Case of the Day: Beijing Zhongyi Zhongbiao Electronic Information Technology Co. v. Microsoft

The case of the day is Beijing Zhongyi Zhongbiao Electronic Information Technology Co. v. Microsoft Corp. (W.D. Wash. 2013). In 1995, Microsoft and the Chinese government signed a memorandum of understanding, under which Microsoft was to develop a Chinese version of Windows 95 using fonts that met the government’s standards, and the government undertook to help procure the fonts. Later, Microsoft, the Chinese government, and Zhongyi entered into a license agreement under which Microsoft received a perpetual, non-exclusive, worldwide license to use Zhongyi fonts.

In 2007, Zhongyi sued Microsoft in Beijing for copyright infringement. The claim was that the license agreement applied only to use of the fonts in Windows 95 and that other uses were infringements. The Chinese court construed the license in light of the memorandum of understanding and held that the scope of the license could not have exceeded the uses the parties, according to the MOU, had intended. The court enjoined use of the fonts in products other than Windows 95. The intermediate appellate court affirmed, and Microsoft appealed again. The second appeal was still pending at the time of today’s case.

Zhongyi sued Microsoft again for infringement, this time in the Western District of Arkansas. The case was later transferred to the Western District of Washington. Microsoft moved to dismiss for failure to state a claim on the grounds that the license agreement was not ambiguous and that it clearly was not limited to Windows 95. The judge agreed with Microsoft’s reading of the agreement, which, I have to say, seems pretty clearly right. The question, though, was whether the US court was required to give preclusive effect to the Chinese judgment.

The judge said no, for two reasons. First, the Chinese judgment was not final because there was still an appeal pending. Isn’t the court just wrong to suggest that the pendency of an appeal deprives a judgment of the finality necessary for it to have preclusive effect? I think the general rule is the contrary. See 18A Wright & Miller § 4433. Second, and more to the point, the judge observed that she was not bound by the legal or factual findings of a foreign court. She’s right, because the Chinese judgment is not a judgment for money damages, and thus no statute requires US courts to recognize the judgment. I think, though, it would have been better for the judge to frame the issue from the perspective of comity rather than simply saying there is no obligation to accept the foreign court’s conclusions.

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