娱美德有限公司 (Wemade Co., Ltd) and 株式会社传奇 IP(ChuanQi IP Co., Ltd.) v. 亚拓士软件有限公司 (Actoz Soft Co., Ltd) and 蓝沙信息技术 (上海) 有限公司

At a glance

Parties

Wemade Co., Ltd (娱美德有限公司) and ChuanQi IP Co., Ltd. (株式会社传奇 IP), both Korea, v. Actoz Soft Co., Ltd (亚拓士软件有限公司, Korea) and Lansha Information Technology (Shanghai) Co., Ltd. (蓝沙信息技术（上海）有限公司)

Case no.

(2020)最高法知民终402号

Court

Supreme People's Court of the People's Republic of China (second instance)

Forum and rules

Appeal from the Shanghai Intellectual Property Court, judgment (2017)沪73民初617号 of 20 December 2019

Underlying award(s)

ICC partial award No. 22820/PTA/HTG of 24 June 2020 (offered as evidence and not admitted); an SHIAC award of 23 January 2018 is mentioned

Tribunal

徐燕如 (Presiding Judge), 刘晓梅, 詹靖康

Sector

Online games; computer software copyright (Legend of Mir 2)

Outcome

The first-instance judgment was set aside and all of Wemade's and ChuanQi IP's claims were dismissed (17 December 2021).

Amount

Claimed: RMB 1,000,000 in reasonable expenses (RMB 500,000 lawyers' fees; RMB 500,000 notarisation and translation). The first instance awarded RMB 300,000; the Supreme People's Court reversed this. Court fees (first instance RMB 13,800, pre-suit preservation fee RMB 800, second instance RMB 13,800) were charged to Wemade and ChuanQi IP.

The dispute

Wemade and Actoz co-own the copyright in the game software Legend of Mir 2 (《传奇2》). Wemade's share later passed to ChuanQi IP when Wemade split off that company. In 2001 Actoz granted Shanda an exclusive licence to operate the game in mainland China. The licence was later assigned to Lansha. Under a 2004 court settlement in Seoul, Actoz kept the power to renew the licence but had to consult Wemade beforehand. On 30 June 2017, over Wemade's objections and three days after Wemade asked a Korean court for an injunction, Actoz signed an Extension Agreement with Lansha. It extended the licence to 2023 (2025 if renewed automatically), switched to Chinese law and SHIAC arbitration, and raised the fee to USD 11 million. Wemade and ChuanQi IP claimed that the agreement infringed their co-ownership of the copyright and was void for malicious collusion and for breach of mandatory law. Actoz and Lansha argued that Actoz held irrevocable authority and a right of renewal, that it had tried to consult, and that Wemade had no justifiable reason to object. Lansha also argued that the dispute belonged to arbitration.

Key holdings

1. Chinese law governs because the case concerns infringement of intellectual property and China is the place where protection is sought (Law on the Application of Laws to Foreign-Related Civil Relations, Arts. 48 and 50). p. 33
2. The ICC partial award No. 22820/PTA/HTG of 24 June 2020 is a foreign award. Under Article 283 of the Civil Procedure Law it has no legal effect in China until it is recognised. Because Actoz and Lansha contest it, it cannot be used to prove the disputed facts. The Seoul High Court judgment was not admitted either, because it was not yet final. p. 33
3. The Extension Agreement is not void for malicious collusion under Article 52(2) of the Contract Law. Wemade and ChuanQi IP share in the benefits of the renewed licence. That Actoz and Lansha are affiliated companies, and that Lansha knew of Wemade's objections and its injunction application, is not enough to prove collusion. pp. 34–35
4. The consultation requirement in Article 9 of the Copyright Law Implementing Regulations and Article 10 of the Computer Software Protection Regulations is not a mandatory provision that affects validity. Those provisions allow one co-owner to exercise rights other than assignment alone, provided the proceeds are shared fairly. A breach of them therefore does not make a unilateral licence void. p. 36
5. No infringement of the co-owned copyright. The agreement was signed without consulting the co-owners, but consultation had become impossible. Wemade's reasons for blocking the renewal concerned mobile and web games outside the PC-game licence and were not justifiable. The new terms (longer term, Chinese law, SHIAC arbitration, higher fee) did not harm the co-owners. The first instance's finding of infringement is reversed. pp. 37–38
6. The first instance did not fail to consider any facts. The 2004 settlement required prior consultation for renewals, so the 2002 Supplementary Agreement and the 2012 Declaration did not give Actoz an unconditional right to renew alone. Lansha's jurisdictional objection had already been decided in separate jurisdiction-objection proceedings and was outside the scope of this appeal. Actoz's request to ascertain Korean law was refused as unnecessary. pp. 38–39
7. Operative part: the Shanghai IP Court's judgment is set aside and all claims of Wemade and ChuanQi IP are dismissed. They bear the court fees of both instances. The judgment is final. pp. 39–40

Procedural history

1. 29 June 2001Actoz grants Shanda an exclusive licence for Legend of Mir 2 in China, with ICC arbitration in Singapore.
2. 29 April 2004Wemade and Actoz settle in the Seoul Central District Court: Actoz keeps the renewal power, subject to prior consultation.
3. 18 May 2017Wemade files an ICC arbitration against Lansha and Shengqu Games.
4. 30 June 2017Actoz and Lansha sign the Extension Agreement, after Wemade's application of 27 June 2017 for a Korean injunction.
5. 16 August 2017The Shanghai IP Court orders a pre-suit stop to performance of the Extension Agreement. The order is lifted on 22 September 2017 against security of RMB 100 million.
6. 20 September 2017The Shanghai IP Court accepts the infringement claim of Wemade and ChuanQi IP.
7. 20 December 2019First-instance judgment: infringement found, RMB 300,000 in expenses awarded, the Extension Agreement not void, and Lansha allowed to keep operating the game.
8. 27 April 2020The Supreme People's Court dockets the appeals of all parties. The hearing is held on 7 February 2021.
9. 24 June 2020ICC partial award No. 22820/PTA/HTG on liability. Actoz and Lansha apply to the Singapore courts to set it aside.
10. 17 December 2021Supreme People's Court judgment: first-instance judgment set aside and all claims dismissed.

Tribunal, counsel and experts

For the claimant

德恒上海律师事务所 · 广东格方律师事务所

For the respondent

上海市协力律师事务所

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Keywords

• Legend of Mir 2
• Wemade
• Actoz
• Shanda
• online games
• software copyright
• joint copyright ownership
• co-owner consultation
• malicious collusion
• mandatory provisions
• contract validity
• foreign arbitral award as evidence
• recognition of foreign award
• ICC arbitration
• SHIAC
• New York Convention
• licence renewal
• Supreme People's Court

Summary generated with AI from the published documents — refer to the award for the authoritative text.