US court rejects dismissal in China Internet filter case

A U.S. court rejected motions to dismiss defendants in a US$2.2 billion lawsuit involving a Chinese government-backed Web filtering package that was allegedly built from stolen code, stating that the court had jurisdiction over the case even though the Web filter makers are in China.

The U.S. District Court for the Central District of California on Monday denied the motions brought by the China-based Zhengzhou Jinhui Computer System Engineering and Beijing Dazheng Human Language Technology Academy.

The two companies developed the Web filtering package called Green Dam Youth Escort, which was designed to filter Internet porn, but also blocked politically sensitive content. The Chinese government had originally required the software be installed on all new PCs sold, but authorities backed off the mandate following an outcry from Chinese consumers and businesses.

U.S.-based Cybersitter, however, alleges the Web filter was built by copying more than 3,000 lines of code from its filtering software. In January 2010, Cybersitter filed a lawsuit against the Web filter's makers, along with the Chinese government and PC makers including Lenovo and Asustek for alleged copyright infringement and engaging in conspiracy to distribute the software in both China and outside the country including the U.S.

Cybersitter filed the lawsuit hoping to "strike a blow" against intellectual property rights infringement it believed to be common among foreign software manufacturers and distributors.

But the Web filter makers, Dazheng and Jinhui, had moved to dismiss themselves in the case, arguing that the dispute should be heard in China. The Web filter makers and another defendant, Chinese electronics vendor Haier, also argued the U.S. court had no jurisdiction over the case because the companies were acting solely in China.

The U.S. court dismissed the motions, stating the companies had allegedly committed the criminal acts knowing that Cybersitter was based in California and that its business there could be damaged.

Haier had also moved to dismiss the entire lawsuit, arguing that the case's key defendant, the Chinese government, was immune from a U.S. court's jurisdiction. But the court dismissed that motion and pointed to an exemption in the law, stating that a foreign state can be tried if engaged in a commercial activity that has had a direct affect in the U.S.

According to Cybersitter's lawsuit, the Chinese government paid the Web filter makers about $6.9 million for a one-year license to distribute the software.

Dazheng, Jinhui and Haier could not be reached for immediate comment.

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