> IPR Special
Rotten tomatos
By WANG XING (China Daily)
Updated: 2008-09-22 08:10

Few of China's antipiracy efforts have received as much attention as the August detention of 29-year-old college graduate Hong Lei.

On August 15, two plainclothes policemen came to Hong's house in Suzhou in East China's Jiangsu province with a warrant for his arrest. They seized all his computers and credit cards and put Hong in custody for violating intellectual property rights. He remains in detention and to date has not been sentenced.

As the webmaster of Tomatolei.com and the author of Tomato Garden, a highly popular visually-enhanced pirated version of Microsoft Windows XP, Hong was accused of offering downloads of the latest Windows XP Tomato Garden Edition. He allegedly made a profit of tens of thousands yuan every month from online advertising and embedded software preinstalled in the revised version of Windows.

In 2003, Hong established the Tomatolei.com site and created the Tomato Garden version of Windows XP, in which he disabled the authentication and certification process and some unpopular system functions. It soon became one of the most popular pirated software systems in China and was copied and resold by pirate software dealers around the country.

Following Hong's detention, Microsoft said it was due to a complaint it had made in June to China's National Copyright Administration of China and the Ministry of Public Security by the Business Software Alliance (BSA) of which Microsoft is a member. It said that Tomato Garden had been infringing on its rights over an extended period of time.

Although there is little evidence supporting the validity of Hong's act, his detention raised a lot controversy because the news came at a time when Microsoft was in a sensitive position after China's anti-monopoly law took effect last month.

According to a previous survey by China's State Administration for Industry and Commerce, Microsoft takes up over 90 percent of China's system software market. It also put the US software company at a high risk of being involved in antitrust legal disputes in China.

Critics say Microsoft's move over Tomato Garden is an act to fend off complaints about itself and the company actually took advantage of the pirated software to crack into the Chinese market and only recently began to file lawsuits against pirates when softwear users had become "addicted" to Microsoft's software.

"Microsoft is conducting harmful trading in China, such as combining products with its Windows operating system. This violates consumers' rights to choose different products," says Dong Zhengwei, a lawyer with a Chinese law firm who claims to have lodged a complaint against Microsoft with the Chinese government.

"In addition, Microsoft sells its products in China for the same price as it does in the United States, which is higher than similar Chinese products, evidence of its monopolistic intentions," he says.

However, Microsoft says the criticisms have no merit and its complaint over Tomato Garden has nothing to do with the release of Chinese anti-monopoly laws. It also said the company's dominating position in China largely relies on the rampantly pirated Windows software, which should be excluded in the company's market share in the country.

According to BSA, the software piracy rate in China's PC industry reached 82 percent last year. Figures from domestic research firm China Labs claimed that the rate was 69 percent. Such numbers can be confirmed in most Chinese IT DIY shopping malls, where computer dealers often pre-install pirated Windows software for customers free of charge as a routine service.

The logic behind the phenomenon is clear: when a pirated copy of Windows software is available for 5 yuan, who in China would pay nearly a month's salary for a copy of authentic system software made by a foreign company that has already collected billions of US dollars in revenue around the world?

That fact has forced Microsoft to be extremely cautious to avoid angering Chinese consumers and instead push them to turn to open-source software, which is backed by Sun Microsystems, IBM and more recently, Google Inc.

However, Ni Guangnan, an academic from the Chinese Academy of Engineering, says in a recent article posted on sina.com that the rampant software piracy has hurt domestic companies far more than foreign companies.

"Although pirated software reduced the revenue of foreign companies, it did help to maintain their dominating position in the market and squeezed domestic companies out of the market," says Ni. "We should continue to crack down on the pirated software, not for the benefit of foreign companies but for the benefit of ourselves."

Editor's note: The IPR Special is sponsored by the State Intellectual Property Office and published by China Business Weekly. To contact the Intellectual Property Office, the IPR Special hotlines are 8610-64995422 or 8610-64995826, and the e-mail address is ipr@chinadaily.com.cn.

(China Daily 09/22/2008 page9)