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Microsoft wins big in Chinese piracy lawsuit

Loser vows to fight on

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Microsoft has won its first major court battle against the use of unlicensed software by Chinese corporations - but the company it vanquished plans to fight back.

The amount of damages that the Shanghai court awarded Redmond may be small - 2.17m yuan, or $318,000 - but the precedent is large.

"This is the first case in which Microsoft has taken a large Chinese company to court over copyright infringement of its software," a Microsoft spokesperson told the Financial Times. "It is also the case in which Microsoft has been awarded the largest sum in damages in China so far."

Shanghai-based Dazhong Insurance was found guilty of using unlicensed Microsoft software. Evidence presented during the trail showed that the company used at least 450 copies of nine different pirated apps.

According to the Business Software Alliance, Dazhong Insurance's piracy is far from unusual. The BSA reports that "estimated financial losses" due to Chinese piracy reached $6.7bn in 2008 - although a recent study by the US Government Accountability Office cast doubt on the way the BSA and others estimate losses.

Still, there's little doubt that piracy is rampant in China, even if the BSA's figures are overblown. Also according to the BSA, 80 per cent of software used in China in 2008 was unlicensed - twice the world average of 41 per cent - and that was down from 90 per cent in 2004. Even if the BSA figures are double or triple the truth, the amount of lost sales remains significant.

Dazhong Insurance, however, is not taking the Shanghai court's verdict lying down. A company exec told The Wall Street Journal: "We don't think it's a settled issue yet. We don't accept the current judgment."

The same exec, Ma Xing, told the Beijing Times that Dazhong and Microsoft had been in negotiations for over a year, but that they had been unable to come to an agreement on compensation for the pirated software. "During the negotiation," he said, "we felt Microsoft's pricing was irrational. We suspected they had such pricing because of their monopoly status...It can't be that no matter how much you demand, we have to obey."

However, according to TechEye, that "irrational" pricing was "under $30 a pop" for the Microsoft Office suite. After a smaller lawsuit was won by Microsoft in 2009, China Daily reported that Microsoft's consumer price for the entry-level version of Windows 7 was 399 yuan. That's under $60, hardly "irrational," and it's the lowest price Microsoft charged consumers worldwide.

Ma's view of Microsoft's pricing underscores how deeply entrenched the Chinese corporate attitude is against paying full freight - or even deeply discounted freight - for software. ®

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