In late July, 2021, u-blox, a fabless semiconductor company that is a leading global provider of positioning and wireless communication technologies and services (“u-blox” or “Plaintiff”), received judgment in its first-instance copyright infringement suit where it alleged copying of its source code by  Techtotop Microelectronic Technology Co. Ltd  (“Techtotop” or “Defendant”) on Techtotop’s TD1030 chip.  The Hangzhou Intermediate People’s Court was willing to draw adverse inferences – both as to liability and damages – after u-blox had presented prima facie evidence of infringement and the quantum of damages.  Techtotop refused to comply with disclosure orders – including an evidence preservation order – made by the Court and was found to infringe and be liable for damages on the basis they had failed to disprove the prima facie case against them.

Plaintiff filed the lawsuit in 2019 after it discovered close similarities between Defendant’s TD1030 chip and modules and its own M8 GNSS receivers that, it believed, could only have arisen through copying of its source code. U-blox GNSS chips are widely used in devices such as vehicles and smart watches to provide satellite positioning. In this case, it was impossible to compare object codes because the software was loaded onto a chip and u-blox did not have evidence that Techtotop had access to its source code.  U-blox did however, analyse the functionality of the software and found there were similar bugs in the software, thereby helping to establish that there had been copying of u-blox’s code.

Plaintiff provided expert evidence that that the functionality of the accused chip was the same with its own and that there were similar bugs. The Court ordered Defendant to produce the source code.  Techotop refused to do so based on alleged grounds of national security. Techtotop argued that there was no evidence it had access to u-blox’s code.  Plaintiff, in response, argued that access to source code can be obtained in many ways, including hacking, and that the bugs in the software cannot be a coincidence.  Techotop also refused to produce sales records.  However, on its website, it claimed to have sold more than 3 million units per month of the infringing chip.

In Court, Defendant argued that there was no evidence it had access to u-blox’s code and there was not enough evidence to establish infringement.  Defendant claimed that, in fact, the bugs identified were not bugs.  Plaintiff, in response, argued that access to source code can be obtained in many ways, including hacking, and that the bugs in the software cannot be a coincidence.

The Court’s determinations regarding both infringement and damages relied, in particular, on Article 75 of the Several Provisions of the Supreme People’s Court on Evidence for Civil Actions (2001) which provides:

Where evidence exists proving that one party is in possession of evidence but refuses to provide it without justified reasons and the other party claims that such evidence is unfavorable to the party in possession of the evidence, an inference that the other party’s claim is valid may be drawn.

Article 54 of the recently revised Copyright Law also provides for a burden of proof reversal, particularly with respect to damages.

Plaintiff was granted a permanent injunction restraining Techtotop from infringing its software code and awarded damages of RMB 10 million (approx. US$1.6M), as well as legal costs.  Techtotop has a right to appeal the decision. At present it is not known if they will appeal.

This award puts the u-blox first instance decision into the top 3 rankings for highest damages awards for software copyright infringement in China, based on research published in 2020, which was previously discussed here.  The willingness to draw adverse inferences and shift the burden of proof is particularly important for software disputes, where comparison of source code can be very burdensome or even impossible to conduct if the other party’s source code cannot be accessed.

This blog was initially prepared by Sharon Qiao and Robin Su with the assistance of Landy Jiang, of the Rouse network firm Lusheng, which acted for u-blox.   Final editing and revisions to the blog were prepared by Mark Cohen of BCLT.

Photo: TD1030 chip