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Article by iTech Troubleshooter

Computer Software Piracy and it’s Impact on the International Economy The PC industry is over twenty years old. In those twenty years, evolving softwaretechnology brings us faster, more sophisticated, versatile and easy-to-use products.Business software allows companies to save time, effort and money. Educationalcomputer programs teach basic skills and complicated subjects. Home software nowincludes a wide variety of programs that enhance the users productivity and creativity.The industry is thriving and users stand to benefit along with the publishers. The SPA(Software Publishers Association) reports that the problem of software theft has grown,and threatens to prevent the development of new software products. Unauthorizedduplication of software is known as software piracy which is a “Federal offense thataffects everyone” (“Software Use…” Internet). The following research examinessoftware piracy in its various forms, its impact on the end user and the internationalindustry as a whole, and the progress that has been made in alleviating the problem. Software piracy harms all software companies and ultimately, the end user. Piracyresults in higher prices for honest users, reduced levels of support and delays in fundingand development of new products, causing the overall breadth and quality of software tosuffer” (“What is…” Internet). Even the users of unlawful copies suffer from their ownillegal actions: they receive no documentation, no customer support and no informationabout product updates (“Software Use…” Internet). The White Paper says that while virtually every software publisher expressesconcern about their software from unauthorized duplication, over time, many havesimply accepted the so-called “fact” that such duplication is unavoidable. This hascreated an atmosphere in which software piracy is commonly accepted as “just anothercost of doing business” (“With the Growth…” Internet). In a brochure published by the SPA it is stated that a major problem arises fromthe fact that most people do not even know they are breaking the law. “Because thesoftware industry is relatively new, and because copying software is so easy, many peopleare either unaware of the laws governing software use or choose to ignore them” (“ToCopy or not to Copy” Internet). Robert Perry states that much of the problem of software theft arises from the waythe software industry developed. In the past, when a software firm spent millions ofdollars to write a program for a mainframe computer, it knew it would sell a handful ofcopies. It licensed each copy to protect its ownership rights and control the use of eachcopy. That is easy to do with only a few copies of a program. It is impossible for asoftware company to handle five million copies of there latest program (27). Software piracy is defined as any violations of software license agreements. In1964, the United States Copyright Office began to register software as a form of literaryexpression. The Copyright Act, title 17 of the U.S. Code, was amended in 1980 toexplicitly include computer programs. Today, according to the Copyright Act, it is illegalto make or distribute copyrighted material without authorization, the only exceptions arethe user’s right to make as an “essential step” in using the program (for example, bycopying the program into RAM or on the hard drive) and to make a single backup copyfor “archival purposes.” No other copies may be made without specific authorizationfrom the copyright owner (title 17 section 117). A SPA press release shows that in December 1990, the U.S. Congress approvedthe Software Rental Amendments Act, which generally prohibits the rental, leasing orlending of software with out the express written permission of the copyright holder(“Retailers Agree…” Internet). “It doesn’t mater whether the transaction is called ‘rental,’buy-back,’ ‘try before you buy,’ preview,’ ‘evaluation’ or any similar term. If thesoftware dealer does not have written permission from the copyright holders to rentsoftware, it is illegal to do so.” said Sandra Sellers, SPA vice president of intellectualproperty education and enforcement (“SPA sues…” Internet.”) NERDC information services researched that the copyright holder may grantadditional rights at the time the personal computer software is acquired. For example,many applications are sold in LAN (local area network) versions that allow a softwarepackage to be placed on a LAN for access by multiple users. Additionally, permission isgiven under special license agreement to make multiple copies for use throughout a largeorganization. However unless these rights are specifically granted, U.S. law prohibits auser from making duplicate copies of software except to ensure one working copy andone archival copy (NERDC Internet). Without authorization from the copyright owner, title 18 of U.S. Code prohibitsduplicating software for profit, making multiple copies for use by different users withinan organization, downloading multiple copies from a network, or giving an unauthorizedcopy to another individual. All are illegal and a federal crime. Penalties include fines upto 0, 000 and jail terms up to five years (Title 18, Section 2320 and 2322). Microsoft states that illegal copying of personal computer software is a crucialdilemma both in the United States and over seas. Piracy is widely practiced and widelytolerated, in some countries, legal protection for software is non existent; in others lawsare unclear, or not enforced with sufficient commitment. Significant piracy losses aresuffered in virtually ever region of the world. In Some cases, like Indonesia, the rate ofunauthorized copies is believed to be in excess of ninety-nine percent (“What is…”Internet). Copyright laws vary widely from country to country, as do interpretations of thelaws and the degree to which they are enforced. The concept of protecting the intellectualproperty incorporated in software is not universally recognized. Asia is one of the most technologically advanced regions of the world. As thesoftware market continues to grow and flourish so does the black market of softwarepiracy (“The Impact…” Internet). The worst countries in this area are China and Russia.Named “one copy countries” two years in a row (1995 and 1996) by the SPA, studiesshow that ninety-five to ninety-eight percent, virtually every copy, of U.S. businesssoftware is illegally pirated, which costs U.S. software companies an estimated five-hundred million dollars a year (“SPA names…” Internet and “U.S., China…” D1 – 2). InRussia the latest statistics from the SPA show that ninety-five percent of businesssoftware is illegally copied, that cost the U.S. 7 million in 1994 (“SPA names…”Internet). Although Asia has extremely high piracy rates, SPA Executive Director KenWasch comments “China, Russia, and Thailand (the three countries in Asia with thehighest piracy rates) deserve credit for enacting copyright laws that specifically protectcomputer programs and other software…” Russia and China enacted copyright protectionstatutes several years ago, and Thailand enacted its law late in 1994 (“SPA names…”Internet). Asian countries have also taken action against offenders of copyright laws. TheSPA reports that “on Wednesday, May 22, 1996, Hong Kong Customs officers arrestedtwo suspected software pirate vendors and seized 20 CD-ROMs, each containingsoftware with an estimated total retail value of US,000 along with the equipmentcapable of reproducing the pirate CDs” (“Hong Kong…” Internet). A Software PublishersAssociation press release shows more examples of Asia’s fight against software piracywhen Singapore police raided vans carrying 5,800 CD-ROMs containing 0,000 U.S.dollars worth of pirated software on March 25, 1996 (“SPA, Singapore…” Internet). TheBloomberg forum reports that on August 7, 1995 China anti-piracy forces invaded storesin the southwestern city of Chengdu and arrested 37 people. The Business SoftwareAlliance’s “vice president Stephanie Mitchell said while that was the largest number ofpeople so far arrested in a single raid on software retailers, China must dish out harderpunishments to discourage pirates after their caught” (“China takes…” Internet). A result of China’s lack of strictness, the SPA called upon the USTR (U.S. TradeRepresentative) “…to take action against China under Section 306 of the Trade Act of1974 for failing to improve enforcement of intellectual property right in computersoftware.” Also Russia and Korea were placed on the Special 301 Priority Watch List bythe USTR so that the SPA is able to review their intellectual property laws andenforcement (“China and Russia…” Internet). “The United States and China signed amajor accord in March of 1996 mandating tough enforcement against intellectualproperty piracy in China…”(Parker np). The BSA’s European anti-piracy program is comprised of over 20 countriesthrough out the region and was initiated in 1989 “…with the filing of the softwareindustry’s first enforcement action for the illegal use of software in Italy”. Piracycontinues to be a significant problem in spite of the enactment of stronger copyright lawsand successful prosecutions against software theft. “The average piracy rates of 25European countries was estimated at 58 percent in 1994, with dollar losses exceeding billion” (“The Impact…” Internet). Microsoft’s studies show that many European countries including some whichoffer computer software protection, have “unreasonably burdensome” administrativerules. Poland and the United Kingdom have displayed difficulty in collecting evidenceand Greece is blamed for “fragmentation of court process.” Most European countries donot have sufficient penalties and inadequate civil enforcement possibilities to discouragepiracy, especially Germany, Poland, Sweden and the UK. “Several countries, forexample, Belarus and Romania, have general copyright laws that protect literaryexpression, but fail to clearly protect computer software” (“What is..” Internet). Irelandis Europe’s worst offender with yearly losses of more then forty-four million dollars peryear due to the fact that eighty-three percent of software is pirated (“Software Piracy:Ireland…” Internet). The BSA “called for legislative reform and stricter observance of laws” afterreviewing a study examining Europe’s software piracy rates. The BSA argues that”experience has shown that improved legal protection for software copyright, and betterpolicing by private companies and governments, can lead to a significant reduction in thenumber of illegal copies being made” (“Software Piracy: Ireland…” Internet). Latin America is the second fastest growing market for package software (“TheImpact…” Internet). SPA president Ken Wasch said, “The encouraging first quarters salesdata (1995) confirms Brazil’s status as a major market for U.S. software publishers. Witha rapidly growing and increasing sophisticated economy. The potential for U.S. softwarecompanies in Brazil is enormous” (“Latin America…” Internet). Gowning along with theincrease of sales and production is the threat of software theft “with the average piracyrate in 16 countries estimated at seventy-eight percent in 1994″ (“The Impact…” Internet). The effect of international piracy organizations is a major problem that everyoneis aware of. Another element which is beginging to make its presence known is the small-time software pirates that distribute software on BBSs (Bulletin Board Systems) or overthe Internet. As with most topics dealing with the extremely new Internet undergroundand Internet crimes, it is very difficult to obtain information on these subjects. In order toacquire information about these underground Internet crimes, which are important tofully understand the concept of software piracy, most of the subject matter is supplied bymy own personal observations and investigations. Most small-time software piracy centers around bulletin board systems thatspecialize in “warez” (common underground term for pirated software). On thesesystems, pirates can contribute and share copies of commercial software. Having accessto these systems (usually obtained by contributing copyrighted programs via telephonemodem or money donations) allows the pirate to copy, or “download,” copyrightedsoftware. All the participants benefit because individuals must “upload” (copy files fromtheir system to the BBS) copyrighted programs in order to download. This way newprograms are appearing continuously. My observation reveals how pirates have found ways to become more efficient bycreating mutual participation “pirate groups” (as referred to by the computerunderground). These groups are composed of ten to seventy members contributing indifferent ways. The members usually are anywhere from thirteen to thirty years of age.Some pirate groups are international, with members operating from different regions ofthe world. Their primary purpose is to obtain the latest software, remove any copy-protection from it and then distribute it to the pirate community. The methods the piratesuse to obtain the software is only known by the members of the pirate groups themselves.Some speculate that the members either “hack” (break into a computer via modem fromone’s own system) into computers of software companies and steal the software or “payoff” employees of software companies. The software they receive is almost always lessthen one day old and is often referred to as a “zero day ware.” “The Internet is an incredible international electronic information systemproviding millions with access to education, entertainment. and business resources, aswell as promoting new forms of personal communication, including e-mail and on-linechatting” (Larson Internet). This also creates ideal piracy breeding grounds. Softwarepirates utilize the services of the Internet to “trade” copyrighted

A report on the early days of software piracy in the mid 90′s. July 13, 1995 CHBC News Brent Stafford: reporter, camera, editor