Software counterfeiting continues to concern global industry watchdog

By Keith Newman

Illegal copying of business software by organisations in New Zealand continues to concern global watchdog, the Business Software Alliance (BSA), which claims software vendors were ripped off to the tune of $40.5 million in sales last year.

While the number is down slightly from 34 per cent of sales in 1997 to 32 per cent last year, it has improved from 1996 when $54.3 million was allegedly lost in software sales.

The BSA bases its annual figures on sales information provided by members including Microsoft, IBM, Symantec and Novell. Piracy rates assume every PC sold each year will have two applications installed. However, the report does not take into account operating systems or the "increasing counterfeit issue" in New Zealand.

The BSA has gone out of its way to point out a significant increase in counterfeit software being bought into the country through our relaxed parallel importation laws. Last month New Zealand was placed on the US Government "watch list" for the first time largely because of changes to our copyright laws in May last year.

BSA Asia Pacific director of public policy, Laura Sallstrom, said lowering the piracy rate required a unified effort between industry, Government policy makers and enforcement authorities in New Zealand.

"Significant losses to the software industry in New Zealand have serious negative implications well beyond the industry as it steals highly skilled jobs and hurts customers, software developers, local distributors and retailers."

The alliance would prefer we got the level down to US-level of 27 per cent. According to a January PricewaterhouseCoopers survey, that would mean an extra $76 million going into Government coffers through taxation.

In many ways, the might of the Microsoft corporate legal machine has helped reduce illegal copying and unlicensed use of software here. The company has even piloted new strategies to catch illegal software importers and users, including financial incentives to dob in culprits and teams which sweep the country purchasing and testing PCs and software at random.

In the past year in particular the software giant has been coming down hard on counterfeiters - and currently has 15 cases awaiting prosecution. Last year Microsoft New Zealand caught 22 resellers bundling pirated copies of Windows 95 and Office 97 with new computers.

Microsoft's corporate lawyer Ron Eckstrom said there was still great difficulty in achieving prosecution because of the way New Zealand law is structured.

A recent case in the Christchurch District Court obtained a successful prosecution and a number of new cases have been filed in the past three months. The Microsoft Foundation had about $175,000 in its coffers through penalties Microsoft had managed to extract from counterfeiters in out-of-court settlements.

Mr Eckstrom said Microsoft had mainly been dealing with individuals who purchased product over the Internet, companies which indiscriminately copied software and retailers "who knew full we they had counterfeit product and were selling it for a similar amount as legitimate retail product".

The most frequently pirated products were Windows 95 and Windows 98 operating systems and Office 97. These were mostly imported 30-50 copies at a time. Microsoft was continually receiving reports about people who had imported one counterfeit copy for their own use. The biggest case to date was won against Mortgage Eliminators in Hamilton which paid a substantial fine after being found with over 100 copies of Microsoft Office.

Mr Eckstrom said the quality of counterfeited product was often so good most people wouldn't know at first glance.

Microsoft planned to make another major sweep of the market from July.

The results of the fourth independent study on global software piracy compiled by the (BSA) and the Software & Information Industry Association (SIIA) claim world software loses at $22.2 billion for 1998, suggesting 38 per cent of the 615 million new business software applications installed were pirated or copied, 231 million. That is an increase of 2.5 million on 1997.

North America, Asia and Western Europe accounted for the majority (80 per cent) of revenue losses. In terms of piracy rates, the study estimated more than nine in ten business software applications were pirated in Vietnam, China, Indonesia, and Russia.