BEIJING -- In a new tack against piracy, Microsoft Corp. will make a series of investments in the Chinese city of Hangzhou, which has promised to clamp down on illegitimate software.
Microsoft will build two new technology centers and make other investments in the wealthy city on China's east coast, with the aim to establish a model city where intellectual-property rights have greater protections than elsewhere in China.
"We wanted to find a showcase," said Simon Leung, Microsoft's chief executive for Greater China. "The city had to be committed to doing the right thing."
Technology companies around the world have tried various measures to stop the drain on their revenue that piracy represents. The move marks a new approach for Microsoft, which in the past has mainly prodded the central government to step up enforcement actions.
In October, Microsoft started sending out software updates that turned users' computer wallpapers black if they had a pirated Windows operating system, a move that sparked anger among some Chinese users.
In January, a Chinese court convicted 11 people of manufacturing and distributing counterfeit Microsoft software, in a case hailed by the company as a milestone.
With several Chinese cities competing to become high-tech hubs, Microsoft is hoping that more can be prompted to follow Hangzhou's lead. Last month, the western city of Chongqing also declared it will "robustly protect international [intellectual-property rights] throughout China for those companies which decide to locate in the city."
Mr. Leung declined to say how much Microsoft's total investment in Hangzhou will be under the agreement but said that the program is above and beyond the $1 billion over three years that Microsoft said last November that it plans to spend on research and development in China.
In Hangzhou, Microsoft will establish a center aimed at developing new applications and business models for "cloud computing," a term that refers to the growing trend of storing and accessing data and applications on remote servers.
It will also launch a second technology center in the city that will work with local companies to put their systems on Microsoft platforms, and it will expand an existing technology center operated in conjunction with the Hangzhou government.
As part of the program, Microsoft plans to offer heavily discounted software to start-up companies in Hangzhou and provide technology and training to a local university.
In return, Hangzhou has set targets for enforcement of intellectual-property rights, including ridding shops of pirated software and encouraging local enterprises to use legitimate programs.
Alec Cooper, general manager of Microsoft's "Genuine Software Initiative" in Greater China, said that piracy fears are among the top concerns for technology companies when they consider investments in China, so it is in Hangzhou's interests to stand out as a strong enforcer.
"I think it will become more of a trend that cities are keen to differentiate themselves," he said, "much as Hong Kong and Singapore have done in the past 15 to 20 years."
Hangzhou, a picturesque city outside Shanghai, is attempting to position itself as a hub for high-tech industries such as software outsourcing. It is the headquarters to Alibaba Group, one of China's largest Internet companies with operations in search, online retailing and the business-to-business transaction platform Alibaba.com Ltd.
Source: The Wall Street Journal
