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A federal judge has granted a default motion against the People’s Republic of China in a $2.2 billion lawsuit brought by a California software firm over copyright infringement. In a pair of rulings on Feb. 16, U.S. District Judge Josephine Tucker in Los Angeles found that Solid Oak Software Inc. provided sufficient reasons why the Chinese government was exempted from the Foreign Sovereign Immunities Act (FSIA), which generally immunizes foreign countries from U.S. lawsuits. The court also granted a default motion against the Chinese government, which has failed to respond to the lawsuit in court. The Chinese government was engaged in the licensing of intellectual property rights — a clear exception to the FSIA, said Gregory Fayer, an attorney at Los Angeles-based Gipson, Hoffman & Pancione, who represents Solid Oak, which is based in Santa Barbara, Calif. “The presumption under the Foreign Sovereign Immunities Act is that a foreign sovereign, a foreign country, is immune from lawsuits in the U.S., but that’s subject to certain exceptions,” he said. “One of those is the commercial activity exception, when a government participates in commercial activities and plays a role that a private entity would otherwise be playing.” Fayer declined to comment on how much in damages could be issued against the Chinese government as part of a default judgment, the next step in the process. The suit was filed on Jan. 5, 2010, by Solid Oak against the Chinese government, two software firms in China and seven foreign computer manufacturers for misappropriation of trade secrets and copyright infringement. In the suit, Solid Oak alleges that nearly 3,000 lines of code were stolen from its CYBERsitter software program for use in Green Dam Youth Escort software, which was distributed to millions of people in China. CYBERsitter, which costs $39.95, is designed to block children from viewing pornography and other inappropriate content on the Internet. Critics claim that the Chinese government used Green Dam to block its citizens from accessing political and religious Web sites that the government deemed objectionable. After the Chinese government mandated that all manufacturers bundle the Green Dam software into any computer sold in China after July 1, 2009, the Obama administration warned China that the requirement could violate free-trade agreements. The mandate was dropped. On Oct. 11, Solid Oak dropped its claims against Toshiba Corp. after having reached a confidential settlement with the distributor of the software. The other corporate defendants are Sony Corp., as a distributor; ASUSTeK Computer Inc., BenQ Corp., Acer Inc., Lenovo Group Ltd. and Haier Group Corp., all manufacturers; and Zhengzhou Jinhui Computer System Engineering Ltd. and Beijing Dazheng Human Language Technology Academy Ltd., both Chinese software firms backed by the government. Sony Corp. — joined by Acer, BenQ and ASUSTeK — filed a motion to dismiss the case based on forum non conveniens — that is, under the doctrine that the lawsuit should not be heard in the United States but in China’s courts, if at all. Sony argued, among other things, that most of the witnesses, documents and companies are based outside the United States. On Nov. 18, the judge denied that motion, noting that none of the defendants is based in China. The judge also found that Sony, which has denied the allegations in court documents, failed to establish why having the case in the United States would burden its ability to obtain evidence and call witnesses. Solid Oak then moved for default ruling against the Chinese government. The U.S. Department of State filed proof of service with the Chinese government on Nov. 12. But the Embassy of the People’s Republic of China in the United States filed a letter with the court on Nov. 29 claiming it did not have to respond to the lawsuit. “The purpose that the Chinese Government applies and installs the Green Dam Youth Escort software is to use web filter technology to block pornographic texts and images on the internet and to protect minors from internet pornography and other dangers,” the embassy wrote. “For the US company to sue China as a State, it is nothing but an uncalled for and unwarranted lawsuit.” Embassy spokesman Baodong Wang did not respond to request for comment. The judge then asked Solid Oak to submit a brief on why the Chinese government was not entitled to immunity under the FSIA. That’s when Solid Oak argued that the Chinese government’s commercial activities exempted it from the FSIA’s protection. The ruling could affect Solid Oak’s efforts in pursuing the case against the four corporate defendants based in China, Fayer said. So far, the Chinese government has refused to serve those entities as required under the Hague Service Convention. The recent ruling could “diminish the power of the arguments that the defendants don’t have to be served because the suit infringes on their immunity,” he said. BenQ, Acer and ASUSTeK have denied the allegations in court documents. Lawyers for BenQ and Lenovo, also based in Taiwan, did not return calls for comment. Haier Group did not respond to a request for comment. Acer’s lawyer, Robert Dickerson, deputy practice leader of IP on the West Coast for Dickstein Shapiro; Sony’s lawyer, Karin Pagnanelli, a partner at Los Angeles-based Mitchell, Silberberg & Knupp; and ASUSTeK’s lawyer, Karen Boyd, founding partner of Turner Boyd in Mountain View, Calif., declined to comment. The two Chinese software companies could not be reached for comment. Amanda Bronstad can be contacted at [email protected] .

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