Software Piracy Dips 23% in U.S.

The Business Software Alliance has determined that the worldwide piracy rate for commercial software, which consists of software applications that are written and sold as packages by vendors, actually dropped 10 percent last year.

This drop was attributed in part to better awareness, better defined copyright laws, and more specific and severe punishments for perpetrators. But BSA said that all could be for naught if online piracy is not curbed.

The Washington, D.C.-based group recently concluded its eight annual survey on global software piracy in which it found that pilfered software decreased in 2002 to 39 percent, down from a high of 49 percent in 1994, when BSA began tallying such totals. It is the first decline since 1999, when an all-time low of 36 percent was reported.

The U.S. experienced an all-time piracy rate low of 23 percent said BSA, which credited improved education as part of the reason for the lower figures. Every country except Zimbabwe has reduced its rate of piracy since 1994. However, there is a flipside to that coin. Though there were fewer charted cases of stolen applications, worldwide dollar losses due to piracy actually increased from $10.97 billion in 2001 to $13.08 billion in 2002, a mark-up of 19 percent. BSA said this can be attributed to higher software prices overall.

Robert Holleyman, president and CEO of BSA, attributed the trend to the industry’s success in implementing educational programs, working with governments to strengthen copyright laws and emphasizing good software asset management businesses practices that contribute to a safe and legal digital world.

Bob Kruger, BSA’s vice president of enforcement, said BSA believes the reasons for the improvements lie in greatly improved copyright laws overseas in regions where piracy has traditionally run rampant.

“There has traditionally not been adequate protection for intellectual property,” Kruger said. “There have been changes made in many middle regimes to protect software from being copied in the first place before its was even released. It was very difficult to put in place because Eastern European companies because, for a long time, there existed the perception that protecting software from piracy was just doing the bidding of the U.S. to help them make more money. But what they didn’t understand and what they learned later was that protecting IP at the local level can be good for their economy. There are very valuable economic benefits to be derived locally in IP protection. It creates jobs and helps grow the local industry.”

Kruger said that these regions, including Eastern and Western Europe, eventually became more interested in bilateral organizations and signed treaties to amend laws to provide at least a basic level or protection. This broader, universal adoption of copyright laws, which the U.S. has had in place but is continuing to make more specific, has enabled law and policy makers to write and eventually mete out specific punishments for software pirates. This deterrence, Kruger said, also plays a part in the software piracy decrease.

Holleyman also acknowledged that while instances of stolen copies of commercial software such as, say, Microsoft’s Windows operating system, are fewer than they were in the past, piracy on the Internet has spiraled out of control. Holleyman is referring to such segments as illegal file-sharing, first through the notorious Napster system, and currently through such services as Kazaa. He said continued, improved education may stem this tide.

Kruger said the Internet piracy problem is so serious that it may not matter what physical copies of software may be counterfeited and exchanged because so much software will be pilfered online.

“There is a lot of work to be done still in curbing counterfeit software, which is often copied in the workplace,” Kruger said. “The truth is that so long as Internet piracy is growing more and more, all of the good progress made in stopping commercial software piracy could be threatened by an inability to control Net-based distribution of software. We are definitely devoting more of our resources to combating piracy of the Internet than we have on the past.”

Laura DiDio, senior analyst of Application Infrastructure and Software Platforms at the Yankee Group, said the the amount of illegal material that is easily obtained via the Internet is certainly a factor in the decline of commercial software piracy. Buti there plenty more. To be sure, the BSA and better defined laws have put the fear of punishment into potential crooks.

DiDio listed reasons why she thinks software piracy has declined:

1. Software vendors and the BSA have stepped up their policing efforts.

2. Penalties — in addition to the true-up costs if you’re caught — can be very stiff. Additionally, once you’ve been identified as having significant non-compliance issues, the business lessens its’ chances of getting the best discounts and licensing deals. The “Scarlet Letter” will follow your firm long after the software non-compliance fees and fines have been paid.

3. Product upgrade cycles are lengthening. Fully 50% of corporate customers keep their main desktop and server OS, databases and productivity software packages for 3 1/2 years and longer.

4. If the BSA catches a company pirating software AND the software that it has pirated was directly used as the main application in the company’s business, BSA can shut the company down. One such example, was a Washington, D.C. court reporting firm that had been found to have illegal court reporting software. The BSA took it to court, won, and the company went out of business.

A consumer-oriented group, BSA informs the public on such topics as software management and copyright protection, cyber security, trade and e-commerce. Its member companies include some of the largest software businesses in the world, including Apple, Macromedia, Microsoft, Network Associates and Symantec.

The BSA study determines the worldwide piracy rates of business software applications, the associated dollar losses and trends in 85 countries.