(By Luo Yanjie) Rhino Software Inc. developed the Serv-U software, a kind of widely adopted FTP server terminal software to help the transmission of documents on websites. In recent years, Rhino Software Inc has been continuously trying to enforce its rights against unauthorized use of Serv-U in China, but the results are not satisfied. In our previous Questions and Solutions to Enforcement of Rights Protection By Overseas Software Enterprise in China, we had analyzed the reasons why Rhino Software Inc encountered obstacles in its protection. That the trial version for 30-days free use made Rhino Software Inc unable to the affirmation of infringement was the reason why Rhino Software failed in today’s post.
Introduction to the Case:
Appellant (Plaintiff at first instance): Rhino Software Inc.
Respondent (Defendant at first instance): Chongqing Huamei Aesthetic Plastic Surgery Hospital Co., Ltd (the “Chongqing Huamei Hospital”)
Court of first instance: Yuzhong District People’s Court of Chongqing Municipality
Court of second instance: Chongqing No.5 Intermediate People’s Court
Rhino Software Inc., the copyright holder of all versions of Serv-U Software, brought Chongqing Huamei Hospital to the court, claiming that, Chongqing Huamei Hospital, unauthorized to duplicate and use the Serv-U software, shall constitute copyright infringement.
The court of first instance accepted the case and heard the following: first, the disputed Serv-U 6.4 on the server of Chongqing Huamei Hospital was the trial version which Rhino Software Inc. was announced to provide for 30-days free use, and Chongqing Huamei produced evidence of the lawful origin of the disputed software on its server. Second, Rhino Software Inc. acting as the developer and the right holder of the disputed software, shall have the ability to determine whether the trial version for 30-days free use was continued to use. Third, however, Rhino Software Inc. did not undertake any effective measures to the use of the disputed software. For these reasons, Chongqing Huamei Hospital’s use of the disputed software on its server beyond the 30-days free use does not constitute infringement.
Rhino Software Inc. was dissatisfied with the judgment of first instance and appealed to Chongqing No.5 Intermediate People’s Court. The court of second instance decided that, when installing the disputed software, the user shall first agree with the Software License Agreement and then could continuously install and use the disputed software. The Software License Agreement made the establishment of a contractual license relationship between the copyright holder and the end user. The judgment whether Chongqing Huamei Hospital constitutes infringement shall be relied on the agreement in the Software License Agreement.
First, Rhino Software Inc. has made clearly allow unintended users to use the personal version of Serv-U software without registration for an indefinite period, and to duplicate and distribute the disputed software and related program on a non-profit basis. Therefore, according to the provision of duplication and distribution in the Software License Agreement, Chongqing Huamei Hospital may obtain the disputed software from the third party.
Second, according to the provision of evaluation and registration in the Software License Agreement, Chongqing Huamei Hospital can evaluate and use the Serv-U software for 30-days free use, and can continuously use the personal version of Serv-U6.4 without registration for an indefinite period. In addition, the Software License Agreement did not have any provision or term of declaring that the personal version of Serv-U Software was designed for personal user for the purpose of study.
Third, Rhino Software Inc.’s claim requesting Chongqing Huamei Hospital to pay the fees had neither legal basis nor factual facts.
For these reasons, the court of second instance affirmed the original judgment, determining that Chongqing Huamei Hospital did not constitute infringement.
Lawyer’s Comment:
- Software enterprise shall have taken the initiative to restrict users using the trial version after the 30-days of free use.
In the original judgment, the court of first instance held that “Rhino Software Inc. did not undertake any effective measures to the use of the disputed software. For these reasons, Chongqing Huamei Hospital’s use of the disputed software on its server beyond the 30-days free use does not constitute infringement.”
This view seems unreasonable but be accord to the market rules. Because there are large amounts of free software in the market and users are already accustomed to use the free software. If software enterprises are allowed to adopt the method of “first free trial and then paid use”, it is likely to lead large amounts of software enterprises into deliberately not expressing or implying that users shall pay for the software, thus damaging the interests of users who are unintended to constitute infringement. Therefore, software enterprises shall, if hope to improve its software through free trial use, have taken the initiative to restrict users using the trial version after the 30-days of free use. If users take breakable ways to continuous use of the trial version, software enterprises may claim for its rights and interests.
- “Personal edition” and “enterprise edition” shall be correct understood.
In daily life, most commercial software sets up different editions for different users named with “personal edition” or “enterprise edition”. An enterprise edition is entitled to be with full functions and higher payment, whilst a personal edition is possessed with basic functions, fewer restrictions and free use, for the purpose of software improvement.
However, from the perspective of the judgment, either personal edition or enterprise edition is just a method of definition and a functional description. A “personal edition” is not designated for individuals, and an “enterprise edition” is not designated for enterprises. In this case, even though Defendant Chongqing Huamei Hospital is an enterprise, the court still determined that the defendant shall have the right to continuous use the disputed software in personal edition for an indefinite period.
- The validity of the Software License Agreement is affirmed so that software enterprises shall make an agreement that enterprises must not use personal edition software.
In most software installation, users are required to agree on similar documents to the Software License Agreement. In this case, the court affirmed the validity of the Software License Agreement and determined that the Software License Agreement made the establishment of a contractual license relationship between the copyright holder and the end user. Meanwhile, the court also held that “Rhino Software Inc. has made clearly allow unintended users to use the personal version of Serv-U software without registration for an indefinite period, and to duplicate and distribute the disputed software and related program on a non-profit basis. Rhino Software Inc. claim requesting Chongqing Huamei Hospital to pay the fees had neither legal basis nor factual facts.”
When combining the understanding of “enterprise edition” and “personal edition”, we could know that software enterprises are unable to use the method of definition such as “enterprise edition” and “personal edition” to restrict that enterprises shall purchase the “enterprise edition” software. The effective way is to affirm the type of users for different editions and attempt to establish the “breach clause” in the License Agreement. Lessons of Rhino Software Inc. in this case shall be a cautionary example for other software enterprises.
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