Feb 01 2008
when a contract isn’t a contract
There are few stories floating around on this suit between Zhongyi and Microsoft. (IP Dragon and China Hearsay both have posts) My take is that this is going be a battle where a contract is allegedly not a contract. First, from China Economic Review:
Chinese information technology company Zhongyi Electronic, which is responsible for many of the Chinese characters seen on the Internet, is suing Microsoft for alleged intellectual property rights violations.
The case brought by Zhongyi involves Microsoft’s use of Zhengma, a Chinese input method editor that allows computer users to enter Chinese characters using Western keyboards.
Lan Dekang, general manager of Zhongyi, was quoted as saying, ‘Microsoft hasn’t paid us for 10 years, since they paid for using Zhengma in Windows 95 in 1998.’
Lan said Microsoft hasn’t signed contracts for the commercial use of the company’s fonts and the input method editor in its Windows 95, Windows 98, Windows 2000 and Windows XP operating systems.
In a statement [Microsoft] said, ‘We entered into these agreements under the supervision and guidance of the Chinese government agencies. Microsoft respects intellectual property rights. We use third party IPs only when we have a legitimate right to do so. Microsoft has fully performed its obligations including paying Zhongyi the license fees in accordance with the license agreement.”
Stan Abrams at ChinaHearsay pondered:
Two points at the outset here: 1) I find it hard to believe that Microsoft would allow something like this to go forward if they had unabashedly ripped off Zhengma for so many years, and even then, why would they claim to have a valid license; and 2) Haven’t these guys ever heard of something called statutes of limitation? I mean really, going after infringement from Windows ‘95, going back ten years – are you kidding me or what?
Part of me wants to laugh at this entire scenario. But I’ve been involved in way too much litigation here in the States to do so. I don’t want to provide too much detail, but in one case, a party had duped the other party into signing a signature page of a draft of a contract. (with an incomplete number of signatures by the terms of the draft itself) Lo and behold, a jury actually found that a contract existed. In another case, two parties entered into a license agreement for a patent but couldn’t agree on the actual cost terms. In the ensuing litigation, one party had been saying that a contract has existed all along while the other vehemently denied it. Thankfully this one settled because the court was leaning toward saying that an expressed agreement actually existed. I think you get my point: contract formation is weird and wacky stuff.
It will be interesting to see how this “contract” was actually executed. I am willing to bet something fell apart there, but I will wait on the facts to come out of this case. (I am not even going to try to address the SOL issue)
Either way, this is a warning to all who engage in business in China: Get your contracts down right. Get them in Chinese and English. Save your papers and drafts in case someone decides they would like to back out. Do not allow there to be any loose ends–especially in a place like China where business moves fast and contract formality is usually eschewed in favor of efficiency. Or it will come back to bite you.
