China's Do-It-Yourself personal computer market has proven a chronic headache for Microsoft Corp, which is continually battling the use of pirated software.

But the US-based software giant won a skirmish this month, when a Beijing court ruled against a major custom PC dealer accused of pre-installing pirated Microsoft Windows and Office software.

On July 2, Beijing No 1 Intermediate People's Court, in a preliminary ruling, sided with Microsoft against Beijing Strongwell Technology & Development Co, one of the larger custom PC dealers in Beijing.

The court said the Beijing company infringed on Microsoft's Intellectual Property Rights (IPR), and ordered Strongwell to pay Microsoft 461,409 yuan (US$67,546) in compensation.

The ruling follows a year-long effort by Microsoft to focus more on battling piracy among smaller customer PC dealers and individual consumers suspected of using pirated software.

During the past few years, Microsoft has persuaded major PC makers, large companies and government organizations in China to use legitimate software.

But the use of pirated software reportedly still is prevalent among individual Chinese consumers.

"The enforcement of IPR protection is vital to innovation," Yu Weidong, Microsoft China's senior director on IPR issues, said in a statement issued to China Business Weekly following the court's ruling.

"We will continue to work with the government to promote the use of legitimate software in China," Yu said.

Established in 1994, Strongwell is the largest custom PC dealer in Beijing, with eight Do-It-Yourself PC stores in the city.

Microsoft sued the company after purchasing 12 computers pre-loaded with pirated Microsoft software, according to Microsoft's lawsuit. Microsoft sought 500,000 yuan in damages.

Strongwell's response was that the pirated software was installed at the request of individuals hired by Microsoft, and that the company only sells computer accessories - not computers.

Strongwell has not reported whether the company will appeal the ruling.

Although Microsoft was successful in promoting the use of legitimate software by corporations and government agencies, piracy reportedly is widespread in Do-It-Yourself markets, according to industry observers.

China's Do-It-Yourself dealers are scattered, but altogether accounted for nearly 25 percent of the country's PC market last year, according to the research firm IDC.

In July 2008, Microsoft filed a complaint with the Chinese government against the author of a highly popular, pirated version of Microsoft Windows XP. The man was arrested in August.

In October 2008, the company initiated a controversial tracking campaign that came with a warning system.

Chinese users of pirated Windows XP software would receive constant reminders from Microsoft.

The system also resulted in desktop screens being "black screened", prompting numerous complaints.

A computer dealer in Beijing said the high price of Microsoft's software is a major reason some consumers turn to cheaper pirated versions.

"Many customers spend 3,000 yuan for a Do-It-Yourself computer, and they don't want to spend much of the rest of their limited budget on something if there is a free alternative," said the dealer, who asked that his name not be used.

The dealer said that although Microsoft recently reduced its product price in China, many Chinese consumers still couldn't afford it.

By the end of 2008, Microsoft had reduced the price of its Windows and Office software products by as much as 60 percent in China.

The drop in price broke with the company's long-standing policy to maintain prices at about the same level around the world.

This month, Microsoft reported that it would sell the basic version of its Windows 7 software for 399 yuan in China --- the lowest price worldwide.

The company hopes that the price reductions, together with its measures against piracy, will encourage more Chinese customers to buy legitimate software.

According to the Business Software Alliance, an international commercial software and hardware industry anti-piracy group, the PC software piracy rate in China dropped two percentage points last year to 80 percent.

That's still almost twice as high as the global average of 41 percent.

Yu Guofu, a lawyer with Beijing's Sam & Partners law firm, said the Strongwell ruling would have a limited effect on software piracy.

"But the case is not expected to extinguish pirated software in this market," Yu said.

"Dealers may encourage consumers to install the pirated software themselves, which is not strictly prohibited under current IPR laws in China," Yu said.

(China Daily July 21, 2009)