Western firms battle mainland's well-connected pirates
A ramshackle, two-storey concrete building in western Beijing is at the heart of the battle to stop piracy in China.
The building is the home of Beijing Central Press Union Digital Technology, one of the country's largest manufacturers of compact disks. The company's website proudly states that it was founded by 13 units of the People's Publishing House, including the large San Lian bookstore chain and the People's Music Publishing House.
But more importantly, it is the target of a lawsuit by Microsoft Corp, which alleges that Beijing Central Press - along with two other CD companies in Tianjin - is churning out thousands of illegal copies of Microsoft software.
The lawsuit marks a change of tactics by the US giant. Where Microsoft used to line up its lawyers against corporate consumers, this is the first time the company has filed suit against a manufacturer. That is because Chinese firms increasingly are moving into mass production with the goal of exporting cheap copies of expensive software.
Beyond Microsoft's own concerns, the case is a sign of the deep roots piracy has within the country.
Many state-owned firms, lured by big profits, ignore top-level orders to halt piracy, an indication that it has become part of the fabric of the country's economic system. China Central Television (CCTV) is a major consumer of pop music from Taiwan, Hong Kong and the west, but it does not pay a single yuan in royalties.
Visitors to Beijing quickly notice how many office buildings and restaurants openly play music by popular western musician Kenny G, who never sees a cent in royalties.
Given the high-level state connections of many organisations stealing intellectual property, western companies tread softly.
The Microsoft case became known only after a question was raised by a reporter at a recent briefing of senior officials from the country's intellectual property rights (IPR) working group.
The Office of the National IPR Protection Working Group, chaired by Vice-Premier Wu Yi, includes senior officials from 12 government agencies, but acknowledges that success has been modest.
Chinese companies stole as much as US$3.8 billion in pirated software last year, according to a survey by the Business Software Alliance (BSA), a trade group.
With more than 200 employees, Beijing Central Press annually produces 150 million DVDs, CDs and other media material. The company said it copied only material that had official approval.
However, the rundown appearance of the plant may be an indication that it is desperate to keep the orders flowing, even at the risk of flouting government regulations.
Microsoft is not the only company fighting back through the Chinese courts.
Last month, the BSA won a judgment in a Beijing court against Beijing Zhihuan Enterprise Management for large-scale piracy of software from US company Borland.
Meanwhile, foreign music publishers are preparing to file law suits against mainland companies that own and distribute western music without paying royalties. But this is unlikely to be a swift process, with the mainland record companies and distributors both claiming it is the other's responsibility to pay the royalties.
Also, as with the Microsoft case, many of the accused companies are state owned and have connections in high places, making the lawsuits difficult.
