Court rules against Microsoft in IP case

Microsoft Corp has been ordered by a Chinese court to stop selling versions of its Windows operating systems that include fonts designed by a local company, citing a violation of licensing agreements.

The ruling, issued by Beijing's No 1 Intermediate People's Court, might signal a new challenge for international and domestic software makers struggling with piracy in China - newly assertive local firms ready to take their own IP claims to court.

"(Chinese firms) are going to think of China as a place to have their own litigation strategy. I think that's a trend that's coming," said Michael Vella, head of China litigation and intellectual property rights (IPR) at Morrison & Foerster LLP.

Vella predicts more lawsuits by local companies.

The Windows XP operating system is used by a computer user in Yi Chang, Hubei proveince. Microsoft Corp was ordered to halt selling Windows operating systems with fonts designed by a Chinese company. Asianewsphoto

"We saw it in Taiwan. At first, Taiwanese companies were always on the defensive, and in recent years we have seen them initiating litigation," he said.

In its ruling, the court said Microsoft violated the scope of licensing agreements between the US software giant and a Chinese technology company, Zhongyi Electronic, which designs Chinese character fonts.

Microsoft will have to stop selling the Chinese versions of its Windows 98, 2000, 2003 and Windows XP, according to the court. It is unclear when the ruling will take effect or how many copies are affected.

Microsoft said it will appeal the ruling. "Microsoft respects intellectual property rights. We use third-party intellectual property only when we have a legitimate right to do so," the company said in a statement.

Analysts said the ruling is unlikely to affect Microsoft's long-term business outlook since only a small percentage of its total revenues comes from business in China.

"The majority of operating systems in the market today are illegal copies, and the ones that are Zhongyi-related have an even smaller share of the market," said Edward Yu, chief executive of Analysys International, a China-focused technology research firm.

"So I don't think it will have much impact on Microsoft's business," Yu said.

China has long been the target for foreign companies seeking to protect their intellectual property.

And China, under pressure from the US government and the European Union, has increased enforcement of its intellectual property laws.

Meanwhile, Microsoft has faced its own issues at the hands of Chinese software pirates.

In August, a Chinese court jailed four people for spreading their bootleg "Tomato Garden" version of Microsoft's Windows XP program, in what Xinhua News Agency called the country's biggest software piracy case.

Even before the highly anticipated launch of the software maker's Windows 7 operating system last month, Chinese bootleggers were already selling copies.

Reuters

(China Daily 12/05/2009 page9)