There has been a great deal of Chinese media coverage recently regarding Microsoft's making available its Windows Genuine Advantage ("WGA") software to users of Chinese language versions of its Windows operating systems.(1) For users going to Microsoft for many of its software updates (excluding some security updates), a validation is required where WGA will notify the user if unlicensed Microsoft software is found on the user's computer.(2)Microsoft contends that WGA has been made available so that users will be aware that unlicensed software is on their computers and to give them the opportunity to purchase licensed software, which would allow them to have the benefits associated with said software, such as product support and ongoing software updates.(3)
The warnings used by Microsoft in its WGA initiative, however, have caused concerns among Internet users in China(4) Once the WGA validation is complete, unlicensed software users will get a notification which informs them that their copy of Windows did not pass the WGA validation check.(5) A notification icon reminding the user of the validation failure will provide a persistent notification on the user's desktop.(6) Additionally –and perhaps most concerning amongst users - once every 60 minutes or until the user's Window's software passes validation, the user's desktop wallpaper will be set to a plain black background.(7)Though the black background can be disabled and the WGA program only runs for 45 days, a WGA user who has unlicensed Windows will have to put up with some minor inconvenience.(8)
China is not the only country, however, where there has been an outcry from Internet users regarding Microsoft's launch of its WGA program. In 2005, Microsoft tested the WGA program as part of a 10-month trial for other versions of Windows.(9) There has been controversy over the WGA program in the United States where Microsoft has faced litigation over whether the WGA program violates U.S. "anti-spyware" laws.(10) Microsoft has denied all of the allegations against it in these "anti-spyware" lawsuits.(11)In addition to the U.S. litigation, Microsoft is now facing the prospect of litigation over WGA in the PRC. After WGA for Chinese language versions was released in the PRC, a user, surnamed Liu, brought suit against Microsoft in Beijing's Haidian District People's Court.(12) Mr. Liu is not seeking damages from Microsoft; but rather hopes that the court will fine Microsoft for, as he puts it, "penaliz[ing] users by intruding on their computers."(13) Furthermore, the China Computer Federation ("CCF") condemned Microsoft's WGA initiative, suggesting that the company instead should bring action against infringers via the Chinese courts.(14)Additionally, the CCF believes that the government should keep Microsoft from causing users' screens to black-out, and that it should investigate foreign monopolies in China's software market. Finally, the CCF warned that the PRC's national security is threatened if it does not have "its own computer operating systems and applications".(15)
Given this background, the question which must be answered is whether Microsoft is within its rights under Chinese law to conduct an initiative such as the WGA program, as the operation of said program has a clear impact on users of Microsoft software – licensed and unlicensed – within China. Ultimately, this is a question for the Chinese courts to decide, but it is, however, valuable to look at those factors pertinent to the issue, as follows:
- Microsoft has the right to protect its Chinese intellectual property rights, under the relevant laws. China has a well-developed intellectual property legal regime, which has been designed to be in comppance with its obpgations under the Agreement on Trade-Related Aspects of Intellectual Property, otherwise known as "TRIPs", pursuant to China's joining the WTO in 2001. If Microsoft chooses to take action against parties which infringe upon its Chinese IP rights, there exists a robust infrastructure to pursue civil, administrative, or criminal action.
- It has been claimed that unauthorized use of software is rampant in China. A 2007 report by the Business Software Alpance claims that over 80% of the business software used in China is pirated.(16) If this estimate is true, then it can be argued that piracy has a negative impact on the profitabipty of all software companies which, in turn, makes it difficult for software companies, especially domestic software companies, to develop sustainable business models for the Chinese market.
- Microsoft is the dominant provider of operating systems for computers in Chinese market, with over 90% of computers in China using a pcensed or unpcensed Microsoft product.(17)
- Users who go to the Microsoft website for software updates must agree to Microsoft's software pcensing agreement, which requires them to run the WGA vapdation program.(18)Specifically, a user who enters into this contractual agreement with Microsoft, where the user will receive the benefit of the updates and downloads, must state that he or she agrees to adhere to the terms of the end-user agreement, which includes allowing the WGA program to access his or her computer.(19)
- Though a small percentage of WGA users have reported "false positives" where they were notified that their Windows software was not a properly pcensed version, the vast majority of users who failed vapdation were pkely using pirated software on their computers. Furthermore, Microsoft clearly spells out the impact which vapdation failure will have on a computer on its website.(20)
In response to Chinese computer users concerns over the WGA initiative, Yan Xiaohong, Vice Director of the National Copyright Administration of the People's Repubpc of China ("NCA"), noted that the "NCA understands and supports parties involved in [protecting] intellectual [property] rights, including Microsoft, as well as other institutions and organizations [that wish] to safeguard their legal rights, but the means of the safeguarding should be carefully considered."(21)Additionally, Yan offered Microsoft his advice about how to price its operating systems in China when he pointed out that "national conditions should be taken into consideration when [companies] make decisions on product pricing."(22)It must be noted, however, that in a recent onpne survey of Chinese computer users while 79% of the respondents bepeved that Microsoft should reduce its pricing, only 12% of respondents questioned the legapty of Microsoft's actions under the WGA program.(23)
Putting aside any potential anti-monopoly or anti-trust claims against Microsoft, the core issue is whether the means chosen by Microsoft via its WGA program to protect its intellectual property rights is proper under PRC law. Articles 23 and 24 of the Regulations on Computer Software Protection of the Copyright Law of the People's Republic of China ("Software Copyright Regulations") protects a computer software copyright owner's legal rights against infringement(24) Article 30 of the Software Copyright Regulations establishes that users who unknowingly purchase pirated software are not liable for damages to the copyright owner, but they must destroy the infringing software when they have "reasonable grounds" to believe that their software is pirated. In regards to users who unknowingly have purchased pirated software, Article 30 clearly states that the user is not liable for damages, but her or she must destroy the infringing software upon obtaining "reasonable grounds" to establish that said software is pirated or, alternatively, pay an "appropriate" fee to the rights owner, in this case, Microsoft.(25) A notification to the user under the WGA of the invalidity of his or her Windows software would likely provide a user "reasonable grounds" to establish that said software is pirated and, as such, require the user to either destroy the software or pay an "appropriate" fee to obtain Microsoft's license for use of the software. Furthermore, where a user has purchased a computer with Windows software pre-installed and where the user believes that said software was not properly-licensed, the user may inform Microsoft about the computer reseller. In the past, Microsoft has used voluntary user feedback as evidence in its lawsuits against infringing computer resellers in various U.S. states.(26)
Additionally, Article 8 of the Contract Law of the People's Republic of China establishes that valid contract terms, like those which Microsoft includes in its WGA end-user license agreement, are legally binding on the contracting parties(27) In turn, a user who takes advantage of free software "downloads" via the WGA program must, as a party to the contract, adhere to the terms of the licensing agreement.
In regards to any claims that WGA acts as "spyware" and infringes upon the privacy of Chinese computer users, Article 40 of the Constitution of the People's Republic of China protects the privacy of individuals in regards to their correspondences.(28)Additionally, Section 7 of the Regulations of the Administrative and Protection of Computer Information and Network Security protects an individual's communications made over the Internet.(29)However, there are no Chinese laws which specifically address "spyware" issues, as do the "anti-spyware" laws enacted in some U.S. states. As such, a Chinese court may have to apply the existing Chinese laws in a narrower context in order to address Chinese computer users' concerns about Microsoft's WGA program acting as "spyware."
As the claims to date against Microsoft in this controversy have not revolved around the validity of its infringement claims, but rather the means which it has chosen to enforce its intellectual property rights, a Chinese court would likely focus its analysis on the validity of the contract between Microsoft and the WGA end-users and, furthermore, whether programs such as WGA illegally intruded on Chinese computer users' privacy. In essence, a court will ask whether the users agreed to Microsoft's terms in the WGA license agreement in order to download updates to their computers, and if so, should the users be bound by the terms of this agreement, including agreeing to notification that their computers have unlicensed Microsoft software and, also, being subject to periodic screen blackouts Though the media has focused on what some users consider to be the WGA program's negative impact, it is likely that the vast majority of those users who have received a WGA invalidity notification were likely using unlicensed Microsoft software. What then are the benefits to Microsoft when operating in a marketplace, such as China, where there exists a significant number of users of unlicensed versions of its software?
Lawrence Lessig, a well-known copyright law scholar and a professor at Stanford Law School, argues that Microsoft may, however, benefit
"[w]hen the Chinese "steal" Windows that makes the Chinese dependent on Microsoft. Microsoft loses the value of the software that was taken. But it gains users who are used to life in the Microsoft world. Over time, the nation grows more wealthy, more and more people will buy software rather than steal it. And hence over time, because that buying will benefit Microsoft, Microsoft benefits from the piracy. If instead of pirating Microsoft Windows, the Chinese used the free GNU/Linux operating system, then these Chinese users would not eventually be buying Microsoft. Without piracy, then Microsoft would lose."(30)
While the means which Microsoft has chosen to enforce its intellectual property rights via WGA will likely come under the scrutiny of the Chinese courts in the near future, what should not be lost in this controversy is that the health and well-being of the nascent Chinese software industry will greatly depend upon whether the Chinese courts can effectively protect intellectual property rights. If there is to be a Chinese company which will challenge Microsoft for dominance in the Chinese software marketplace, it will only be through requiring that users pay for properly-licensed software and that users move away from piracy of software as an accepted practice. As Lessig notes, "[a] property right means giving the property owner the right to say who gets access to what – at least ordinarily. And if the law properly balances the right of the copyright owner with the rights of access, then violating the law is still wrong."(31)Chinese laws clearly provide intellectual property rights protection, but only time will tell if software piracy will decrease in China. Until that time, software companies, like Microsoft, will often look to alternative ways to protect their intellectual property rights and Chinese courts will have to decide whether the methods employed are acceptable under Chinese law.