Trial of Computer Software Copyright Cases by Shanghai Intellectual Property Court (2017-2018)

Trial of Computer Software Copyright Cases by Shanghai Intellectual Property Court (2017-2018)

At present, China’s economy has been transitioning from a phase of rapid growth to a stage of high-quality development. This is a pivotal stage for transforming our growth model, improving our economic structure, and fostering new drivers of growth. The software industry, as a high-tech industry, is of great significance for advancing the high-quality development of China’s economy. In recent years, the number of computer software copyright cases is increasing. These cases are concerned with sophisticated technology or professions and are difficult to hear. To further enhance the awareness of protecting the computer software copyright, advance the development of software industry, Shanghai Intellectual Property Court sorted out the trials of civil cases about computer software copyright in 2017-2018, summarized the trial experience, and put forward countermeasures and suggestions, hoping to attract the attention of relevant departments, enterprises and the public.

1. Basic Information on Computer Software Copyright Cases

1.1 The Number of Cases Received and Concluded Increased

In 2017-2018, 702 computer software copyright cases (including 34 pre-trial preservation cases) were accepted, an increase of 13.04% compared with that in 2015-2016. 614 computer software copyright cases were concluded, an increase of 20.16% compared with that in 2015-2016 (see Fig.1). Among which, 154 cases were settled by judgment and 422 cases were concluded by mediation and withdrawal (see Fig.2).

收案

Cases accepted

结案

Cases concluded

2015-2016年收结案

Cases acceptedand concluded in 2015-2016

2017-2018年收结案

Cases accepted and concluded in 2017-2018

Fig.1 Computer Software Copyright Cases Accepted and Concluded

 

判决

Judgment

其他

Other

调撤

Mediation or withdrawal

Fig.2 Methods of Concluding Computer Software Copyright Cases

1.2 Contract Cases Increased Significantly

From the perspective of the distribution of cause of action, there were 122 cases about ownership and infringement, accounting for 18.26%, including 115 disputes over infringement upon computer software copyright and 7 disputes over the ownership of computer software copyright. There were 546 contract cases, accounting for 81.74%, up nearly 30 percentage points from 2015-2016. Among which, there were 516 disputes over computer software development contract, 23 disputes over computer software copyright licensing contract, and 7 disputes over computer software copyright transfer contract (see Fig.3).

许可使用合同

Licensing contract

转让合同

Transfer contract

侵权

Infringement

权属

Ownership

开发合同

Development contract

Fig.3 Distribution of Cause of Action of Computer Software Copyright Cases

1.3 The Amount of Money Involved in Cases Rose Sharply

In 2017-2018, the average amount of money involved in prosecution computer software copyright cases was RMB1.46 million, an increase of 70.76% compared with that in 2015-2016. In 2017, the Court accepted a case of dispute over infringement upon computer software copyright involving online games, with an amount of money involved reaching RMB 99.9 million, which is a case about computer software copyright involving maximum amount of money that the Court accepted.

1.4 More Professional Software Involved

In the cases about infringement upon computer software copyright, in addition to office software such as Windows commonly used by enterprises, there were many kinds of professional software, e.g. steel structure details drawing software Tekla, structural finite element analysis software Nastran, 3D industrial design software CATIA, UG, etc.

2. Main Practices in Trial of Computer Software Copyright Cases

2.1 Increasing the Amount of Compensation for Damages to Guarantee Sufficient Compensation to the Right Holder According to Law

In recent years, the Court has found that in the trial of cases, although the awareness of the legalization of enterprise software has been enhanced, there are still some enterprises using pirated software for commercial use. To this end, the Court has taken the following measures. The first was to impose severer punishment upon infringement. For repeated infringement, willful infringement and infringement with other serious circumstances, the Court increased the amount of compensation according to law, which fully reflected the crackdown and deterrence to infringement, making infringers pay heavy prices. For example, in the case of dispute over infringement upon computer software copyright filed by the plaintiff Dassault Systems S.E., the defendant signed a software procurement contract with the plaintiff after being investigated by the administrative agency for the use of the software charged with infringement but failed to pay the contract amount. Not only that, the defendant had further expanded the scale of the infringement. The subjective malice of its infringement is obvious. Therefore, the Court increased the amount of compensation and ordered the defendant to compensate RMB 9 million for economic loss. The second was to apply statutory compensation system correctly. The statutory compensation system has dual functions of compensating the loss of the right holder and punishing the infringement. When it’s able to prove the amount of loss obviously exceeds the ceiling of statutory compensation, the Court determined the amount of compensation above the ceiling of statutory compensation. For example, in the case of dispute over infringement upon computer software copyright brought by the plaintiff SAP, the existing evidences were enough to prove that the loss of the plaintiff incurred from the infringement exceeded the ceiling of statutory compensation. Given the price of training fee, infringement nature, subjective state, infringement circumstances and duration of the defendant as well as the plaintiff’s charge of royalties from its partners, etc., the Court determined at its discretion that the compensation amount should be RMB 1.55 million.

2.2 Actively Applying Evidence System to Relieve Right Holder’s Burden of Proof

In the computer software copyright cases, “difficulties to get evidence of infringement” are problems that have long plagued right holders. To effectively relieve right holder’s burden of proof, the Court actively applied various litigation evidence systems and adopted the following measures. The first was to give full play to the role of the pre-trial evidence preservation system. It’s usually difficult for right holders to obtain evidence directly for the commercial use of pirated software by the end-user. As for the application for evidence preservation submitted by the right holder, the Court actively accepted, quickly reviewed, and arbitrated according to law. The preservation team composed of judges, executives and technical experts implemented evidence preservation on site. In 2017-2018, the Court granted judgment in favor of 27 applications for pre-trial evidence preservation from right holders, effectively resolving right holders’ difficulties in producing evidence. The second was to grasp the standard of proof in civil litigation properly. The computer software copyright cases,, especially about software development contract, feature long litigation cycle and low degree of resurgence of facts. Therefore, according to logical reasoning, business transaction habits and rules of daily-life experience, the Court comprehensively reviewed and judged the relevance, authenticity, legitimacy, the existence of proof power and the weight of electronic evidence submitted by the parties in the litigation such as chatting records, emails and development results, and determined the facts of the case according to high degree of probability. If the evidence submitted by one of the parties can prove that the facts of its claim are preliminarily established, the party denying the facts should provide counterevidence on its defense or rebuttal. The third was to apply the rules of proof of obstruction according to law. In determining the amount of compensation, when the right holder has tried his best to produce evidences, and the evidences related to the infringement are mainly in the hands of the infringer, the infringer will be ordered to provide these evidences. If the infringer refuses to provide evidences or the evidences provided are insufficient to prove the facts to be proved, the amount of compensation may be determined by referring to the claim and evidences provided by the right holder. In the case of dispute over infringement upon computer software filed by the plaintiff Xindong Network Co., Ltd., the evidences showed that there were more than 330,000 downloads of the games charged with infringement in the game platform operated by the defendant. Although the defendant denied it, it failed to provide ample evidence to prove the actual downloads. The Court ordered the defendant to compensate RMB 1 million for economic loss by referring to the evidences provided by the right holder.

2.3 Innovating the Case Trial Mechanism to Improve the Efficiency of Trials Vigorously

The case about computer software copyright features complicated facts, intertwined technical problems and legal issues, and long trial cycle. The Court made explorations to improve the efficiency of trials by innovating the trial mechanism. The first was to improve the dispute fixing mechanism. The Court guided the parties to submit written pleadings before the trial and fixed the focus of disputes to speed up the trial progress. The second was to hold court in the form of remote video. The Court formulated the Operating Rules for Case Trial through Remote Video, gave full play to the scientific and technological advantages of Internet courts for cases with clear facts and disputes, and held court in the form of remote video to try and conclude the case quickly, which not only saved the time and economic costs of the parties, but also gave the parties a sense of gain from the construction of smart court. The third was to advance the in-depth operation of diversified dispute resolution mechanism. According to the characteristics of the case about computer software copyright which is concerned with sophisticated technology or professions, the Court gave full play to the advantages of professional mediation organizations and industry associations and introduced mediators regularly to advance pre-trial and on-trial mediation and resolve disputes quickly. In 2017-2018, the Court entrusted 172 cases for pre-trial mediation, among which 43 ones were successfully mediated, accounting for 25%. 137 cases were entrusted for on-trial mediation, among which 65 ones were successfully mediated, accounting for 47.45%. The fourth was to systematize the trial model of cases about computer software development contract. By strengthening in-depth application of big data, artificial intelligence and other technologies, the system embedded a unified case trial process into the data-based intelligent assistant case-handling software to standardize the trial methods and trial standards for disputes over computer software development contract.

2.4 Applying the “Four in One” System Effectively to Find Technical Facts Accurately and Efficiently

To systematically improve the scientificness and professionalism of technical fact finding in the cases about intellectual property, the Court has established a “four in one” (four: technical investigation, technical consulting, expert jury and technical evaluation) technical facts finding system. In the application of this system, the following measures had been taken. The first was to divert disputed technical facts. Corresponding methods were selected to find the technical facts based on the types and complexity of the technical problems involved in the case about computer software copyright as well as the characteristics of various methods. The second was to give full play to the role of technical investigators as “technical assistants.” In 2017-2018, the technical investigators of the Court participated in the finding of technical facts for 150 times. They not only participated in the trial and consulting of the case, but also took part in evidence preservation and on-site inspection to provide support for the finding of technical facts in all respects. The third was to superimpose the applicable technical facts finding methods. Technical consulting, technical investigation, expert jury and technical evaluation have their own characteristics and scope of application and they are not mutually exclusive. In judicial practice, the Court can adopt two or more methods of finding the technical facts to ensure the accuracy according to the complexity of the technical facts involved in the case. For example, in the case of dispute over computer software development contract filed by Shanghai Landi Digital Technology Co., Ltd., the judges, technical investigators and experts of the Court worked together on the on-site inspection of the software involved, and they completed the function demonstration in 12 hours, which laid a solid foundation for finding the relevant technical facts of the case according to law. The fourth was to standardize the start-up and application of technical evaluation procedures. The technical evaluation features long cycle and high cost, which has a certain impact on the trial efficiency of the case. Therefore, the Court has made it clear that only when it is difficult to find the technical facts involved in the case by other means such as technical investigation and technical consulting, can the evaluation be entrusted. Meanwhile, the Court established regular prompts, reminders and quality feedback mechanism in the procedure of entrusting a judicial evaluation. In 2017-2018, only 6 computer software copyright cases, were entrusted with evaluation, avoiding long trial cycle caused by evaluation.

3. Related Suggestions

3.1 Further Enhancing the Awareness of Risk Prevention of Computer Software Copyright in Enterprises

In 2017-2018, the Court ordered the defendants to bear a high compensation of RMB 15.05 million and RMB 9 million respectively in the two cases of disputes over infringement upon computer software copyright. In many other cases, the defendants reached a settlement with the plaintiffs by paying millions or even tens of millions for software procurement. The above situation reflects that some enterprises do not attach importance to the protection of computer software copyright, and even involve in repeated infringement and willful infringement, which have paid a heavy price. In this regard, enterprises, especially those relying on professional software for design and R&D, should attach great importance to the legal risks of software copyright and effectively advance the efforts in legalization. The first is to take the initiative to prevent infringement. Enterprises should purchase genuine software through formal channels or unified bidding, regularly check the software used in their computers to prevent employees from downloading and installing pirated software without authorization. The second is to actively respond to infringement complaints. In case of infringement complaints by the right holder, if the infringement does exist upon investigation, the enterprise shall communicate and negotiate with the right holder actively and seek reconciliation by purchasing genuine software.

3.2 Further Improving the Management Level of the Whole Process of Signing and Performing Contracts

In the cases about computer software development contract, there are many situations such as unclear stipulation of development requirements, lack of evidence to fix the change of requirements, and uncertainty of the content and time of deliverables. In this regard, enterprises should further enhance their level of contract management. The first is to make the development requirements as clear as possible when signing a contract. The functions of computer software are usually complex and varied. Although it is impossible to include all the functional points involved in software in the contract, the important functional points should be reflected in the development requirements of the contract, and the development content of the corresponding functions should be described in detail, to prevent disputes arising from unclear development requirements and even unfavorable legal consequences. The second is to dynamically track the progress of contract performance, contract change, deliverables, payment of price, etc. and do a good job of fixing the evidence for the important nodes in the performance of the contract, so as to prevent adverse legal consequences from being unable to provide relevant evidence in litigation.

3.3 Further Strengthening Communication and Negotiation during the Performance of the Contract

The computer software development contract features a long performance cycle and strong dependence on both parties. It is difficult to fix all the details of development at the beginning of signing the contract. This requires all parties to the contract to properly fulfill their obligations such as notification and assistance in accordance with the nature, purpose and transaction habits of the contract and to settle disputes in accordance with the principle of good faith. In practice, due to the lack of a good communication mechanism between some parties and the poor awareness of cooperating with each other in fulfilling contract obligations, conflicts between the two parties intensified and litigation occurred. In this regard, both parties to the contract should enhance communication and negotiation based on abiding by the principle of good faith and fulfilling their obligations in accordance with the contract. The first is to establish a sound communication and coordination mechanism. Both parties to the contract shall arrange special personnel for project communicating, who shall respond, cooperate or give feedback in time for problems that need to be confirmed and the development results that need to be tested during the performance of contract. The second is to enhance the awareness of dispute settlement through negotiation. For disputes arising from the performance of the contract, the parties shall actively negotiate to avoid unilateral termination of fulfillment of contractual obligations, resulting in the failure of contract purpose.

3.4 Further Enhancingthe Enterprise’s Initiative and Enthusiasm to Participate in Litigation

As computer software copyright cases features complex facts, strong professional and technical characters, high litigation cost, part of enterprises, especially small and medium-sized enterprises, lack enough initiative, enthusiasm and due proceeding capacity, and no professional legal persons and technicians are arranged for the lawsuit. As a result, it is difficult to find out the facts of the case, and there is a certain gap between the expectation of the parties involved and the result of the judgment. In this regard, first of all, the specialty and complexity of computer software copyright cases must be highly valued. Enterprises must hire lawyers or assign company personnel with legal expertise to participate in the litigation, to actively prepare evidence and formulate corresponding litigation strategies. Second, enterprises shall arrange staff involved in the contract, as well as the technical personnel engaged in the development of the software involved to appear in court. When necessary, experts may be employed to help find out technical facts as part of efforts to restore facts as much as possible and improve accuracy and objectivity of technical fact-findings.


Typical cases

1. Dispute of Dassault Systemes against Shanghai Zhidou Company for infringing computer software copyright

[Case Review]

The Plaintiff, Dassault Systemes, was the copyright owner of computer software CATIA V5 R20. It once complained to Administrative Authority in February 2017 that the Defendant, Shanghai Zhidou, used its software. During the administrative law enforcement, it was found that the Defendant used 8 sets of infringement software, during which the Defendant reached reconciliation with the Plaintiff and signed a copyrighted software purchase contract with its authorized agent. The Administrative Authority made a decision to reduce the administrative punishment of the Defendant according to law in August, 2017. However, the Defendant did not pay for the software as agreed. In November of the same year, the Plaintiff applied to Shanghai Intellectual Property Court for pre-litigation evidence preservation. During the preservation, the Court, with the consent of the Defendant, preserved the evidence of the installed software involved in the case by means of random inspection, and calculated the number of software involved according to the proportion of random inspection. It was found that there were 73 computers in the Defendant’s business location through counting, and all the 15 computers selected had been installed with software involved. The plaintiff made an appeal to the Court to stop the Defendant’s infringement and ask for the compensation of economic losses and reasonable expenses totaling more than RMB 18 million.

Shanghai Intellectual Property Court, through trial, deemed that the Defendant installed the software involved in the business location without permission of the Plaintiff, which infringed the Plaintiff’s copy right to the software involved, and must bear the corresponding civil liability according to law. In consideration of all evidences of the case, and unit price of sales contract software submitted by both, the number of computers with the software involved during infringement, and the Defendant’s malicious subjective extent after being found out the use of the software involved, the Court sentenced the Defendant to compensate the Plaintiff for economic losses and reasonable expenses totaling 9 million RMB. The Court affirmed the original judgment in trial of second instance.

[Case Study]

The problem to be solved in intellectual property trial is how to actively explore specific ways of increasing compensation and reasonably determine the compensation for infringement damage and reasonable expenses for stopping infringement. In accordance with all evidences of the case, the Court has determined, by taking into consideration the legal compensation limit, which the Defendant should compensate the economic loss of the Plaintiff and fully supported reasonable expenses claimed, which reflects the attitude and determination of the Court to continuously strengthen the judicial protection of intellectual property rights. At the same time, the Court has also advocated the public to use copyrighted software and respect for the labor and efforts of software developers in a way to promote enterprise software legalization, and create a legalized business environment that respects and protects intellectual property rights, encourages and develops innovation.

 

2. The Applicant, Trimble Company applying for pre-litigation evidence preservation

[Case Review]

The Applicant, Trimble Company, was the copyright owner of computer software of Tekla Structures series, and it found out that Shanghai Branch of Zhejiang Green Building System Integration Co., Ltd. required applicants to be capable of using Tekla Structures software when recruiting engineers on its website. Trimble Company had verified that Shanghai Branch of Zhejiang Green Building System Integration Co., Ltd. had not purchased Tekla Structures software from it or its authorized dealers. Given that computers with the software involved were in the business location of Shanghai Branch of Zhejiang Green Building System integration Co., Ltd., which indicated that it was objectively unable to obtain the evidence, and that the evidence involved were all computer software and related data, which was easy to be hidden or destroyed due to its intangibility, once the evidence was transferred, hidden or destroyed, it would be difficult to obtain and identify relevant facts. As a result, Trimble Company asked the Court to give pre-litigation evidence preservation.

Shanghai Intellectual Property Court, through review, deemed that the Trimble’s application should be granted as the evidence it had applied for was legally liable to be lost or difficult to obtain and could not be collected by itself for objective reasons. During preservation, the Court had set up a professional preservation team composed of judges, executives and technical experts to timely and effectively complete the evidence preservation of more than 100 computers and related equipment in the business locations of Shanghai Branch of Zhejiang Green Building System Integration Co., Ltd.

[Case Study]

Increasing judicial protection of intellectual property shall not only be reflected in the construction and implementation of substantive legal system, but also in the implementation of procedural systems such as temporary injunction and evidence preservation. This case involved the commercial use of pirated software by end users of computer software, and the court had actively examined and dealt with the application of pre-litigation evidence preservation by the Applicant. For qualified applications, evidence preservation and fixation could be determined in time to effectively resolve the “difficulties to get evidence of infringement” in disputes. On account of the specialty and complexity of software data in the process of preservation, the Court had a built a team composed of “Judge, executives and technical experts” to give full play to the role of the external technical experts as part of efforts to obtain and fix the installation and deletion records of the computer software involved in time. In terms of working mechanism, working groups like technical expert group, on-site count group, on-site control group were set up to define and divide responsibilities in ways to effectively and accurately preserve the evidence.

The application of pre-litigation evidence preservation measures in accordance with the law not only fixed relevant evidence in time, but also fully demonstrated the judicial protection strength for intellectual property rights, and also provided referable working methods and ideas for exploring the preservation execution mechanism in line with the characteristics of such cases and improving the efficiency and accuracy of preservation implementation.

 

3. Dispute of Shanghai Chencheng Houxin Intelligent Technology Co., Ltd. (the Plaintiff) against Shanghai Huola Network Technology Co., Ltd. (the Defendant) for computer software copyright license contract

[Case Review]

The Defendant was the copyright owner of the game “Tangseng and Banshee,” and it signed a contract with the Plaintiff, which agreed to allow the Defendant to release and operate the iOS (including jailbroken version) and Android mobile versions. The Defendant had delivered the iOS jailbroken version involved on January 30, 2015, and the Android version on October 10, 2015. The Plaintiff deemed that: the involved iOS jailbroken version, through analysis and testing, provided poor data and low channel ratings, and few users would like to keep the game after playing it; the delivery time of the Android version was much longer than that of agreed in the contract; moreover, the official iOS version had not been delivered. Therefore, it asked the Court to determine the termination of the contract, requiring the Defendant to refund the contract amount of RMB 2.25 million and compensate for the loss of interest. If the contract could not be terminated, the Defendant should compensate for the loss of RMB 2.25 million caused by the extension of the contract performance. The Defendant counterclaimed and required the Plaintiff to pay the second license fee of RMB 1 million.

Shanghai Intellectual Property Court, through trial, deemed that as the two parties had changed the delivery terms of the game versions involved in the actual performance, and had agreed to deliver iOS jailbreak firstly, then the Android version, finally the official iOS version; and as the Plaintiff provided no evidence to indicate that problems of iOS jailbroken version were caused by the technical-related issues, the Defendant’s performance were basically in line with the new agreement of the two parties. As a result, the Court refused to support the Plaintiff’s request of terminating the contract involved. However, as the game involved was delayed in delivery, and the Defendant did have certain faults for the delayed performance, by taking into consideration the circumstances, the Court determined that the Defendant should assume the liquidated damages of RMB 500,000. The contract involved in the case had not been performed to the stage of paying the second license fee, so the counterclaim of the Defendant was not supported. The Plaintiff withdrew the appeal in trial of second instance.

[Case Study]

In the case of the game software copyright licensing contract dispute, it is necessary to distinguish the technical problems of the game itself from the market demands of the game operation for the identification of the rights and obligations of the game software licensing contract. This case accurately identifies the nature of the contract and clarifies that although the game software licensor has the obligation to deliver the normal-operated game to the operator, it has no obligation to ensure that the licensed game achieves market success or meets the needs of players.

 

4.Dispute of Shanghai Jintong Tourism Consulting Co., Ltd. against Hangzhou Qiaochu Network Technology Co., Ltd. for computer software development contract

[Case Review]

The Plaintiff, Shanghai Jintong Tourism Consulting Co., Ltd. signed the Service Agreement of Online Customer Service and Intelligent Customer Service Robot System with the Defendant, Hangzhou Qiaochu Network Technology Co., Ltd., which stipulated that the Plaintiff purchased the 365webcall online customer service system of server edition from the Defendant, and the attachment to the contract stipulated the functions of the current stage and the customized stage. The Plaintiff deemed that the Defendant failed to provide products in line with the contract on time, and to complete the customized development of the following four functions: 1. Keeping the historical chatting records of the purchase/supply within the validity period of 14 months; 2. Order display information launched based on the order on the right side of the purchase/supply window; 3. The function of the customer service staff starting the conversation when the purchase/supplier logging in; 4. Client-side installation of the purchaser/supplier. Therefore, the Plaintiff appealed the Court to determine the termination of the contract and ask the Defendant to return the first payment.

Shanghai Intellectual Property Court, through trial, deemed that, as for the questions 1-3 claimed by the Plaintiff, the functions needed to be developed were not clearly agreed in the contract, and there was no evidence indicating that such functions were the ones that the software should normally had. For question 4, the function was not stipulated in the contract involved. On the contrary, it was stipulated in the attachment that “The purchaser would consider it as a visitor, and the purchaser/supplier didn’t need to install independent client-side and could communicate through the webpage.” Therefore, it was clearly stipulated in the attachment that there was no need for the purchaser/supplier to install the client-side. The current claim of the Plaintiff was obviously inconsistent with the contract. Moreover, there was no delay in the performance of the Defendant. As a result, all claims of the Plaintiff were rejected. The Court affirmed the original judgment in trial of second instance.

[Case Study]     

Computer software is a system integrated with all sorts of functions, and there are usually organic links among functions. When interpreting a certain software function agreed in the contract, it is difficult to accurately understand the real intention of the party involved if the disputed terms of language are not connected with the contract context in terms of other agreed functions and the disputed terms are interpreted in isolation. As a result, the use of overall interpretation is especially important in the interpretation whether a computer software development effort meets the agreement of the contract. In this case, under the circumstance that the contract involved did not explicitly stipulate whether the function of “the purchaser/supplier install client-side” needed to be developed, the conclusion that the software involved did not need to develop the function was reached through the interpretation of other clauses in the attachment of the contract.

 

5. Dispute of Alexander Trade (Shanghai) Co., Ltd. against TMO for computer software development contract

[Case Review]

The Plaintiff, Alexander Trade (Shanghai) Co., Ltd signed the Contract of Wine Sales Website Development with the Defendant in March 2015. However, the Defendant did not design and develop the wine sales website completely in accordance with the agreement. The Plaintiff had brought a suit against to the Defendant to Shanghai Intellectual Property Court on October 21, 2015, and the two parties had reconciled in the trial that the Defendant handed over web site source codes involved to the Plaintiff and the Plaintiff paid to the Defendant the contract balance and maintenance cost of the first quarter. After that, although the Defendant handed over the source codes to the Plaintiff, the installation could not be completed. Moreover, the Defendant was not willing to provide installation and guidance services to the Plaintiff, which violated the “Reconciliation Agreement” signed by both parties. Therefore, the Plaintiff brought the case to the Court again, asking the Court to terminate the contract signed by both parties and ordered the Defendant to return the contract amount paid to the Plaintiff and assume the liability for breach of contract.

Shanghai Intellectual Property Court, through trial, deemed that, as a software developer, the Defendant should hand over the relevant technical materials necessary for the installation of the software to the Plaintiff, and should provide assistance or guidance when the Plaintiff said that the software involved could not be installed. Especially, given that both parties had reached reconciliation in the previous case, the Defendant should actively implement the reconciliation agreement. The Defendant’s behavior violated the principle of good faith and his contractual obligations as a software developer, causing the source code of the involved website unable to be properly installed and put into operation. Considering that the Plaintiff had entrusted another third party to develop the website, the Court affirmed that the failure of the contract purpose was caused by the Defendant’s violation of the obligation of assistance and guidance, and the Plaintiff had the right to ask for the termination of the contract. Therefore, the Defendant was ordered to return the contract amount already paid to the Plaintiff. The Court affirmed the original judgment in trial of second instance.

[Case Study]

In the computer software development contract, the entrusted party shall not only deliver the computer software and documents that meet the requirements stipulated in the contract, but also provide necessary assistance and guidance for the installation and use of the computer software to the entrusting party. If the computer software is unable to be installed and used due to the trusted party’s violation of the obligations of assistance, notice and guidance, which makes the purpose of the contract impossible to be realized, the entrusting party shall have the right to terminate the contract.

Generally, the entrusting party is not fully familiar with and proficient in how to install and use computer software, and needs to rely more on the assistance and guidance of the entrusted party. This is especially true when the software is developed by the entrusted party according to the non-general development technology. In this case, the Defendant used non-general rules to develop the software involved, which made it impossible for the Plaintiff to install the software even if the Plaintiff had entrusted a third-party professional. Under such circumstances, whether the Defendant provided assistance and guidance would directly affect the installation and use of the software involved. However, the Defendant did not perform its due obligations when the Plaintiff asked for assistance, and considering that the Plaintiff had entrusted an outsider to develop the website, the Court concluded that the Defendant’s behavior had made the Plaintiff unable to achieve the contract purpose involved. As a result, the contract involved should be terminated.

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