For foreign software copyright holders, particularly those from the United States and Europe, China represents a vast market filled with opportunities, yet it also poses significant legal challenges. The prevalent unauthorized use of software—ranging from corporate users installing unlicensed copies to organized piracy networks—necessitates a comprehensive understanding of how to effectively enforce intellectual property rights within China’s judicial framework.
The revised China Copyright Law implemented in 2021, marked a new era of enforcement by introducing higher statutory damages and stronger deterrents against infringement. However, foreign companies continue to encounter distinct procedural and substantive challenges compared to Western legal systems. By examining the notable case Alt-N Technologies, Ltd. v. Shenzhen Fengmou Communication Equipment Co., Ltd., we will explore essential strategic considerations for successfully protecting rights in China.
The Critical Need for Local Legal Representation
An important initial step for a foreign software company considering litigation in China is choosing the right legal counsel. Many foreign companies mistakenly assume they can rely on their in-house legal team or their usual foreign attorneys to handle cases in Chinese courts. However, China Civil Procedure Law imposes strict regulations in this regard. While foreign individuals may act as agents ad litem, they are not permitted to serve as lawyers unless they hold a valid license from the Chinese bar. Additionally, courts rigorously verify the qualifications of agents, and anyone lacking proper authorization or credentials will be barred from participating in the trial.
In practice, engaging a qualified Chinese lawyer is not only highly recommended but essentially mandatory for effective representation. Beyond fulfilling legal requirements, a local attorney provides valuable insights into judicial preferences, procedural nuances, and the specific evidentiary standards expected by Chinese courts. Given the Chinese legal system emphasis on notarized evidence and protocols for handling cross-border documents, local expertise is indispensable. An experienced Chinese intellectual property lawyer can navigate bureaucratic challenges that often hinder foreign parties without local representation, enabling the case to focus on the substantive issues of infringement rather than procedural obstacles.
Overcoming Procedural Hurdles: Notarization and Authentication
For foreign plaintiffs, the litigation process begins well before submitting a complaint, starting with the critical step of establishing legal standing. Chinese courts require foreign parties to verify their existence and authority through a rigorous documentation procedure. This typically involves notarizing corporate documents and powers of attorney in the plaintiff’s home country, followed by authentication from the appropriate Chinese embassy or consulate.
The Alt-N Technologies case offers a valuable example regarding the validity of such documents. In this instance, the defendant challenged the plaintiff’s standing, arguing that the lawsuit was initiated by an agent whose authority was based on expired or defective documentation. The court ultimately ruled in favor of the plaintiff, as the authorization was clear, properly notarized, and explicitly permitted delegation to local Chinese agents. This case underscores the importance of preparing comprehensive and enduring powers of attorney that accommodate the often extended duration of Chinese litigation. Rights holders should ensure their Authorization Letter is detailed and explicitly authorizes actions such as filing complaints, collecting evidence, and accepting service of process, all of which must comply with stringent notarization and legalization requirements.
Conflict of Laws: The Primacy of the Lex Loci Protectionis
In international intellectual property disputes, identifying the applicable law is essential. Unlike contract disputes where parties may choose the governing law, intellectual property rights are inherently territorial. According to the Law of the People’s Republic of China on the Choice of Law for Foreign-related Civil Relations, matters related to ownership, scope, and infringement liability of intellectual property are governed by the law of the jurisdiction where protection is sought.
For instance, if a software company files a lawsuit against a Chinese party for unauthorized use within China, Chinese law will apply. This includes the Copyright Law, the Regulations on the Protection of Computer Software, and relevant judicial interpretations. While China is a member of the Berne Convention for the Protection of Literary and Artistic Works, which ensures equal protection for foreign works as for domestic ones, enforcement procedures are strictly governed by Chinese national law. Therefore, plaintiffs must tailor their legal strategies and evidence to align with the specific statutory requirements of China’s Copyright Law, rather than relying solely on U.S. or EU copyright standards.
Demonstrating Copyright Ownership: The Importance of Evidence
Establishing ownership is a crucial element in any copyright dispute. In the United States, a registration certificate issued by the Copyright Office serves as prima facie evidence of ownership. In China, although registration is not mandatory for protection under the Berne Convention, it remains a valuable form of evidence. Many foreign software companies, however, often forgo registering their works in China, assuming that their foreign registrations or international reputation suffice. Experience from litigation shows that this assumption can be mistaken.
For example, in the Alt-N Technologies case, the defendant challenged the plaintiff ownership of a specific software version (MDaemon 11.0.3). The plaintiff successfully rebutted this by presenting a combination of evidence, including U.S. Copyright Office registrations for earlier versions, trademark registrations for the software’s name, and notably, the physical packaging and installation media bearing the copyright notice. The court ruled based on the principle that, unless proven otherwise, the individual or entity named as the author is presumed to be the rightful author.
This case underscores a key strategic consideration for software vendors: the © copyright notice displayed on software interfaces, installation screens, and packaging carries significant legal weight. For foreign companies, it is essential to maintain thorough archives of original source code (even if partial), design documents, version histories, and legitimate publication records. Such documentation is vital in linking the foreign corporate entity to the digital product in a Chinese court. Additionally, the End User License Agreement (EULA) often serves as critical evidence to support ownership claims and clarify authorized usage terms.
Technical Aspects of Infringement: The Role of Telnet
One of the more complex technical issues in software infringement cases in China involves how infringement is detected. In cases concerning server-based software—such as mail servers, database management systems, or ERP software—rights holders typically cannot access the defendant premises to inspect their hard drives. Consequently, plaintiffs often rely on external probing methods, particularly using the Telnet protocol.
Telnet is a network protocol that enables two-way interactive text communication over the internet or local networks. When connecting to a server port (for example, port 25 for SMTP mail servers), the server usually responds with a banner or text string identifying the software and its version running on that port. In the Alt-N Technologies case, the plaintiff used Telnet commands to query the defendant server and received a response indicating the presence of MDaemon software.
Chinese courts have taken a nuanced view of this evidence. While they recognize that Telnet responses can reliably indicate that certain software is installed, they also acknowledge limitations: system administrators might alter the banner to misrepresent the software, or the software could be a cracked version mimicking the original. Importantly, Telnet only reveals surface-level information—the software name and version—and does not confirm that the underlying code matches the plaintiff. Here, the balance of probabilities standard applies. According to Chinese judicial interpretation, if the plaintiff evidence makes infringement highly probable, the burden may shift to the defendant to provide a reasonable explanation. In the Alt-N Technologies case, the defendant claimed the Telnet evidence was unreliable and that they were only using a 30-day trial version. The court rejected this defense because the plaintiff conducted two separate Telnet probes more than 30 days apart, both yielding the same result, effectively disproving the trial version claim.
This illustrates an important strategic insight: relying on a single piece of evidence is often insufficient. Plaintiffs should pursue a comprehensive investigative approach. While Telnet can offer an initial lead, it should be corroborated with additional evidence such as screenshots from the defendant website demonstrating software features, employee testimonies, or forensic analysis of any downloadable files. The high probability standard enables courts to consider the broader commercial context beyond the technical limitations of remote detection.
The Guangdong High People’s Court judge featured article on this case is below
The Substantive Standard: Substantial Similarity and Access
In China, the legal test for software infringement goes beyond just technical detection and is based on the principle of Substantial Similarity plus Access. This means the plaintiff must show that the accused software closely resembles the copyrighted work and that the defendant had access to or contact with the plaintiff’s work.
When it comes to software, substantial similarity involves more than just comparing the user interface or visual design. Legal analyses and court decisions emphasize that the user interface is only a small, separate part of a software program. Two different software products can have identical interfaces but very different underlying code. Therefore, courts examine deeper elements such as the software’s organizational structure, processing flow, data structures, input/output formats, and source code.
This creates a challenge for foreign plaintiffs who may be hesitant to reveal their source code in open court. Often, courts may require comparison of object code (binary code) or specific functional behaviors if the source code is protected as a trade secret. The key for plaintiffs is to prove that the similarities are not coincidental or due to functional requirements but result from copying the creative expression in the plaintiff’s code. Once the plaintiff establishes a prima facie case of substantial similarity and access (which is usually presumed for widely distributed commercial software), the defendant must provide a reasonable explanation for the similarities, such as independent development or use of open-source components.
Damages and Remedies: Financial Considerations
The 2020 amendment to China Copyright Law has significantly strengthened rights holders ability to claim damages. Previously, statutory damages were often capped at amounts that made litigation impractical for lower-value software. The new law introduces punitive damages for intentional and serious infringements and raises the maximum statutory damages.
Chinese courts generally calculate damages using a hierarchy of methods:
- Actual Loss: The plaintiff’s proven financial loss due to infringement.
- Infringer’s Profit: The illegal gains the defendant made from the infringement.
- Statutory Damages: An amount set by the court when actual loss or profits cannot be proven.
For example, in the Alt-N Technologies case, the court awarded RMB 120,000 (about USD 17,000–18,000), covering both economic loss and reasonable expenses. The court considered factors like the software release date, reputation, official price, and the nature of the infringement. Reasonable expenses—such as attorney fees, notarization, and investigation costs—are recoverable but must be supported by invoices and contracts. Foreign law firms should keep detailed records of billable hours and costs related to the Chinese case.
Rights holders should manage their expectations: although damages in China are increasing, they often remain lower than in the U.S. or EU. The main value of litigation in China often lies in obtaining an injunction to stop unauthorized use, which can pressure defendants to settle or purchase legitimate licenses. The threat of a court-ordered public apology and reputational harm often motivates settlements more effectively than the damage award itself.
Corporate Structure and Infringement
A key, though often overlooked, aspect of litigation in China is the potential to pierce the corporate veil. In the case under discussion, the defendant ties to a labor union or a separate operational entity were highlighted. In China, infringing activities are frequently hidden behind a network of related companies or affiliates. An effective legal approach involves pursuing not only the primary infringing party but also associated entities that control or benefit from the infringement. This strategy helps prevent defendants from evading liability by dissolving the targeted company and continuing their operations under a different name.
While Western views on IP protection in China can be influenced by political narratives, the reality within IP courts in Beijing, Shanghai, Shenzhen, and Guangzhou is one of increasing professionalism and fairness. Judges in these specialized courts are highly trained, many holding advanced legal and technical qualifications. They are becoming more discerning of weak defenses and are prepared to enforce foreign rights robustly. The successful lawsuit brought by an American software company against a Shenzhen-based entity is indicative of a maturing legal system that aligns more closely with international standards. Achieving success requires thorough preparation, cultural insight, and strategic patience. Rights holders should approach the Chinese market with confidence, fully aware of the legal tools at their disposal.
Practical Advice for Foreign Rights Holders
Software companies seeking to safeguard their interests in China should adopt a proactive stance rather than a reactive one. First, meticulously document all evidence of creation and publication, including earlier versions, as the software’s development history carries significant weight in court. Second, consider voluntary copyright registration in China. Although not compulsory, obtaining a Chinese registration certificate provides strong evidentiary support and simplifies early-stage proof. Third, maintain active market monitoring by working with local counsel to conduct regular investigations, employing technical methods to detect unauthorized use of server-side software.
When infringement is identified, act promptly to notarize evidence. In China, a Notarial Deed represents the most compelling form of evidence. Courts are generally hesitant to accept screenshots or recordings that have not been notarized, given their susceptibility to alteration. Utilizing a notary public to witness activities such as Telnet probes or downloads establishes an indisputable record.
Finally, choose legal counsel with care. Cross-border litigation is complex and demands lawyers who possess both strong legal expertise and cultural understanding. Counsel who grasp the client commercial objectives and the procedural nuances of Chinese courts are invaluable. The Chinese legal market is open, and competent representation is readily available. Concerns about local protectionism have largely diminished in major commercial hubs, replaced by a judicial culture that prioritizes fairness and the rule of law.
Conclusion
China digital economy is vast, making it an essential market for software developers. While piracy and unauthorized use remain genuine risks, they are manageable. China legal system, bolstered by recent reforms and a sophisticated judiciary, offers a practical avenue for enforcement. By understanding procedural requirements, standards for technical evidence, and effective litigation strategies, foreign copyright owners can successfully protect their rights. The Alt-N Technologies case demonstrates that a well-prepared plaintiff with strong evidence and capable counsel can secure a fair outcome. Software copyright protection in China is no longer merely theoretical but a practical reality for those who know how to engage effectively with the system. The message to rights holders worldwide is clear: your intellectual property is protected in China courts, and enforcement mechanisms have never been stronger.
This article provides a general overview of the legal environment and does not constitute specific legal advice. If you need assistance or wish to discuss particular challenges related to your software products in the Chinese market, please contact us at wen.liang@hengdulaw.com or +86 139-1010-4946 for a confidential consultation to explore how we can support your intellectual property enforcement goals.