“The Supreme People’s Court’s proper handling of this case has reasonably defined the rights boundaries of secondary developers of software under open source licenses such as GPLv2, setting a benchmark for the development of a Chinese-style open source community, marking an important milestone in China’s software development industry, and is of great significance.”
On November 22, 2023, Liu Jiming, the general manager of a certain network technology company in Suzhou, specially visited the Intellectual Property Court of the Supreme People’s Court to present a banner and the above thank-you letter (excerpt) to the collegial panel team. “Your judgment has boosted the confidence of software R&D companies, and I truly felt the people’s court’s effort to ensure that the public feels fairness and justice in every judicial case.” Liu Jiming expressed his gratitude excitedly while shaking hands with the judge. Who leaked the R&D secrets? A certain network technology company in Suzhou is a national key high-tech enterprise. Since 2009, the company has invested approximately 25.89 million yuan in R&D, completing a gateway product system software named “OfficeTen,” and obtained the copyright registration certificate for “OfficeTen1800 System Software (V1.8)” from the National Copyright Administration in 2013. The software primarily targets large domestic telecommunications operators such as China Mobile and China Telecom, with a broad market prospect. Until one day, they discovered that a counterfeit version had appeared on the market. In January 2016, the company purchased a corporate gateway produced by a certain communication technology company in Zhejiang from a distributor. Upon comparison, it was found that the software running results of the device contained special markers from the source code of the Suzhou company’s software, and there were other identical indicators in the software running results. Who leaked the R&D secrets? The Suzhou company conducted an in-depth investigation and found that after Liu and Wu left the Suzhou company, the Zhejiang company contacted them and hired them as employees. Liu and Wu were both former employees of the Suzhou company, serving as hardware engineers and embedded engineers, respectively. During their tenure, they were important members of the software development project team and had normal access to the technical information involved in the software development. The Suzhou company discovered that the Zhejiang company indirectly established a related network company as a “firewall,” with Liu and Wu nominally employed by the related network company, but actually developing gateway software directly for the Zhejiang company. They illegally logged into the Suzhou company’s server and downloaded the source code of the software in question, allowing the related network company to complete a highly similar accused software within a few months; the accused software was specifically used for the gateway products produced by the Zhejiang company, which publicly sold the corresponding gateway products in the market and directly competed with the Suzhou company in various tenders, seizing clients that originally cooperated with the Suzhou company and profiting significantly. In July 2016, the Suzhou company reported to the Suzhou Public Security Bureau that Wu and the Zhejiang company were suspected of copyright infringement. An appraisal institution commissioned by the public security agency found that the similarity rate between the accused software and the non-open source code of the 1800-c version of the software in question was as high as 90.2%, indicating substantial similarity. Subsequently, the Suzhou company filed a lawsuit against the Jiangsu Provincial Suzhou Intermediate People’s Court, claiming that the Zhejiang company and others had copied, modified, and distributed the software owned by the Suzhou company without permission. The Zhejiang company and the related network company raised a non-infringement defense based on the GPLv2 agreement. The Suzhou Intermediate Court held that this non-infringement defense could not be established. The court ultimately found infringement and ordered the Zhejiang company and others to cease infringement and compensate the Suzhou company for economic losses and reasonable expenses. The Zhejiang company and the related network company were dissatisfied with this judgment and appealed to the Supreme People’s Court. Is the non-infringement defense valid? Is the non-infringement defense raised by the accused infringers based on the GPLv2 agreement valid? If software developers themselves violate the GPLv2 agreement to some extent, do they still not enjoy copyright for the newly developed software? This issue was the main point of contention in the second instance. It is reported that in the common operational model of the software industry, software development generally involves issues related to open source agreements. When programmers develop software, they look for relevant modules to achieve the desired functionality. Many of these module codes are open source codes subject to open source agreements. So, what is an open source agreement? The open source agreement involved in this case is the General Public License version 2 (GPLv2). The publisher of the GPLv2 agreement is the Free Software Foundation, and it is a license written by some veteran programmers abroad regarding software usage. According to its terms, any other derivative software developed based on software subject to the GPLv2 agreement is also subject to this agreement. Therefore, although developers can freely download, copy, and modify the program code subject to this agreement, the new code developed must also remain open source according to the agreement. The presiding judge of this case, Kong Liming, found that the official valid text of this agreement is only available in English. Although there are various Chinese translations available online, some key clauses are inaccurately translated. What is the true meaning of this agreement? He decided to translate it himself. The agreement is drafted in the style of Anglo-American contract documents, filled with algorithms and logical relationships. Fortunately, Judge Kong had experience in drafting and negotiating English contracts for foreign projects and is a professional in international law, which allowed him to translate this obscure English version into Chinese. He also reviewed all the questions and answers in the FAQ section on the agreement’s official website. After a lot of hard work, Judge Kong gained a deep understanding of the true connotation of the open source agreement, the viewpoints held by open source organizations on various legal issues, and the relevant case situations in the United States and Europe. He shared his findings at a professional judges’ meeting. The presiding judge of the case, Yuan Xiaoshuang, told reporters that after discussions at the professional judges’ meeting, it was believed that open source agreements are a complex and difficult issue deeply intertwined with law and technology that is highly concerned by the global software industry, and such disputes need to be handled with caution. It was suggested that the collegial panel convene experts from the industry, academia, and relevant departments to hold a special seminar to conduct in-depth discussions on the judicial protection of copyright in open source software. The deputy head of the Intellectual Property Court, Zhou Xiang, told reporters that regarding how courts will handle intellectual property cases involving open source software in the future, the ideas have become clearer through expert discussions and extensive consultations with various parties. Handling such cases requires seeking a balance of interests among strengthening copyright protection, respecting developers’ autonomy, and supporting and encouraging the construction of open source communities, while adhering to the organic unity of political, social, and legal effects. Based on the above research results, the collegial panel reached a consensus. Is the copyright of the software in question protected? Specifically in this case, the “OfficeTen” software developed by the Suzhou company is derivative software developed based on the OpenWRT system software (OpenWRT system software is open source software, and the applicable license agreement is GPLv2). It can be divided into two parts: one part is the underlying system software formed by adding, deleting, modifying, and adjusting the source code corresponding to the OpenWRT system software (hereinafter referred to as the underlying system software), and the other part is the upper functional software formed by the new source code corresponding to the specific functions of the software in question (hereinafter referred to as the upper functional software). The Suzhou company claims that it has established an isolation layer between the underlying system software and the upper functional software using technical means such as sockets and command lines, and that the communication content between the two does not involve internal data structure information, thus making the upper functional software an “independent and separate” program under the GPLv2 agreement. The Intellectual Property Court of the Supreme Court, in its second-instance judgment, determined that the “OfficeTen” gateway product system software developed by the Suzhou company, which invested a large amount of cost, is original and can be reproduced, constituting a work under copyright law and should be protected by law. Others may not copy, modify, or distribute the software in question without the permission of the Suzhou company; otherwise, it will constitute an illegal act infringing on the copyright of the software in question. The collegial panel determined based on the evidence that the related network company copied and modified the source code of the software in question during the development of the accused software; it was determined that the Zhejiang company engaged in the sale of the accused software. It was determined that these acts of copying, modifying, and distributing were all done without the permission of the Suzhou company, infringing on its copyright of the software in question. The second-instance judgment clearly responded to the issues of concern to both parties and the general concerns of software developers regarding the boundary of rights of open source software and software developers’ copyright, as well as the legal relationship between violating open source software agreements and infringing on software copyrights: “In the infringement dispute where the software has not yet been open-sourced, and the copyright owner believes that its software is not subject to the GPLv2 agreement, while the accused infringer raises a non-infringement defense based on the GPLv2 agreement, whether the software developer has violated the GPLv2 agreement and whether they enjoy copyright for the software are two relatively independent legal issues that should not be conflated to avoid unreasonably depriving or limiting the copyright that software developers are entitled to based on their original contributions under the law.” However, it should be noted that the final determination of infringement in this case and the support for part of the claims of the copyright owner do not imply that the copyright owner will be exempt from liability for breach of contract and/or infringement in potential future lawsuits. The representative of the Suzhou company, lawyer Lü Chengwei, a partner at Beijing Deheng (Suzhou) Law Firm, told reporters that after the second-instance judgment, the accused infringer fulfilled all compensation during the execution phase and published an apology statement, fully safeguarding the legitimate interests of the rights holder. The rights holder sincerely thanked the Supreme People’s Court for its fair judgment and expressed high respect for the professionalism and dedication of the judges of the Intellectual Property Court. What is the value of the second-instance judgment? “As a complex and difficult case, the biggest controversy lies in whether the computer software for which the plaintiff seeks protection is developed based on open source software. The complex issues involved include whether the plaintiff’s computer software should be open-sourced according to the open source license agreement, whether the plaintiff’s failure to open-source according to the agreement constitutes a violation, and whether the defendant’s unauthorized use of the software constitutes infringement.” Professor Wang Qian from East China University of Political Science and Law stated in an interview with our reporter that the judgment reasonably distinguishes between whether the plaintiff’s actions violate the open source agreement or even constitute infringement and whether the defendant’s actions infringe on the plaintiff’s copyright. The particularly valuable aspect is that it was not interfered with by the seemingly complex factor of the “open source agreement,” but rather looked through the phenomenon to grasp the essence, firmly holding onto the basic principles of copyright law, thus making a correct judgment that complies with the provisions and legislative spirit of copyright law. The relationship between open source software and new software independently developed based on open source software is similar to the relationship between a novel and a movie adapted from that novel, that is, the relationship between the original work and the derivative work. Even if the creation and subsequent use of the derivative work are unauthorized by the original work’s copyright owner or exceed the scope of permission, thus constituting a breach of contract and infringement of the original work’s copyright, it does not affect the derivative work (infringing derivative work) being protected by copyright law; unauthorized use of the derivative work still constitutes infringement of the copyright of that derivative work.” The judgment in this case follows basic legal principles and clarifies the basic rules for the trial of future cases involving copyright infringement of open source software, which is highly instructive and commendable.” “Open source agreements are a legal issue of universal concern in the global computer software development industry. The ruling principles established by the Supreme People’s Court in this case create a relatively relaxed legal environment for the healthy and stable development of China’s computer industry. Especially for some small and medium-sized software development companies, they can enjoy corresponding computer software copyrights according to their original contributions made during the secondary development process, in accordance with China’s copyright law.” Li Hongbin, a representative of the National People’s Congress and vice principal of Nanjing Foreign Language School, stated that this case has given these small and medium enterprises peace of mind, helping to enhance their business confidence and further increase R&D investment. “On the other hand, this case also confirms the legal effect of the GPLv2 international legal text, without denying the autonomy of the parties involved. This judicial philosophy fully aligns with China’s policy direction of encouraging the construction of open source software communities, effectively balancing the interests of building open source software communities and protecting the rights of software developers.”Source: People’s Court Daily