Why the Copyright Law could leave software unprotected

The current Copyright Law was last amended in 2010 and does include a software provision. It allows studying ideas of software through installing, displaying, transmitting and storing programs. Some academics argue this provision allows reverse engineering, as it does not stipulate all the possible ways to study software programs. However, the majority disagree because these are normal uses of software programs. The provision does not cover activities where objective codes are converted into source codes. Legislators perhaps left this issue unaddressed as it was too complicated to regulate when the Law was first adopted in 1990. In practice, the provision has never been cited to support or oppose the legality of reverse engineering. Numerous articles were cited by legal practitioners instead to support their cases.

Under the Copyright Law, some articles may be interpreted to support reverse engineering and others to the contrary. Article 12 of the Interpretation on Several Issues Concerning the Application of the Law in the Trial of Civil Unfair Competition Cases (关于审理不正当竞争民事案件应用法律若干问题的解释) promulgated in 2007 is one article that does support reverse engineering. It provides that the acquisition of trade secrets through independent development or reverse engineering does not constitute infringement of trade secrets. Source codes are usually protected as trade secrets and reverse engineering under this interpretation is broadly covered.

Article 6 of the Regulations on Computer Software Protection (计算机软件保护条例) provides that protection does not cover the ideas, processes, manipulations and arithmetic formulas of programs. The purpose of reverse engineering is to study the ideas and processes embedded in software, rather than to duplicate or use the programs. This article could then be interpreted to allow reverse engineering.

Article 10 of the Copyright Law and Article 6 of the Software Regulations grant owners exclusive rights to duplicate their programs. Reverse engineering inevitably requires duplicating programs, which is not allowed without prior consent of the owners, according to these articles.

At an IP law forum, a supreme court judge once said reverse engineering of software is more complicated than in other technology protected as trade secrets, because owners have the exclusive right to duplicate and modify their programs and these rights are fundamental under the copyright regime.

Judicial practice

Chinese courts have intentionally avoided discussing the legitimacy of reverse engineering during proceedings. Instead, they have focused on the activities defendants engaged in after reverse engineering is successful.

In December 2006, the Shanghai Higher People's Court rendered a decision concerning reverse engineering of a computer-aided design (CAD) program. The plaintiff developed an engraving system, which included a CAD program, a digital controlling system and a mechanical part. The CAD program outputs a design in an encrypted format and transmits it to the controlling system.

The defendant engaged in reverse engineering of the CAD program and obtained the protocol for encrypting and transmitting design information. They then used the same protocol to design a controlling system, compatible with the plaintiff's program. The Court's ruling failed to consider the legality of reverse engineering, but determined the encryption protocol is not protected by copyright and thus does not constitute infringement. This judgment indicates the Court's position that reverse engineering is not infringement if the activities conducted after do not violate any provisions protecting copyright.

In June 2008, Shenzhen Intermediate People's Court rendered a criminal judgement for copyright infringement. The defendant engaged in reverse engineering of an instant messaging program, owned and distributed by the plaintiff. After conducting reverse engineering, the defendant developed a plug-in to improve the functionally of the program. It also blocked the program's advertisements to display the defendant's ads, from which they generated profits.

The Court did not discuss the legality of the reserve engineering. Instead, it determined that the plug-in modified the instant message program and it is infringement to modify a copyrighted work without consent by the plaintiff. The Court again did not focus on the reverse engineering, but the activities after.

Both decisions reflect the court's practical approach when determining if the defendants engaged in reverse engineering to compete with the plaintiff. This position largely corresponds to the draft Amendments of the Copyright Law. The new provision in the Law allows the copying and interpretation of software programs to acquire compatibility information. According to the official explanation, interpretation includes analysing software programs from object codes to sources codes. The same provision imposes a number of restrictions on lawful reverse engineering activities.

Functions

Reverse engineering aims to reveal and study the ideas and processes of software programs. The draft Amendment only permits reverse engineering to acquire minimal information about the compatibility of programs. This includes the format of information input and output from the program as well as the communication protocol between the software and other programs or equipment. Typically, this information does not include arithmetic formulas used in the software. Reverse engineering under the draft Amendment does not allow developing programs with ideas or processes the same or similar to those of the original program.

It is unclear whether reverse engineering can be used for fair use purposes under the Software Regulations and the draft Amendment. For example, making modifications to apply the program to the user's environment or to improve its functionality for self-use purposes. The restriction on compatibility information appears to be in line with current judicial practice. However, it appears contradictory to the principle under the Copyright Law (and the draft Amendment) that protection does not cover the ideas, processes, theories, mathematic concepts or methods embedded in the work. The limitation of reverse engineering when acquiring compatibility information prevents the party from studying or adopting the ideas and processes embedded in the original software program.

Restricting use

The draft Amendment permits two activities of reverse engineering without prior consent from software owners: copy and interpretation. These are both basic activities that make up reverse engineering. The draft Amendment defines copy as the reproduction of a work into one or more copies by printing, copying, recording, photo-taking, digitalisation or other manners. Installing software onto a computer and the output of source codes (which reverse engineering cannot avoid) are both classed as copy under the definition.

Interpretation is converting a work from one language to another. Objective codes and source codes are two language forms of a program. The process of converting the objective codes into source codes falls within interpretation and is permitted under the draft Amendment.

The draft Amendment requires the party engaging in reverse engineering owns a legitimate copy of the software, purchased through lawful channels. The parties are subject to the terms and conditions of the licence agreements, which raises the issue of whether licence agreements contractually prohibit reverse engineering. The Amendment also prohibits three ways of using information from reverse engineering: information to third parties; developing software programs which compete with the original program; and the use of the information to conduct infringing activities.

Selling information gathered through reverse engineering is prohibited. This ensures information does not enter the public domain. However, it is unclear if this prevents outsourcing reverse engineering to third parties. Developing software programs considers how information is gathered. Parties can only acquire compatibility information through reserve engineering. Similarly, they can only use the information to develop products compatible with the original program. Software that competes or has the same function is not allowed. Infringing activities is when the information is used to make illegal copies or removing IP protection measures and reverse engineering actually is infringement.

Prohibitive measures

In practice, software owners take all measures necessary to prevent source codes from being disclosed. Two typical measures are contractual prohibitions on reverse engineering (prohibitive provisions) and technical measures to prevent reverse engineering (prohibitive measures).Under current laws it is unclear whether the prohibitive provisions and prohibitive measures are enforceable against reverse engineering. The draft Amendment also has no clear rule on this. However, some cases highlight the court's attitudes towards the prohibitive provisions and measures.

A software licensing agreement usually contains a prohibitive provision. Anyone who purchases a software program is in theory party to the provisions. The question is whether they are enforceable. Since current laws do not include reverse engineering as a type of fair use, it is widely accepted that it falls under freedom of contract, when determining if it is allowed. In other words, a prohibitive provision is enforceable. Beijing Intermediate People's Court upheld this understanding during the first instance trial of Microsoft's case involving the discussion over the enforceability of a form contract.

If the draft Amendment is passed and still includes the provision on reverse engineering, will it invalidate the prohibitive provision? Probably not as a matter of judicial practice. Chinese courts interpret contractual provisions close to the original intention permitted by law. Essentially, if a contractual provision partially contradicts a mandatory law, that section is removed from the provision. However, the rest of the provision is enforceable. If the draft is passed, the prohibitive provision will likely prohibit reverse engineering activities other than those expressly permitted.

To protect source codes, copyright owners often apply prohibitive measures to their software. According to the Software Regulations, it is infringement to intentionally avoid or destroy the technical measures software owners apply. There are no clear rules on this issue under current laws or the draft Amendment. However, there is precedence and it shows avoiding or destroying prohibitive measures for legitimate reverse engineering is not infringement. In the CAD decision, the Court determined technical measures are protected to the same extent as copyrightable works. They cannot be used to protect information not protected by law, such as compatibility information. Essentially, parties may avoid or destroy prohibitive measures to acquire information about compatibility.

Public standing

The industry's main concern from the draft Amendment is that explicitly allowing reverse engineering threatens highly confidential source codes. Software companies argue that it is difficult to prove whether a third party engaged in reverse engineering for compatibility information or to develop competing software. In addition, compatibility information may constitute valuable confidential information from other programs that work together with the initial software.

Owners also face reduced capacity to generate profits from surrounding products. For example, in the mechanical industry, digital machine manufacturers generate stable revenues by selling service parts. These manufacturers can charge high prices and maintain an advantageous market position because they own the software which controls key parts of the machines. Specialised manufacturers cannot produce service parts compatible unless they obtain the compatibility information from the software. The reverse engineering provision gives them the opportunity to access this information.

Legal practitioners have welcomed the provision, simply because it is the first rule of its kind. It indicates that legislators are considering complicated copyright issues as a result of sophisticated commercial practices. However, there are many areas of reverse engineering that remain unclear.

Connie Carnabuci and Yang Xun, Freshfields Bruckhaus Deringer, Hong Kong