Bowen YU
Chinese Attorney-at-Law
Beijing Wei Chixue Law Firm

Introduction:

In the era of digital economy, the blooming of digital products has led to the widespread implementation of technical measures to protect these products from unauthorized use. Rights holders frequently employ these measures to safeguard their digital products, such as software applications, digital games, and multimedia content. However, many infringers use illegal means to “crack” these protective measures, even manufacture and distribute tools designed to “crack” them for personal gains. For example, among the top ten intellectual property cases announced by the Supreme Court in 2023, the case of making and selling pirated “PassDog” (Judgment (2023) Shanghai 03 Criminal First No. 23) is a typical case involving the provision of cracking tools.

This article will explore the current legal framework, the concept and legal nature of “cracking behavior,” and the associated liabilities. The discussion will also cover the consequences of engaging in such illegal activities. 

1. “Technical Measures” and “Cracking Behavior”

In the age of digitization and networking, the dissemination of copyrighted objects, such as software and audio-visual products, has transcended traditional media constraints. Once uploaded to the internet, these materials can be quickly and widely disseminated, posing unprecedented challenges for copyright holders in protecting their rights. Apart from conventional post-infringement legal remedies, copyright holders have increasingly adopted various technical measures to more effectively safeguard their legitimate rights.

In the context of copyright law, technical measures refer to the methods employed by copyright holders to prevent unauthorized access, viewing, listening, copying, or dissemination of literary and artistic works, performances, audio-visual works, or computer software in a digital environment. According to China’s copyright law, these technical protection measures are generally categorized into two types: access control measures and those that directly protect the exclusive rights of copyright holders.

Access control measures involve the technical measures including setting “keys”, to prevent unauthorized access to literary and artistic works or running computer software, thereby encouraging users to pay for their use. For instance, some video platforms restrict movie viewing to premium subscribers only. On the other hand, technical measures are also designed to safeguard the exclusive rights of copyright owners, such as anti-piracy measures that prevent unauthorized duplication. For example, when anti-piracy measures are integrated into specific console games, purchasers cannot directly duplicate the game files to computers and disseminate it.

“Cracking behavior” is not a legal term, but simply put, it refers to the act of circumventing the “technological measures” embedded on the hardware or software of the products to achieve the purposes of using or duplicating the hardware or software. Circumvention of technical measures consists of two types of behavior, one of which is the direct cracking and circumvention of technical measures, therefore called “direct circumvention”. In contrast to “direct circumvention”, the other type is the act of providing the public with software and hardware tools for circumventing technical measures, which is referred to as “indirect circumvention” of technical measures. In fact, a simple online search reveals that various tools and services for circumvention technology are readily available.

2.China’s Current Legal Provision

The World Intellectual Property Organization (WIPO) Copyright Treaty (1996 version) and the WIPO Performances and Phonograms Treaty (1996 version) stipulate that contracting parties shall provide effective legal protection for technological measures. Since then, contracting countries have incorporated “technical measures” into their legal protection frameworks.

The amended Copyright Law of China defines “technical measures” in Article 49, paragraph 3, as “The technical measures stipulated in this Law refer to effective technologies, devices or components used to prevent or restrict the browsing or viewing works, performances or audio-visual recordings without the authorization of the right holder, or the making available of works, performances or audio-visual recordings to the public through an information network.”

Initially, the definition of technical measures and related prohibitive clauses were mainly stipulated in Articles 4, 26 and 29 of Regulation on the Protection of the Right of Information Network Dissemination, as cracking behavior primarily involved the information network dissemination rights of copyright. Prior to the amendment of the Copyright Law, only direct cracking behavior was deemed infringing. However, in practice, many cracking behaviors infringe upon rights beyond network dissemination right, leading to a strong call for the explicit inclusion of cracking behavior infringing upon non-network dissemination rights within the scope of infringement.

The Copyright Law, amended in 2020, stipulates in Article 49, paragraph 2, that “Without the permission of the copyright holder, any entity or individual shall not manufacture, import, or provide to the public the devices or components to circumvent or destroy technological measures. They shall also not intentionally provide technical services for others to circumvent or destroy technological measures. Exceptions are provided by laws and administrative regulations.” This amendment encompasses cracking behaviors beyond the realm of information communication right within the scope of copyright infringement, and further affirms it as copyright infringement.

3. The Determination of Infringement of Cracking Behavior

Article 49 of the Copyright Law stipulates that “In order to protect copyright and copyright-related rights, right holders may take technical measures.” It can be seen that copyright owners are entitled to take technical measures to protect their copyright. However, technological protection measures should have the necessary restrictions and boundaries; otherwise it will lead to the abuse of technological measures, deviating from the original intention of copyright protection. Based on the typical cases in judicial practice and the judicial guidelines of Beijing High Court, the author summarizes the applicable conditions for the determination of infringement of cracking behavior as follows:

a. The purpose of technical measures is to protect legitimate copyrights

Technical measures under Copyright Law, as previously discussed, refer to the protective measures taken to safeguard the lawful interests of rights holders, encompassing controls over access, viewing, and utilization of works, performances, and audio-visual recordings. These measures align with the objective of safeguarding legitimate copyright interests.

In legal practice, the utilization of technical measures to safeguard business models unrelated to copyright does not qualify as a technical measure under Copyright Law. Case No.48 in the Supreme People's Court's series of Guiding Cases, where Beijing Jingdiao Technology Co., Ltd. sued Shanghai Nake Electronics Technology Co., Ltd., delves into the determination of the infringement of “circumvent technical measures.”

Regarding Beijing Jingdiao’s technical measures, which set the output data of the software in a specific file format, the aim was to ensure exclusive operation of the software on its designated engraving machine, thereby creating a tie-in relationship between the software and the equipment. This strategy does not fall within the scope of technical measures that copyright owners use to protect their software copyrights.

Ultimately, the court held that another person’s development of software to read a specific file format set by Jingdiao did not constitute an infringement of computer software copyright.
In addition to the purpose of technical measures as addressed in the referenced case, the Beijing High People's Court, within its Guidelines for the Handling of Copyright Infringement Cases, specifies four types of technical measures that are not protected by Copyright Law:

(1) Bundled Sales: This measure involves the sale of works, performances, or audio-visual recordings bundled with other products or services.

(2) Geographical Pricing: This measure refers to the price differentiation for works, performances, or audio-visual recordings across different geographical areas.

(3) System Disruption: This measure is aimed at disabling the computer systems of users who have not been authorized to access works, performances, or audio-visual recordings.

(4) Other Measures: Any technical measures that do not directly relate to the lawful interests protected under copyright law.

It can be seen that, the technical measures identified by the Beijing High People's Court as non-protected are primarily those that cater to business strategies, operational requirements, or cyber security needs, and do not directly related to copyright protection.

b. The technical measures should be effective

The technical measures protected by the Copyright Law refer to those that can effectively prevent infringement in normal usage environments, instead of requiring them to be impossible to circumvent or decrypt. In the judgment (2020) SPC IP Civil Final No.1206 where a company sued an individual for alleged infringement of computer software copyright, it was emphasized that the effectiveness of technical measures for a certain act is relative; they should generally not be easily circumvented or decrypted but not necessarily be impossible to circumvent. The company involved had implemented technical protection measures requiring the simultaneous setting of DEBBUR and DEBBUR3AXIS keys, which posed a significant challenge for an average computer user based on their average computer operation knowledge and skills. Therefore, the court recognized the company’s use of effective technical protection measures for the software involved in the case.

The Beijing Higher People’s Court’s Guidelines on Hearing Copyright Infringement Cases stipulate in Article 27 that technical measures protected by copyright law shall be effective. The effectiveness of these measures should be evaluated based on whether an average user can circumvent or decrypt them using ordinary methods, and the ability of technical experts to do so does not undermine their effectiveness. 

c. The technical measures should be legitimate:

Copyright, as a form of intellectual property, inherently embodies a right to prohibit others’ unauthorized use. The right holder can acquire a monopoly of use based on this right, thereby securing corresponding benefits. However, if the right holder illegitimately expands the protection scope beyond the statutory limits, even at the expense of public interests, then the technical measures should not be entitled to protection.

In the case heard by the Third Intermediate People's Court of Shanghai (Judgment (2023) Hu 03 Criminal First No.23) involving the production and sale of pirated “PassDog”, the court examined the legitimacy of the technical measures in question. It was determined that the “security system” installed by the Company in its medical device terminals functions similarly to a “door access system.” Authorized personnel utilize “PassDog”, akin to “access cards,” to gain access through this system. This enables access to encrypted files and the utilization of local encryption repair tools only after successful verification. The court determined that the design of this encryption mechanism aims to protect software functionality and encrypted files, without the abuse that could endanger public interests. Therefore, the system’s protective purpose is deemed legitimate.

d. Exceptions  of Cracking Behaviour  not Constituting Infringement Prescribed by Copyright Law

Generally, once it is established that a right holder has implemented effective technology protection measures, it can be presumed that the accused infringer has committed cracking behavior as long as the behavior controlled by such technical measures exists, unless the accused infringer can provide evidence to the contrary. However, not all the cracking behaviors against the technical protection measures constitute an infringement.

The technical measures under legal protection are aimed to safeguard the copyright itself, rather than to hinder technological and cultural progress or to exclude legitimate competition. In order to balance the interests of copyright holders and the public interests, in addition to the limitations on right enforcement by copyright holders under the general fair use provisions stipulated in Article 24 of the Copyright Law and other provisions, Article 50 of the existing Copyright Law also stipulates five circumstances in which technical measures may be circumvented:

(1) Provision of a small number of published works for use by teaching and research personnel for classroom teaching or scientific research, and the works cannot be obtained through normal channels.

(2) Provision of published works in accessible formats for individuals with reading disabilities on a non-profit basis, when such works cannot be obtained through normal channels.

(3) Government agencies perform official duties by administrative, supervisory, or judicial procedures.

(4) Evaluating the security of computers, systems, or networks as part of security testing procedures.

(5) Encryption research or reverse engineering of computer software.

Therefore, if the cracking behavior falls within these exceptions, it constitutes a ground for non-infringement, qualifying as fair use of copyright and not amounting to copyright infringement. However, the entity engaging in cracking shall not provide others with technical means, devices, or components to circumvent technological measures, nor can they infringe upon rights that copyright holders lawfully possess. The entity that is engaging in cracking should bear the burden of proof  that his behavior falls within the exceptions stipulated by the Copyright Law.

e. Burdens of Proof for the Rights Holder

It should be noted that, from the point of view of proof, the right holder should bear the burden of proof as to whether or not it has taken technical measures, as well as the purpose and effectiveness of such measures. For instance, in the retrial case of Foreign Language Teaching and Research Press (FLTRP) and Guangzhou Xiaotaiyang Education Technology Co., Ltd.(Judgment (2016) Yue Civil  Retrial No. 3308), the Guangdong Higher People’s Court ruled that “in the absence of sufficient evidence proving that FLTRP implemented technical measures to control the use of its audio recordings, FLTRP’s claim that Xiaotaiyang Company deliberately circumvented or destroyed these technical measures without authorization, thereby infringing the right of information network dissemination, lacks sufficient factual and legal basis. ”

In author’s opinion, when determining whether the rights holder has implemented effective technical measures, the court should not impose an excessively high standard. On condition that the rights holder provides preliminary evidence, the court can consider the rights holder’s industry, business model, and the infringer’s subsequent use of the work to determine whether effective technical measures were in place. Additionally, the author suggests that, if time and budget permits, the rights holder may consider applying for judicial authentication to enhance the chance that the implementation of technical measures can be recognized by the court.

4. Legal liability of Cracking Behavior

Article 53 of the Copyright Law specifies the civil liabilities for engaging in cracking behavior, including the cessation of infringement, elimination of negative effect, apology, and compensation for losses. Additionally, administrative authorities are entitled to impose penalties, give a warning, confiscate the illegal income, confiscate, harmlessly destroy and dispose of the infringing copies as well as the materials, tools, equipment, etc., which are mainly used for making the infringing copies, and may also impose a fine. Furthermore, the Criminal Law Amendment (Eleven) encompasses “the act of intentionally circumventing or destroying technical measures implemented on works, sound and video recordings, etc., to protect copyright or related rights” within the scope of copyright infringement. Thus, if cracking behaviors meet the threshold for criminal case and are deemed to constitute a crime, the infringer may also be subject to criminal liability.

The Chinese copyright law does not differentiate the legal liability between direct and indirect circumvention in cracking behavior. Therefore, indirect circumvention, such as providing devices or services for cracking, is also included in the scope of copyright law infringement, bearing the corresponding civil and administrative liability for infringement. It should be noted, however, that the Criminal Law Amendment only provides for the act of “intentionally circumventing or destroying” technical measures, but neither the criminal legislation nor the judicial interpretations provide a specific definition of the act of “circumventing or destroying”. Under the principle of legality, it is doubtful whether the indirect act of circumvention of “providing the means of circumvention” is subject to criminal punishment.

The author opines that the nature of the act of indirect circumvention, which provides the means of circumvention, is essentially the same as the act of direct circumvention, both of which are a specific act against a protected work by means of copyright infringement. Both the Copyright Law and the Regulations on the Protection of the Right of Information Network Dissemination and other prerequisite laws regard indirect circumvention as a kind of copyright infringement, and also explicitly stipulate “If it constitutes a crime, criminal responsibility shall be investigated according to law” in Article 53 of the Copyright Law. Therefore, the connotation of cracking behaviors, i.e., circumvention of technological measures in the Criminal Law should be consistent with the aforementioned prerequisite laws.

Furthermore, due to the dissemination of indirect circumvention, it is often more harmful to society than direct circumvention. Additionally, Article 50 of the Copyright Law explicitly prohibits providing others with the technology, devices, or components to circumvent technical measures, which means that there is no exception for indirect circumvention. As a side note, the legislation imposes the severe restrictive attitude towards the indirect circumvention of technical measures. Therefore, based on the principle of “argumentum a minore ad manius” indirect circumvention acts should be subject to criminal liabilities.

This viewpoint is supported by a case involving individuals selling pirated “PassDog,” where the indirect acts of circumvention were included within the scope of the crime of copyright infringement. The Supreme People’s Court and the Supreme People’s Procuratorate, in the Interpretation of Several Issues Concerning the Application of Law in Handling Criminal Cases of Infringement of Intellectual Property Rights (Solicitation of Opinions), which was made public in 2023, also made an affirmation that indirect circumvention should be pursued for criminal liability.

Consequently, regardless of whether the cracking behavior involves direct or indirect circumvention, cracking the effective technical protection measures implemented by copyright owners can lead to civil, administrative, or even criminal liability, depending on the specific circumstances.


Reference:

1. On the Legal Nature of Providing Means to Circumvent Technical Measures
Author: Wang Qian
https://mp.weixin.qq.com/s/nQa2ky8OKKBteyzxU0UbHg

2. Recognition of Software Copyright Infringement in the Category of “Maliciously Circumventing Technical Measures”
Author: Zhang Peng,
China Intellectual Property News
https://mp.weixin.qq.com/s/fnm48M6_rk99auroCRwNag

3. Determination and Remedies for Circumvention of Technical Measures in Copyright Law
Author: Hao Pengyu
Grandall Law Firm
https://mp.weixin.qq.com/s/KgSrQEUjE0qF6N9Edw8-7w

4. The Boundaries of Copyright Owner's Technological Protection Measures in the Digital Age
Author: Cheng Shoufa 
JOINTIDE (Jinan) Law Firm
https://mp.weixin.qq.com/s/_ViEFt0I_ODj9eztSya12Q

5. Does Circumvention of Technological Protection Measures for Copyright Infringement Constitute a Crime?
Author: Liu Yaling, Zhang Minjie
Shanghai High People’s Court
https://mp.weixin.qq.com/s/8L7YM7edDh5u02VeaVt0VQ?poc_token=HNFGp2ajGGiU3wam5HdlqkhpR3LSe2DcFGoKKH-Z

6. Judgment (2020) SPC IP Civil Final No.1206

7. Judgment (2023) SPC IP Civil Final No. 2167

8. Judgment (2016) Yue Civil Retrial No. 3308 by Guangdong Higher People's Court

9.  Judgment (2006) Shanghai High Civil Third IP Final No. 110 by Shanghai Higher People's Court

10. Judgment (2023) Shanghai 03 Criminal First No. 23 by Shanghai Third Intermediate People's Court