despite the shining eyes, they continued to observe sharply: "However, as the verdicts were meted out at a local district court and Shenzhen took the lead in doing many things, further observation is needed to determine whether the case will be a 'milestone' for the country's intellectual property law enforcement," according to Wang.

Read the Xinhua article via China Daily here.

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China's NCA versus Microsoft: Pot Calling the Kettle Black?

Last week Mr Yan Xiaohong, vice-president of the National Copyright Administration of the People's Republic of China (NCA Chinese) criticised Microsoft's Windows Genuine Advantage software, according to an AFP article. Mr Yan's has a problem that this system which turns computer desktops black every hour if the installed Windows XP operating system fails an authenticity validation test: "Measures for safeguarding (intellectual property) rights also need to be appropriate. We've paid great attention to the 'black-out' issue."

According to the AFP Mr Yan also said: "The company adopted unified prices in the past without considering the income gap between developed and developing countries[.]" Read the AFP article here.

Who is to blame here?

• Microsoft because of the quote by Mr Bill Gates in Fortune magazine which hounds him ever since about that Microsoft did not enforce its copyright in China to secure market share: "They'll get sort of addicted, and then we'll somehow figure out how to collect sometime in the next decade," read more here, and now that they do, they allegedly enforce in a consumer unfriendly way.
• China's NCA, because so far they seem to be unable to effectively enforce Microsoft's copyright and this is a case of best defense is offence and Microsoft is only securing that users "are getting the experience they expect"?
• Or both Microsoft and China's NCA?
• Nobody?

What do you think?

UPDATE 1:

Mr Joel Martinsen of Danwei.org has a great article 'Kong Yiji and the question of software piracy' about it here.

UPDATE 2:

The Haidian District People's Court in Beijing lodged a case by Mr Liu against Microsoft because of its Windows Genuine Advantage system. Cheng Zhiliang wrote an article about it for the Shanghai Daily named: 'Microsoft sued for anti-piracy measures', read it here.

UPDATE 3:

Is Microsoft budging because of the pressure? Mu Xuequan of Chinaview.cn via Xinhua wrote 'Microsoft to take more flexible pricing strategy in China' read here.

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"Microsoft Does Not Enforce Copyright Piracy in China Because of Network Externalities"

Bill Gates said in 1998:"As long as they're going to steal it, we want them to steal ours," he said of Chinese users, according to Fortune magazine. "They'll get sort of addicted, and then we'll somehow figure out how to collect sometime in the next decade." Read more here.

Now Mr Bagwad Jal Park, a freelance writer who lives in Chennai, India, asserts in an interesting article for Amateurs Economists that the survival of Microsoft Windows depends on copyright piracy.

"A company that has amazing technological and financial resources at its command should actually find it quite a trivial matter to simply enforce over the Internet the policy of a unique copy of Windows being installed on just one computer. I believe it can certainly be done."

Then Mr Bagwad contends that Microsoft is not doing this because of the network externalities. Read his article here.

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Xiamen Cyberpolice Stealed the Logo of Microsoft's Internet Explorer?

CH of Mobimania pointed me to the Xiamen cyberpolice who uses the logo of E of Internet Explorer, the browser of of Microsoft. Did they get permission to use it? See their website here.

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Zhongyi Electronics to Microsoft: "See you in Court"

According to MarketWatch (head tip to China Economic Review) Microsoft is sued by Zhongyi Electronics for alleged copyright infringement for its Chinese character input method editor that Microsoft applies in Windows 95, Windows 98, Windows 2000 and Windows XP operating systems. The case will te held before the Beijing’s No.1 Intermediate People’s Court. Microsoft has denied any copyright infringement and said that is has written license agreements.

Read the article from MarketWatch here.

UPDATE: Stan Abrams of China Hearsay raises some good questions about the case here.

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Microsoft Starts Selling 3 $ Starter Editions to Governments and Students in China

Jack Schofield reports for the Guardian Unlimited about Microsofts offer to Chinese governements and students to buy a stripped down version of Windows XP (Starter Edition) and Office (Home and Student 2007) for 3 US dollar.

Schofield asserts that piracy has been good for Microsoft in the sense that is has cut out a market for them. Microsoft has decided that it is time for them to start harvesting. 3 US dollar is relatively cheap, compared to the 100-500 US dollar users in the West have to pay for normal versions of Windows XP and Office. This volume low margin strategy might work if the legitimate offer satisfies the former users of pirated software, because of the increased safety due to online updates that are possible.

Read Schofields article here.

Microsoft's other China strategy against piracy is to sell pre-installed software, read more here.

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Where to Find Genuine Software in Shenzhen? "Maybe in Shanghai"

Dr John, who wants to stay anonymous for obvious reasons, did an investigation into copyright piracy in Shenzhen for The Inquirer. He and his wife went from the back alleys to the public shops looking for pirated software. Dr John's story, with pictures made by his wife, is quite disturbing.

The most hilarious lines of this investigative piece of journalism:

"I asked the guy running the software shop where I could find a copy of genuine Microsoft Windows. I told him I needed it for something important. He really had no idea. "Maybe Shanghai. You might be able to buy it in Shanghai, but it will be very expensive.""

Read Dr John's article here.

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