Software Piracy

 

 

(1) Definition & Analysis:

 

 

Software piracy is unauthorized copying and use of Software without proper licence. Similarly, simultaneous use of single user license software by multiple users or loading of a single user license software at multiple sites, also amounts to software piracy. By buying a software, one only becomes a licensed user and not an owner. One can make copies of the program only for back-up purposes, but it is against the law to give copies to friends and colleagues or sell such copies to others. It is not possible to completely eliminate Software piracy, but the same can be controlled by enforcing the laws and generating an awareness in the society.

 

 

Buying a software ¹ Owning a software

 

 

Buying a software = Becoming licensed to use it under certain restrictions

 

 

Any Copyright infringement is the unauthorized use of copyrighted material in a manner that violates one of the copyright owner's exclusive rights, such as, the right to reproduce or to make derivative works that build upon it. For electronic and audio-visual media, such unauthorized reproduction and distribution of a copyrighted work is often referred to as piracy (however there is no legal basis for the term 'piracy').

 

 

The society doesn't really treat software piracy like other kinds of theft as nothing is physically taken away. There is no immediate effect on the inventory or productive capacity of the programmer. Only copies of the disk or other storage medium are made and the legal owner is still in possession of the software. With digital technology, perfect copies of the original can be made in no time. Most often, the actual cost of creating goods is determined by the production cost of individual item. However with software, the reverse is true. The cost of producing copies is negligible compared to the cost of constructing the original. Hence it becomes very easy and all the more attractive to make copies of unauthorized software.

 

 

(2) Why licenses matter ?

 

 

By using licensed software, it is ensured that critical updates are available when needed, that the products are fully supported, reliable and above all it is legal. There are three primary ways to legally obtain a software license :

 

 

l Purchasing a new PC equipped with OEM software and equipment.

l Purchasing products "off the shelf" from a certified retailer.

l Signing a License Agreement online.

 

 

 

(3) Types of software piracy:

 

 

End-User piracy:

 

 

End-User Piracy is unauthorized reproduction of copies of licensed software. Using one licensed copy to install a program on multiple computers or acquiring academic or other restricted versions and using the same for commercial purpose also amounts to End-User Piracy. This type of piracy also includes, both, casual copying and distribution between individuals and companies who do not strictly monitor the number of software licenses they install and do not acquire enough number of licences to cover their software installations.

 

 

Software Counterfeiting :

 

 

When illegal copies of software are made and distributed in packaging that replicates the original manufacturer's packaging it amounts to Software Counterfeiting. Counterfeit software copies come out with similar packaging, manuals, license agreements, labels, registration cards, security features and often look authentic. The intention is to directly imitate the copyrighted product. This is a more serious offence as it is done in an organized manner and the buyer is also made to believe that he is buying a genuine product.

 

 

Internet Piracy :

 

 

Internet Piracy is unauthorized downloading of software over the Internet. Any form of software piracy that involves the use of the Internet either to market or distribute copyrighted software programs can be termed as Internet Piracy. Many pirate websites on the internet make software available as free download or in exchange for uploaded programs. Many online auction sites offer counterfeit or infringing copyright software. Email, IRC, News Groups and FTP could be the tools which facilitate in illegally uploading or downloading of copyrighted software programs over Internet.

 

 

Hard-Disk Loading :

 

 

Hard-disk loading occurs when a business that sells new computers, loads illegal copies of software onto the hard disks to make the purchase of their machines more attractive.

 

 

Pre-installed Software Piracy:

 

 

When a computer manufacturer uses one licensed copy of software and illegally installs it on more than one computer it is called Pre-installed Software Piracy. To avoid this type of piracy the consumers should be on the lookout for proper license documentation when purchasing a new PC in order to ensure that they're getting what they paid for.

 

 

Client-Server Overuse :

 

 

Client-Server overuse occurs when a software is installed on the server for simultaneous use by several people over the network. Simply put Client-Server Overuse is having more users than allowed by the licence.

 

 

(4) Software Piracy rates and Losses:

 

 

Software piracy is a growing problem throughout the world, particularly in India and other developing countries. Vietnam has the highest piracy rate in the total software base with about 92%, US is the lowest with 21% and India has about 74% while the Asia Pacific average is 53 % (2004 figures).

 

 

Region wise losses in dollars

 

 

The total losses world wide in the year 2004 due sale of Pirated Software is about $ 33b. In India the losses amounted to $ 519 m (i.e. Rs. 2,200 crore) in the year 2004. The piracy rate in India was about 73% in 2003 and the same went up to 74% by 2004, however the losses in dollar terms were $ 367m in 2003 but the same shot up to $ 519m in 2004. Studies found that legitimate sale of software fetched $ 52 b in the developed world as against a pirated sale of about $ 22 b. Whereas in the developing countries the sale of legitimate software fetched only $ 7 b as against $ 12 b for sale of pirated software.

 

 

Definitions of Terms used above:

 

 

Total software base is the total amount of software, legitimate and pirated, installed during the year. It is obtained by multiplying the number of PCs receiving new software during the year by the average number of software packages per PC that were installed in that year. Losses represents the loss to the total industry, including the channel, retailers and local in country software vendors. Pirated software is the difference between paid-for or legitimate packaged software units and the total software base.

 

 

Piracy rate is the percentage of the total packaged software base that is pirated. (Figures are taken from annual reports of NASSCOM, Business Software Alliance [BSA] &

International Data Corporation [IDC])

 

 

(5) How is software piracy flourishing ?

 

 

l The main motivation to software pirates is definitely money.

l Making copies of CD s is so easy and fast using a computer.

l Growth in the use of the Internet

l Introduction of broadband made downloading easy and fast.

l The Licensed versions are too costly.

l Lack of strong will in enforcement of intellectual property laws.

l Less risky as the society in general is lenient towards such crime.

l Software counterfeiting has become a multibillion-dollar industry.

 

 

(6) Why is it an Economic Offence?

 

 

The computer software industry is one of the great business success stories in the recent past, with healthy increases in both hardware and software sales around the world. However, software piracy threatens the industry's future. Legitimate companies receive nothing from the sale of pirated software, and this loss of revenue often leads to lay offs within the software and related industries. In addition, the profits from the sale of counterfeit software don't help expand the economy by providing jobs, taxes, and wages. There is also a good chance that these profits may be funding additional, illegitimate businesses. The software industry loses more than $33 billion annually worldwide due to software piracy.

 

 

That is, it costs the IT sector almost a $1000 every second.

 

 

l The software pirates neither pay tax, provide jobs nor pay salaries, on the other hand the legitimate sale of software will have a cascading effect on the economy.

 

l The software industry is growing more rapidly than the traditional industries in India, therefore the impact of piracy on the Indian economy will be substantial. As India is moving towards a knowledge-based economy protection of knowledge capital becomes essential for future growth.

 

l Software piracy also affects the Government by way of loss of tax revenue and wrath of the IT industry etc. The BSA study states that a reduction in piracy rates in India from the present 70% level to 60% level in next four years will —

 

l add $2 billion to India's economy;

 

l increase local industry revenues by around $1.6 billion;

 

l generate 48,435 new high-tech & high-wage jobs;

 

l generate $92.4 million in tax revenues to the government

 

 

The projected IT sector growth during the next four years will stand at 148% if the piracy rate continues at the present level of 70%. However, a 10 % reduction in the piracy rate has the potential to raise the IT sector's growth in India by 163%. The continuing piracy problem means higher prices for consumers of licensed products, less revenue for investment in new products (R&D), and a potential barrier to success for new software start-ups in India. All these factors are serious inhibitors to further the growth of IT in India. The products that are generally affected by the piracy are Operating System software, MS Office tools, Oracle / SQL database server versions, Lotus Smart Suite, Adobe Photoshop package, Multimedia software etc. All these are products of large MNCs and hence piracy may not be directly effecting the Indian software firms. But these MNCs do have their R&D centers, Replicators, Distributors, Resellers, Retailers, Marketing & Sales staff, Customer Support staff, Call Centers etc. in India - hence there is definitely an impact on our economy apart from the loss of tax revenues to the government. If piracy in India is brought down by 10% it will add 50,000 new jobs and increase the turnover of the industry by $2.6 bn. (Figures are taken from annual reports of NASSCOM, Business Software Alliance [BSA] & I nternational Data Corporation [IDC] )

 

 

(7) Modus Operandi & Intelligence Gathering:

 

 

The most frequently adopted MO is End-User Piracy. Though rampant, it is done in an unorganized manner. Here mostly the small time software firms and the Multimedia designers are the targets. The Web Designers, the Desk Top Publishers, the 3D animators, small time advertisement firms, Presentation Designers etc. adopt this MO. They generally buy a single user license software, load the same on many terminals and misuse the same for commercial purposes. The law enforcement agencies can get the required actionable information form any of the employees working in such firms. The second MO adopted is Hard-Disc Loading / Pre-installed Software. This MO is used by the Hardware firms which sell locally assembled computers. They load a variety of illegal copies of software onto the hard disks to make the purchase of their machines more attractive. Similarly a computer assembler purchases one copy of software and illegally installs it on more than one computer. Most of the Hardware firms selling assembled computers will be the targets of law enforcement agencies for adopting this MO. The third, but a more serious MO is Software Counterfeiting. This MO cannot be adopted by an individual or a small firm. It is done in a much more organized manner and is generally trans-national in nature. For manufacturing counterfeit products one needs high end machines, thorough knowledge of the security tags, proper imitation of the packaging and use of Holograms identical to that of the original. This MO is more serious because the customer is cheated and made to believe that he is buying a genuine one and he is also made to pay a price that is equal to that of the original. Such products are manufactured in bulk in countries like China, Singapore, Hong Kong etc and are smuggled in to India through seaports and airports. Here the involvement of the Customs officials can also be examined. Since it would be difficult for each and every seller to liaison with the foreign replicator, they have formed an organized network and often exchange the products depending on the demand prevailing in different cities in India. Source of information in this case will be the authorized dealers of the Software giants like Microsoft, Adobe, Oracle etc. as they are the worst effected.

 

 

(8) How to Identify a Counterfeit Product: