software group

The global software industry was on Friday celebrating what it said was a landmark victory against Chinese piracy after a district court sent four men to prison and handed them hefty fines for distributing counterfeit versions of Microsoft’s Windows XP and other computer programs over the internet.

Huqin District People’s Court in Suzhou sentenced Sun Xiansheng and Hong Lei, the founders and main executives of Tomato Garden, a website that generated advertising revenues by offering pirated software for free, to 3½ years in prison and a fine of Rmb1m ($146,000) each. Others involved got smaller fines and jail sentences.

The industry hailed the verdict as a milestone in the fight against software piracy in China.

“This is the first successful criminal case to crack down, on such a large scale, on online software piracy in China,” said the Washington-based Business Software Alliance, the industry’s main global lobbying group.

Microsoft believed Tomato Garden’s counterfeit programs were estimated to have been installed on tens of millions of computers in China. “This shows that the government is really taking action,” said Liu Fengming, Microsoft’s vice-president for Greater China.

Experts in intellectual property rights said increasing numbers of counterfeiters had been prosecuted for criminal offences in the past couple of years. But they said the verdict handed out against Tomato Garden marked a landmark, both in the size of business shut down and the harshness of the sentencing.

Douglas Clark, managing partner at Lovells, the law firm, in Shanghai, said: “If people go to jail for infringing IPR, you’ve done a good job. If there’s a heavy fine, you’ve also done well. Getting both is really unusual.

“This company was operating a successful big business – probably big enough as an individual counterfeiter to affect Microsoft in its ability to sell its products in China.”

The defendants can appeal. Mr Hong’s lawyer said his client had not decided yet whether to or not. Mr Sun’s lawyer could not be reached for comment.

Industry executives often regard Beijing’s moves against piracy as little more than show. Counterfeit films, music and software are still readily available in shops, on the street and online.

IPR lawyers said the police’s economic crimes division, which probes piracy cases, gave priority to other crimes such as fraud. They said this meant rights holders had to invest a lot of time and money to provide sufficient evidence to the police to open a case.

Security authorities launched the investigation into Tomato Garden after a complaint from the BSA last year.

Since 2004, China’s software market’s piracy rate – the proportion of counterfeit software sales out of total software sales – dropped from 90 per cent to 80 per cent, said the BSA.

Even so, it put losses from software piracy at $6.68bn (€4.7bn, £4bn).