Deuterium
07-12-2004, 10:46 AM
Industry survey finds 36 percent of software sold in the world last year was pirated
By Paul Geitner / AP Business Writer
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BRUSSELS, Belgium - O&O Software, with only 28 employees, has built a $3 million-a-year operation developing award-winning tools for users of Microsoft Windows, such as defragmenters, data rescue and system security.
It is impossible to say how much bigger it might be after six years in business without the plague of software piracy, which a new study says accounts for more than a third of computer software sales and costs legitimate businesses $29 billion.
At least some O&O sales are being lost, for sure.
"We even have customers who try to register" pirated software copies, says O&O spokesman Frank Alperstaedt. "Sometimes they know they're illegal, sometimes not."
Berlin-based O&O is one of dozens of global high-tech companies, including giants like Microsoft, IBM and Apple, joining in a "call to action" against the trend by focusing attention on the growing scale as well as the costs to government and society.
Industry groups say the long-festering problem is worsening due to increased availability of illegal software on the Internet, faster download speeds, a lack of adequate legislation and lax enforcement.
A survey released Wednesday, conducted by the U.S.-based market research firm IDC, found 36 percent of computer software installed last year was counterfeit or pirated.
The piracy rate was lowest -- 23 percent -- in North America, where losses were more than $7.2 billion. That was about the same, $7.5 billion, as in the Asia-Pacific region, although the piracy rate there was more than double at 53 percent, reflecting smaller sales.
Piracy was most expensive in the European Union, where a 37 percent rate cost software publishers more than $9.78 billion, according to the survey conducted by the U.S.-based market research firm IDC.
Open-source advocates call such figures exaggerated, since there's no way to say whether someone would have actually gone out and paid full price for the software if he didn't have access to an illegal copy. They also argue that users can get hooked enough on a copy to go out and buy upgrades they might never have otherwise.
But the Business Software Alliance, the Washington-based lobbying group that commissioned the survey, argues their survey was conducted independently and using scientifically based methods.
In addition, the biggest form of piracy is when a company with 200 desktops, for example, buys licenses to install software legally on only 10 of them. "Clearly that's lost opportunity there," said BSA spokeswoman Diane Smiroldo.
The industry hopes to convince the public that piracy is "certainly not a victimless crime," said BSA president Robert Holleyman. "It really affects everybody and the resulting tax revenue and job losses affect every economy."
Year-on-year comparisons were unavailable because the BSA broadened its 2003 survey to include software on servers as well as personal computers, including local-language programs. Earlier surveys looked only at business software.
But the International Intellectual Property Alliance estimated sales losses due to copyright piracy of business and entertainment software in 2001 at $4.4 billion -- in the United States alone.
In 1982, the U.S. International Trade Commission estimated counterfeiting and piracy of all products -- not just software -- caused industry losses of about $5.5 billion. By 2000 the figure was $450 billion.
At the First Global Congress on Combatting Counterfeiting, held in Brussels in May, the World Customs Organization estimated trade in counterfeit products exceeded 6 percent of global trade last year, or more than $500 billion.
Interpol Secretary General Ronald Noble told that conference that organized crime and terror groups were increasingly turning to the lucrative trade, but governments generally give fighting counterfeiting a low priority.
Business leaders at the conference launched an alliance to work with law enforcement in fighting piracy, and try to increase pressure to act by highlighting social costs in terms of lost tax revenue and employment.
The survey aims to aid the fight by providing the most comprehensive data yet, said Holleyman.
For example, a 10 percent reduction in software piracy across western and eastern Europe could bring more than 250,000 new jobs and $23 billion in tax revenues by 2006, according to the industry group.
"Without piracy we could increase revenue by 30-50 percent," said Dominique Pouliquen, chief executive of Realviz, a developer of 3D graphics software applications based in Sophia-Antipolis, France.
"At the very least this would mean that we would be able to hire 7-10 additional staff and there would be fresh funds available for investment in R&D," he said in a statement.
Business leaders called European governments to move fast to enact into national law an EU directive, passed in March, to crack down on piracy by harmonizing the checkerboard of currently existing national legislation.
Under that bill, counterfeiters could face civil penalties, including seizure of property and bank accounts, if they are found guilty by national courts. The penalties must be "effective, dissuasive and proportionate," but were left to national capitals to set.
Proposals for criminal sanctions were dropped from an earlier version, despite support from the EU head office and industry groups.
The United States does allow for criminal penalties, but they are used mainly for Internet-based piracy and counterfeiting, Holleyman said.
But civil penalties in the United States are the world's toughest -- $150,000 per work infringed -- a big part of the reason the U.S. piracy rate is so much lower than Europe's, Holleyman said.
"That provides a strong disincentive," Holleyman said. "It's just not worth the risk of being caught and embroiled in an anti-piracy case."
The BSA also complained that less than half of the 25 EU countries have implemented a 2001 EU copyright directive, more than 18 months after the deadline. That attempt to harmonize protections across the continent tightened the definition of "private copy" and banned commercial use of copied material taken from the Internet.
Still, companies concede the quixotic nature of the battle.
"You can't win this race, just try to create more difficult license keys," said Alperstaedt of O&O in Berlin. "But even Microsoft hasn't found a solution for that and they have the resources to do so."
By Paul Geitner / AP Business Writer
Comment on this story
Send this story to a friend
Get Home Delivery
BRUSSELS, Belgium - O&O Software, with only 28 employees, has built a $3 million-a-year operation developing award-winning tools for users of Microsoft Windows, such as defragmenters, data rescue and system security.
It is impossible to say how much bigger it might be after six years in business without the plague of software piracy, which a new study says accounts for more than a third of computer software sales and costs legitimate businesses $29 billion.
At least some O&O sales are being lost, for sure.
"We even have customers who try to register" pirated software copies, says O&O spokesman Frank Alperstaedt. "Sometimes they know they're illegal, sometimes not."
Berlin-based O&O is one of dozens of global high-tech companies, including giants like Microsoft, IBM and Apple, joining in a "call to action" against the trend by focusing attention on the growing scale as well as the costs to government and society.
Industry groups say the long-festering problem is worsening due to increased availability of illegal software on the Internet, faster download speeds, a lack of adequate legislation and lax enforcement.
A survey released Wednesday, conducted by the U.S.-based market research firm IDC, found 36 percent of computer software installed last year was counterfeit or pirated.
The piracy rate was lowest -- 23 percent -- in North America, where losses were more than $7.2 billion. That was about the same, $7.5 billion, as in the Asia-Pacific region, although the piracy rate there was more than double at 53 percent, reflecting smaller sales.
Piracy was most expensive in the European Union, where a 37 percent rate cost software publishers more than $9.78 billion, according to the survey conducted by the U.S.-based market research firm IDC.
Open-source advocates call such figures exaggerated, since there's no way to say whether someone would have actually gone out and paid full price for the software if he didn't have access to an illegal copy. They also argue that users can get hooked enough on a copy to go out and buy upgrades they might never have otherwise.
But the Business Software Alliance, the Washington-based lobbying group that commissioned the survey, argues their survey was conducted independently and using scientifically based methods.
In addition, the biggest form of piracy is when a company with 200 desktops, for example, buys licenses to install software legally on only 10 of them. "Clearly that's lost opportunity there," said BSA spokeswoman Diane Smiroldo.
The industry hopes to convince the public that piracy is "certainly not a victimless crime," said BSA president Robert Holleyman. "It really affects everybody and the resulting tax revenue and job losses affect every economy."
Year-on-year comparisons were unavailable because the BSA broadened its 2003 survey to include software on servers as well as personal computers, including local-language programs. Earlier surveys looked only at business software.
But the International Intellectual Property Alliance estimated sales losses due to copyright piracy of business and entertainment software in 2001 at $4.4 billion -- in the United States alone.
In 1982, the U.S. International Trade Commission estimated counterfeiting and piracy of all products -- not just software -- caused industry losses of about $5.5 billion. By 2000 the figure was $450 billion.
At the First Global Congress on Combatting Counterfeiting, held in Brussels in May, the World Customs Organization estimated trade in counterfeit products exceeded 6 percent of global trade last year, or more than $500 billion.
Interpol Secretary General Ronald Noble told that conference that organized crime and terror groups were increasingly turning to the lucrative trade, but governments generally give fighting counterfeiting a low priority.
Business leaders at the conference launched an alliance to work with law enforcement in fighting piracy, and try to increase pressure to act by highlighting social costs in terms of lost tax revenue and employment.
The survey aims to aid the fight by providing the most comprehensive data yet, said Holleyman.
For example, a 10 percent reduction in software piracy across western and eastern Europe could bring more than 250,000 new jobs and $23 billion in tax revenues by 2006, according to the industry group.
"Without piracy we could increase revenue by 30-50 percent," said Dominique Pouliquen, chief executive of Realviz, a developer of 3D graphics software applications based in Sophia-Antipolis, France.
"At the very least this would mean that we would be able to hire 7-10 additional staff and there would be fresh funds available for investment in R&D," he said in a statement.
Business leaders called European governments to move fast to enact into national law an EU directive, passed in March, to crack down on piracy by harmonizing the checkerboard of currently existing national legislation.
Under that bill, counterfeiters could face civil penalties, including seizure of property and bank accounts, if they are found guilty by national courts. The penalties must be "effective, dissuasive and proportionate," but were left to national capitals to set.
Proposals for criminal sanctions were dropped from an earlier version, despite support from the EU head office and industry groups.
The United States does allow for criminal penalties, but they are used mainly for Internet-based piracy and counterfeiting, Holleyman said.
But civil penalties in the United States are the world's toughest -- $150,000 per work infringed -- a big part of the reason the U.S. piracy rate is so much lower than Europe's, Holleyman said.
"That provides a strong disincentive," Holleyman said. "It's just not worth the risk of being caught and embroiled in an anti-piracy case."
The BSA also complained that less than half of the 25 EU countries have implemented a 2001 EU copyright directive, more than 18 months after the deadline. That attempt to harmonize protections across the continent tightened the definition of "private copy" and banned commercial use of copied material taken from the Internet.
Still, companies concede the quixotic nature of the battle.
"You can't win this race, just try to create more difficult license keys," said Alperstaedt of O&O in Berlin. "But even Microsoft hasn't found a solution for that and they have the resources to do so."