The biggest crackdown on software piracy in recent years is the latest evidence of the government's crackdown on copyright infringement. A Chinese court on Aug 20 sentenced four people to prison and levied about $1.6 million in fines against them for various counts of software copyright infringement.
Hong Lei and Sun Xianzhong, the founders of Chengdu Gongruan Networking Technology, were accused of operating a website that provided online downloads of pirated Windows XP software. The two were sentenced to 3.5 years in jail in the eastern Suzhou city and fined one million yuan for making a profit from the piracy. Another two employees of the company were sentenced to two years in prison, and each was fined 100,000 yuan.
The government began its crackdown last year in the wake of software vendors, especially foreign ones, lodging complaints about rampant piracy rates in China. "This is the first successful criminal case to crack down on such large-scale online software piracy in China," stated the Business Software Alliance, a US industry Group that represents a group of technology firms that include Microsoft, Intel and Adobe.
The Alliance last year filed a complaint with the National Copyright Administration of China and the Ministry of Public Security about a software called Tomato Garden. The complaint triggered the arrest of Hong Lei in June 2008, prompting the Business Software Alliance to label the case a milestone in China's efforts to crack down on Internet piracy.
According to the Business Software Alliance, China's piracy rate was as high as 90 percent in 2004, but dropped to 80 percent last year. However, a domestic research firm, China Labs, questioned the Alliance's figures, reporting that the actual piracy rate is much lower.
In 2003, Hong allegedly established the Tomatolei.com website and created the Tomato Garden version of Windows XP, in which he reportedly disabled the authentication and certification process and also some unpopular system functions. It soon became one of the more popular pirated software systems in China and was copied and resold by pirate software dealers around the country.
According to the court, Hong and his partners offered downloads of the Windows XP Tomato Garden Edition to at least 10 million users for free and made their profits from website advertisements. Chengdu Gongruan Networking Technology, which profited from online advertising and pre-installing software in the pirated Tomato Garden Windows XP, had its income of 2.92 million yuan confiscated and was fined 8.77 million yuan.
In China, computer users can easily pirate software for less than $2, or download software like Tomato Garden free of charge. In most Chinese IT DIY (do-it-yourself) shopping malls, computer dealers often pre-install pirated Windows software for customers free of charge as a routine service. That has made domestic and foreign vendors suffer from lost revenues.
Microsoft in recent years had convinced large PC makers, large companies and government organizations to use legitimate software. Since last year, Microsoft intensified its efforts to focus more on battling piracy among smaller customer PC dealers and individual consumers.
In July, the US company won a milestone case against Beijing Strongwell Technology & Development, one of the larger custom PC dealers in Beijing. The Beijing company was accused of pre-installing pirated Microsoft Windows and Office software. The Chinese court ordered Strongwell to pay Microsoft 461,409 yuan ($67,546) in compensation.
By the end of 2008, Microsoft had also reduced the price of its Windows and Office software products by as much as 60 percent in China. The drop in price broke with the company's long-standing policy to maintain prices at about the same level around the world. Microsoft said earlier that it would sell the basic version of its latest operating system Windows 7 for 399 yuan in China -- the lowest price around the world.
Analysts said by intensifying its anti-piracy efforts and reducing pricing, Microsoft will reap more profits from the world's second-largest PC market.
(Source: SIPO 2009-08-31)