Wednesday, February 18, 2009

Shenzhen Court Convicts Software Pirates: A Cause for Cautious Optismism (Republish)

On December 31, 2008, a criminal court in the Futian District of the southern city of Shenzhen convicted 11 suspects charged with pirating Microsoft software.  Besides the criminal convictions, the Court also handed out hefty fines to some of the criminals.  The result of this case surprised many, and was welcomed, of course, by Microsoft Corporation and many intellectual property holders that do or want to do business in China.  In part, I agree this is a great case to celebrate for the enforcement of IP laws in China, I am only cautiously optimistic about the progress that China is making in the overall enforcement of its otherwise strong laws.

The following provides the background information for this post:

Wang and his counterfeit ring were found to have made illicit gains of 1.9 million yuan by counterfeiting 15,000 disks of Microsoft software and distributing 54,837 disks, said the statement.

On Dec. 31, Wang was sentenced to six and a-half years in prison with a fine of 1.5 million yuan.

China’s Criminal Law defines “especially grave violations of copyright” as those involving 2,500 or more copies. Violators could be sentenced to three to seven years in jail. Suspects in similar cases could face up to five years in prison in the United States.

Zhang and Che were sentenced to five years and three and a-half years in jail, respectively, with fines of 400,000 yuan and 800,000 yuan. Eight other offenders were jailed for 18 months to three and a half years.

The verdict was arrived at under the Criminal Law and two judicial explanations on criminal cases of violation of intellectual property rights by the Supreme People’s Court and Supreme People’s Procuratorate, the statement said.

There is no doubt that software piracy is a tremendous legal and economic problem for China and for the business community.  There is also no doubt that China does have the necessary laws and regulations already in place, protecting property rights in software by imposing monetary fines and even criminal punishment.  However, as is well known, the problem always lies in enforcement.

For example, as far as the legal infrastructure is concerned, China has the following (to name just a few) that directly deal with criminalizing software piracy:

a.    Copyright Law of China (2001), see Articles 47, 48;

b.    Regulations on Computer Software Protection (2002), see Articles 23, 24;

c.    Criminal Law of China (1997), see Articles 213-220.

d.   IP Infringement Criminal Thresholds (2004).

Basically, China’s got all the laws on paper that will make all software owners’ hearts sing.  But, as many commentators have suggested, software piracy is not simply a legal problem that can be addressed by a few pieces of legislation and a host of regulations and judicial interpretations.  That is why piracy is so rampant in China, almost everywhere in the nation, despite all the progress China has made on IP protection.

Now, the Shenzhen Court has put a bunch of software pirates out of business and has given a number of them jail time.  Does this suggest a breakthrough in enforcing software rights in China? Or does it still represent yet another critical step in China’s long march towards becoming a serious software protector?  Views diverge on this.  For instance,

Li Shunde, a legal scholar who heads the Chinese Academy of Social Sciences Intellectual Property Research Center, told Xinhua: “This [case] shows China’s sincerity in implementing intellectual property law enforcement.”

Mr. Li regards this case as a prime example of China’s “sincerity” and real action in enforcing software law enforcement.  But I respectfully disagree.  I think this case serves as an example of what China can do when under intense international pressure.  The fact that Microsoft and FBI were involved in the initial busting of the convicted should not be lost on readers.  Further, this case shows what the city of Shenzhen has chosen to do to fight software piracy.  Long regarded as a manufacturing powerhouse, Shenzhen has been trying to transform itself to be the next high-tech city in China.  Shutting down a piracy ring within jurisdiction of Shenzhen is a good additional step towards providing the necessary infrastructure to incubate the rebirth of the new high-tech Shenzhen.  But, equating the progress made in this southern pearl of a city to that of the entire country is unrealistic and exaggerating.  The fact is that much of China has much to do to catch up with what this Shenzhen Court has done.

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