China's courts pass controversial rulings on open-source licensing

In a recent decision that could have legal implications on the use of open-source software in China, the Beijing Intellectual Property Court (BIPC) used a controversial test to determine whether software developer YouZi infringed on copyright or simply exploited open source technology when developing its product "APICloud".

The court found that YouZi did in fact violate copyright in the development of its product – a decision that has proved to be controversial because the justices employed a legal test that differs from the reasoning used by courts in other prominent jurisdictions, such as the US.

The case began when business-software developer Digital Heaven filed a lawsuit claiming that YouZi had copied the code for three plug-ins contained in its development tool "HBuilder". In its defence, YouZi pointed out that Hbuilder is based on a GNU open-source module known as "Aptana", which is licensed under General Public Licence (GPL) 3.0. Since HBuilder uses the code developed by a third party and released under GPL, YouZi argued, HBuilder is also open-source software with a source code any third party should be entitled to use to build derivative work.

To arrive at a decision, the BIPC stated that since Digital Heaven claimed that only three of HBuilder's plug-ins (and not its entire software) were infringed, it was necessary to identify whether these plug-ins are subject to the GPL, specifically Section 5 and the Section 7 Exception of the Aptana-GPL Exception License, which stipulates that the works which are identifiable sections of the modified version, are not derived from the Program, and can reasonably be considered independent and separate works would not fall under the GPL.

Despite acknowledging the GPL and the Aptana-GPL Exception License, the court did not elaborate on the interpretation of these two licenses, but instead applied a very simple test. According to an examination of HBuilder conducted during the trial, the plug-ins were deemed to exist in three separate folders. The examination also showed that the GPL source file was not stored in these three folders or in Hbuilder's root directory. Without further examination of the open-source Licences, the court ruled that since there was no GPL open-source file in HBuilder's three folders and root directory, the GPL did not apply to the three plug-ins and could not be considered derivative works under the GPL.

The court ruled in favour of Digital Heaven, and against YouZi.

But the ruling's true impact was linked to the approach the Chinese IP Court took to define derivative works, which to critics was both simple and highly questionable. This approach differs from US Courts, which often use the "abstraction-filtration-comparison" (AFC) test to determine whether a computer program is a derivative work. In Germany, the Hellwig vs. VMware lawsuit could shed light on the interpretation of the GPL's derivative work provision. However, the court of first instance dismissed the case on the basis of German evidence law and did not elaborate on the interpretation of the derivative work provisions.

Validity of open source licences

In China, however, this is not the first time that open-source licences have been before the courts. In 2011, the plaintiff Huilan Information Technology filed a lawsuit against Beijing Zhonghengdian claiming that the defendant's software “G-BOP” and websites it had developed copied code from Huilan's web content management software “EasySite”. This case was tried in the Beijing Haidian District People's Court, and not the BIPC.

Beijing Zhonghengdian claimed that EasySite, G-BOP and the websites were all derived from DNN (DotNetNuke), a third-party software app licensed under a standard BSD agreement, and that EasySite also contained codes from other software distributed under the GPL. In short, the defendant argued that anyone using EasySite is not infringing on the plaintiff's copyright.

In this case, the court acknowledged open source licences and ruled that because "the open source agreement is a true meaning representation between the publisher and the user of the open source software, its content does not violate the prohibition of laws and administrative regulations, and is legal and effective”.

The court decided that failure to comply with open-source licences constituted “breach of contract”.

GPL is not “viral”

What lessons can be learned from these cases? In both suits, the defendants believed that when software contains code licensed as open source, the software automatically becomes open source and can be freely used. This represents the most common misunderstanding about open-source licences, particularly the GPL and "copyleft" concept.

When one combines its proprietary code with a GPL code, this does not mean that the proprietary code is automatically licensed under the GPL. The GPL is not “viral”. If the owner of the proprietary code does not license it under the GPL, he is in breach and loses the right to use or modify the code under GPL.

Although they may be controversial, recent judgments in China have made clearer the legal implications of using open-source software in this jurisdiction. As a result of these cases, open-source licenses have been recognized by Chinese courts and may be enforced in court. It remains to be seen, however, whether the Beijing Intellectual Property Court, established in 2014 as a specialized court for intellectual property disputes, will share the same opinion as the other courts when passing judgments on copyright infringement and open-source licences.

For more information on this issue, and strategies to mitigate the risks of litigation in China, please contact Markus Deck and Philippe Heinzke.