Microsoft’s Piracy Lawsuit Against Chinese Internet Café Postponed

May 15, 2010 Updated: May 15, 2010

The hearing for a lawsuit filed by Microsoft China against an Internet café company for software piracy has been postponed after Microsoft’s attorney requested an additional 1 million yuan in damages.

If successful, the lawsuit could have far-reaching consequences for many more Internet cafés in China, where owners are making and using illegal copies of Microsoft software.

The hearing was originally scheduled for May 12 at the Dongguan Intermediate Court. However, on May 11, Microsoft’s attorney suddenly requested an additional 1 million yuan (US$146,460) in damages, raising the total amount of damages from 600,000 yuan (US$87,876) to 1.6 million yuan (US$234,336).

The defendant, Tonecan Network Communications Co. Ltd., is the biggest Internet café company in Dongguan City, Guangdong Province. The company has been making illegal copies of Microsoft Windows software and Windows Server software for installation and use.

The Dongguan Digital Times said in a May 10 report that others in the same business indicated that if Tonecan Network Communications lost the case, more Internet café companies would receive letters from Microsoft’s attorneys, and the 1,056 Internet cafes in Dongguan would need to pay Microsoft copyright fees of over 100 million yuan (US$14,646,006), possibly causing one-third of them to shut down.

The report also said that Microsoft has been trying to get businesses in Dongguan to use legal [software] copies for the last two years, and an investigation of 26 Internet cafés in the city confirmed that they were all using pirated versions of Microsoft products in violation of copyright laws. As a result, Tonecan Network Communications became a target for the lawsuit.

Tonecan Network Communications directly owns 19 Internet cafés and is also affiliated with more than 100 other Internet café companies. According to Tonecan’s website, they are equipped with 5,000 computers.

Dongguan Digital Times said Microsoft China and the Dongguan City Internet Service Association made a joint announcement in April 2009, requiring Internet cafés in Dongguan to gradually change to using copyrighted copies of Microsoft products over a five-year timeframe, completing 20 percent of the task each year.

It will cost a mid-sized Internet café about 20,000 yuan (US$2,929) per year to purchase Windows XP Pro at the most favorable price, and that does not include voluntarily purchasing copyrighted versions of Windows Server and Microsoft Office. Most business owners think that this is too expensive.

The Dongguan City Internet Service Association has tried to negotiate with Microsoft China, but the parties have failed to reach a consensus, the Digital Times said.

On April 22, the Financial Times reported that Microsoft had won one of its biggest victories to date in its fight against piracy in China as the Shanghai Pudong New Area district court sentenced Dazhong Insurance Company to pay 2.17 million yuan (US$317,841) in damages for infringing on Microsoft’s intellectual property.

Dazhong Insurance is a Shanghai-based insurer backed by a number of Chinese state-owned and listed companies, the report said.