Microsoft Corporation (Microsoft) vs. Beijing Hongguang Century Trading Co., Ltd.(Hongguang Century); Beijing Chaowai Yuexiu Computer Market Co., Ltd. (Chaowai Yuexiu); Beijing Kaiye Electronic Technology Co., Ltd. (Kaiye)

In June 2011, Microsoft’s agents bought 2 laptops that were pre-sale loaded with Windows software – Microsoft Windows XP Professional and Microsoft Office Professional Edition 2003 - from Buynow (Bai Nao Hui) Beijing Flagship Store, one of Beijing’s most well known IT and electronics shopping centres, opened by Kaiye and managed by Chaowai Yuexiu on behalf of Kaiye. Microsoft China reviewed the software and confirmed that the Windows software was counterfeit, and that the software had been installed on the computers without Microsoft’s permission. Microsoft sued the laptops seller - Hongguang Century, as well as the owner of Bai Nao Hui – Kaiye and the manager of Bao Nao Hui - Chaowai Yuexiu, for joint copyright infringement.  

The Beijing No.2 Intermediate People’s Court concluded that the seller of the laptops had infringed Microsoft’s reproduction and distribution rights in the software under the PRC Copyright Law and related software protection regulations. However, the court refused to find that the owner and manager of Bai Nao Hui had knowingly assisted with the infringing activities. The Intermediate Court accordingly ordered the seller to stop its infringing activites and to compensate Microsoft RMB100,000 for its economic losses and RMB15,000 for its legal expenses.

Both Microsoft and the seller appealed to the Beijing Higher Court – in the appeal, Microsoft requested compensation to be increased to RMB365,000, and also requested the Higher Court to order the seller and the owner of Bai Nao Hui to be jointly liable for the compensation, and order all the three defendants to make a public apology to it.  

The Higher Court issued its decision on 22 April 2013, dismissing the appeals. The court found that Microsoft was indeed the owner of the copyright in the software, based on the copyright registration certificates issued by the US Copyright Office and filed in the court by Microsoft, since both China and the US were the members of the Berne Convention. The court held that the seller had infringed Microsoft’s reproduction and distribution rights, and ordered it to stop the infringing activities. Microsoft’s claim regarding the joint liability of the owner and manager of Bai Nao Hui was not accepted by the court, since the court felt that they were not at fault (a fundamental liability requirement underlying China’s civil based legal system) and that Microsoft had not been able to prove that they had known or should have known about the seller’s infringing activities.