Software Piracy: Lone-Gone Silver

Illegal software is a curse, but vendors and anti-piracy groups alike are determined to bring offenders to justice by hook or by crook. Pete Morris reports

Software piracy takes many forms, from highly organised silver disk piracy where applications are carefully ? or sometimes not so carefully ? copied and packaged to look like the original, through to the gold disks sold at car-boot sales, which do not even pretend to be anything like the original.

Then there is the piracy which is not so black and white, including hard disk loading, where PCs are sold with unlicensed and illegal software to boost their value; grey importing, where software that was not designed to be sold in the UK and is not supported in the UK is sold on; and finally softlifting, or informal copying by customers who are too cheap or lazy to buy adequate licences. Although there is some overlap, the kind of piracy that most dealers are likely to come across is hard disk loading.

The level of software piracy in the UK is falling as a percentage of all software sold, but as the market for software grows, so the overall size of the piracy problem is increasing. Figures from industry enforcer the Business Software Alliance (BSA) show that software piracy in Western Europe fell last year as a percentage of all software sold, from 49 per cent to 43 per cent.

The UK has one of the lowest software piracy rates in Europe ? about a third of software is pirated ? but the loss to the industry, and thus the channel, is still estimated to be some #300 million a year.

As piracy is a multi-layered problem, any approach to tackling it has to be multi-layered as well. Although there are a number of industry-wide enforcement agencies, such as the BSA and the Federation Against Software Theft (Fast), some of the larger software manufacturers have unilaterally decided to take the piracy issue into their own hands, and attack it on a number of fronts.

The most active of these manufacturers has been Microsoft. At the sharp end, it has a programme of sampling software from dealers ? the Test Purchasing programme (see box) ? as part of its Clean Dealer campaign. But it has also helped develop a third-party corporate auditing industry with its Legal Ware campaign.

Microsoft anti-piracy manager Dave Gregory says the decision to adopt more anti-piracy measures came as a response to the problem piracy was causing in the legitimate Microsoft channel. ?Our anti-piracy campaign initially started in the legal and corporate affairs division of Microsoft, but we saw it as a wider business issue, and the sales and marketing side got involved,? says Gregory.

The anti-piracy team is now a separate business unit ? an indication of how seriously Microsoft takes the problem. ?Piracy is our number one competitor and the number one competitor for our legitimate channel ? we will come down hard on it,? Gregory explains.

In the year to 30 June, Microsoft in the UK seized over 5,000 illegally copied or counterfeit programs and CD-Roms, worth more than #500,000. In the same period, the Test Purchasing programme led to 77 actions against pirates, 26 criminal raids and one term of imprisonment. Worldwide, says Gregory, Microsoft?s anti-piracy actions saved it a total of $311 million, and it has seized product worth $170 million. The total figure includes the value of injunctions taken out against pirates. ?This is the amount of money going back into the channel each year as a result of our actions,? he says.

It is not just the channel that benefits from the enforcement. Half of the revenue recovered by Microsoft from counterfeiting cases is used to fund the Microsoft Scholar Programme, which trains out-of-work IT specialists and helps them to find work in the PC industry.

But not everyone is happy with Microsoft?s bullish approach to tackling piracy among UK dealers and OEMs. The combination of Microsoft coming down hard on grey import software, and of taking out press adverts to name companies that it has taken action against, has angered the Personal Computer Association (PCA). Executive director Keith Warburton says: ?Microsoft has every right, and indeed a responsibility to protect its brand equity and to ensure that counterfeit software does not reach the market. But there is a problem with it blurring the distinction between counterfeit software, and grey import software.?

Warburton claims that Microsoft?s ads and the terms of the settlements that it makes copyright infringers sign blur the distinction between software that is being passed off as Microsoft software and grey imports. He says that as long as grey imports are not being passed off as Microsoft UK product ? and therefore available for support and upgrades ? then it is probably not illegal to sell them in the UK.

But Gregory insists that 95 per cent of grey import software its investigators come across is counterfeit in some way, and that cleaning up the UK channel involves clamping down on all non-Microsoft UK product.

But Warburton feels that Microsoft is blurring the distinction for its own ends, adding that many small OEMs have been driven towards sourcing non-UK product because of the way Microsoft has been favouring a small number of large US direct sellers with cheap OEM product.

?The problem is of Microsoft?s making,? says Warburton. ?Small UK OEMs have to pay a lot more for copies of Microsoft Office, which makes it harder for them to compete on price.?

He says that large direct sellers are getting Microsoft software at a much cheaper rate, which gives them an advantage in the marketplace. ?By doing this, Microsoft has unbalanced the whole market.?

Although Microsoft is an active member of the BSA, it no longer belongs to Fast. Gregory says Microsoft supports the educational aims of the BSA, but that the compliance certificates that Fast issues to its members would not offer those members immunity from a Microsoft investigation.

?Things change over time, and just because a company is certified compliant at one time does not mean that holds good for ever,? says Gregory.

Carmel Brown, Fast marketing manager, agrees that the organisation would not afford its members any protection against a piracy investigation. ?We could never offer immunity for piracy,? she says. But Fast argues that members that have been certified software compliant would be less likely to engage in piracy than those that had not.

But chinks are beginning to appear in the anti-piracy armour. Fast, for instance no longer counts Microsoft, Novell or Adobe among its members, tending instead to represent the smaller software publishers. ?Novell has a very specialised piracy problem,? says Brown, ?and it is best placed to deal with this itself because it has a direct line to its dealers.?

Microsoft, she says, is fortunate in having the resources to be able to tackle piracy in a unilateral manner. ?Fast is working at the top end of computer piracy tackling gold disk pirates. The enforcement authorities that we deal with would rather deal with an independent industry-wide body than with a single manufacturer.?

Although Fast welcomes Microsoft?s move to raise the profile of the fight against software piracy, Brown says it is unlikely that many other software publishers would have the time or the resources to do likewise, and do not want to be distracted from their core business.

?I?m glad that Microsoft is spending its resources on tackling piracy,? she says. ?All the elements of tackling piracy do fit together, and it would be a shame if we were not seen to be presenting a united front.?

Although there are differences in how the fight is to be carried out, all the anti-piracy parties agree that they are on the same side. This, however, is not necessarily true of dealers. Most of the complaints that come to all the enforcement bodies are about dealers, and many of the complaints themselves are from honest dealers ? the ones that suffer most from the corner-cutting and criminal activities of the few.