This case broke late last week, and I’ve been trying ever since to figure out something significant to say about it.

The global software industry was on Friday celebrating what it said was a landmark victory against Chinese piracy after a district court sent four men to prison and handed them hefty fines for distributing counterfeit versions of Microsoft’s Windows XP and other computer programs over the internet.

Huqin District People’s Court in Suzhou sentenced Sun Xiansheng and Hong Lei, the founders and main executives of Tomato Garden, a website that generated advertising revenues by offering pirated software for free, to 3½ years in prison and a fine of Rmb1m ($146,000) each. Others involved got smaller fines and jail sentences.

The industry hailed the verdict as a milestone in the fight against software piracy in China. (FT)

I have to acknowledge that this is very good news.

The counterfeiters were thrown in jail, the IP owners (via the government) were vindicated, and the system worked, even against a large successful company. To the extent that this is an indication of progress, then all is good.

Coupled with the recent win in the WTO A/V products case, it has been quite a good summer for the digital entertainment folks thus far.

To be completely honest, though, I do have to admit the other side of this. The infringement was pretty obvious and straightforward in this case, and it appears as though the activity was going on for some time. I would really like to know when Microsoft first became aware of this and how long it took to resolve the problem.

If the infringers were monetizing their little business through online ads, this means that they had heavy traffic and were around long enough to generate that traffic. In other words, this was allowed to go on for an extended period of time, which is not so good.

The headline news here is that this was a criminal case. This is the Holy Grail of IP enforcement – tough criminal sanctions. The IP lobby has been preaching this to Beijing since time immemorial, with little effect. In a typical IP enforcement case, it is still very difficult to get the police involved or convince the prosecutor’s office to go after infringers.

There are exceptions, and there are some indications that things are changing. If the offense are large in scale (like this case) and the IP owner is large/famous, political pressure can be brought to bear. This is good if you are Microsoft and not only have central government and local government guanxi, but also dedicated government relations staff, but not so good if you are a small software company with 10 staff and RMB 5 million in sales.

I guess I’ll take this as good (if slightly boring) news of a win for the good guys, and we can wait and see whether this was evidence of a greater trend or not.