Software Piracy



Software Piracy

Lee Seversky

Abstract

Software systems are an intricate part of the global infrastructure. They are the foundation for the world economy, ensure public safety, and provide a source for entertainment to millions. In a software market that is maturing, the availability and needs for software has shifted. Today, the driving force behind the industry's growth is the vast selection and availability of commodity software from many competing sources. Globally, the demand for software is growing as well as the potential revenue for software developers. With an increase in demand for software the market for software piracy also increases . Software, like other forms of intellectual property, is protected by intellectual property laws. Due to software's unique digital format, software is an easy medium to pirate and easily disseminate using low cost digital mediums and the Internet. Combating piracy is a difficult endeavor around the world including the United States. Lack of intellectual property laws, differing social stands on property rights, and a lack of education, hinders the reduction of pirated software. Education is a key part to reducing piracy. Understanding the significance and impact of software piracy is equally important as it is to develop anti-piracy technologies. Recent connectivity software, such as peer to peer clients and the growing availability of high speed network connections, provide the means for easy access to, and the proliferation of, illegal software. Currently, the monetary benefits, the low cost, easy access to counterfeit material, and enforcement difficulties, make software piracy a growing epidemic if left unchecked.

Table of Contents

Introduction 3

What is Software Piracy 3

Motivations for Piracy 4

Types of Software Piracy 5

Impact of Piracy 6

Combating Piracy 6

A Change in the Industry 7

Conclusion 7

Figures 8

Biography 10

Bibliography 10

Tables and Figures

Figure 1.1: 2003 Piracy Rates by Country 8

Figure 1.2: 2003 Worldwide Software Piracy Figures 8

Figure 1.3: Software piracy losses 2003, by selected countries 9

Figure 1.4: Software piracy losses 2003, rate per 100,000 population by selected countries 9

Introduction

Intellectual property provides the ability to own rights to an individual's creativity and innovation. It also allows for protection through the use of patents, trade marks, designs, and copyrights. In a global economy, software systems play a dominant role, running, protecting, and entertaining the world. The need for software is growing exponentially, and so is the market for pirated software.

Software piracy, the unauthorized duplication and distribution of software, is a worldwide problem that is growing at an epidemic pace. Software piracy is a problem in the United States and North America, but it is more severe overseas. The mechanisms for protecting intellectual property, common in the United States, such as copyrights, patents, and software licensing, are rarely acknowledged or fully understood in other parts of the world. Furthermore, ease of distribution, and lack of consistent intellectual property laws beyond country borders make software piracy a global problem.

Software piracy occurs within businesses, among colleagues and friends, and in large global counterfeiting rings. Recent technologies provide a means for easy dissemination of counterfeit software across the Internet. Many advances in technology and increased availability to hardware that enables mass production of software have given rise to large counterfeit rings. These rings look to capitalize on the lucrative profits that are attributed with making and distributing counterfeit software. Application software and networks such as peer to peer, IRC, BBS provide the means and ease for any computer user to engage in the illegal act of making software copies. Software piracy can be as easy as surfing the World Wide Web or as complex as running a world wide counterfeit ring.

The cost and impact of software piracy is enormous. Whenever a piece of pirated software is used, a company is deprived of its earnings. Piracy undermines the software market, making it less lucrative for software companies to continue to offer innovative and high quality software. It also hurts the consumer. Frequently, pirated software does not include documentation or provide access to customer support, and, or, future software upgrades. Most importantly, pirated software is illegal and a crime in most countries. There are many agencies and organizations that have been created for the sole purpose of reducing and preventing acts of software piracy. Recent legislature is empowering software creators to protect their assets. An increase in penalties for pirating software and a larger push for wider enforcement are attempts to curb the rising piracy rates worldwide. Also, new anti-piracy technologies are being incorporated to prevent and deter the counterfeiting of software.

Solving software piracy requires a combination of education, technology, legislature, and enforcement. Anti-piracy methods must be effective in deterring piracy and not hinder the legal use of the software by the user. A successive and viable solution for piracy prevention is a solution that incorporates both hardware and software protection in conjunction with education about intellectual property rights. It is also important to provide choices for quality software at fair prices.

What is Software Piracy

Software piracy is the illegal duplication and distribution of software packages and applications, which violate software licenses and copyright laws.[1] Software is protected by the same laws that protect other intellectual property such as music, literature, and movies. Like digital music and digital movies, software is a fairly new type of intellectual property. Software's unique digital existence is a challenge to those protecting the intellectual property attributed with any software.

Most users never consider stealing, but many make copies of software and, or, use pirated software every day. These users are breaking the law. In many ways, the losses from stealing software intellectual property are more severe and costly than stealing non intellectual property. Consider a car stolen from the side of a street. This car has a certain market value. But unlike a car, software can be duplicated an unlimited number of times. Each copy, contains the exact same information as the original, and is duplicated for a small price. This price is usually the cost of the blank media it is recorded on. If these were cars, one car could be duplicated many times for little cost and then resold at market value. If this were possible it would crush the car industry and economy. Counterfeit copies of software can be distributed and sold for large profits, making the software piracy industry a very damaging to the economy and a very lucrative business for software pirates.

To purchase software means to purchase a software license. A software license specifies specific regulations and terms of use determined by the copyright and software maker. In general, most software licenses allow for use on a single machine and for a single backup copy. Copying, distributing, and exchanging software with friends, coworkers, or on the Internet violates the license, and is a violation of copyright law. Stealing intellectual property is a crime and so is software piracy. It is a crime regardless of the type, severity, or motivation.

Not only is using or distributing pirated software a crime, but it increasingly violates many corporate policies and many professional organization's policies. Today corporations specify strict intellectual property policies for their employees. These policies are meant to protect the corporation from breaking copyright and property laws. The policies prevent users from installing personal software on corporate machines by securing copies of company software and licenses, and limiting access to employee workstations. Many of the corporate policies are adoptions from professional organizations by-laws and ethics. The ACM code of ethics explicitly mentions honoring property rights and copyrights. It also mentions that proper credit should be given when using intellectual property.[2] The professional community organizations are leaders in respecting and honoring intellectual property.

Motivations for Piracy

Software is an integral part of the global economy. The large growth in software application makes developing software a big business with potentially large profits. Software enables users and business to do more with their systems, and the need for software is growing. But, many times software is not free, and depending on the type of software, it can cost large amounts of money. Wherever there is potential for large profits and there exists a high demand, illegal methods for satisfying the demand at a lower cost also exist. But money is not the only motivation. Power, satisfaction, and lack of education are also factors for fueling the software piracy industry.

Only in the past few years, with the wide availability of large disc copying machines, the Internet, and large profit gains due to the increasing demand for pirated software, has larger, more professional groups begun mass copying and distributing software. Large scale, professional software counterfeiting throughout the world is largely dominated by organized crime groups. These groups have been known to be linked with worldwide crime syndicates. These counterfeiting groups run million dollar operations, which are used to finance other crime and terrorist activities.[3] These groups pose the greatest financial threat to the software industry due to their large scale and multinational distribution cells. Such groups are participants of violent crimes that are unrelated to software counterfeiting.

Money is a driving motivation for counterfeiting software. But organized crime is not the only place where software piracy occurs. Motivated by the recent decrease in the cost of computer hardware and the increase in low cost, bare bones computer discount stores, the competition for consumer business is fierce. Many smaller third party computer distributors use counterfeit software as an avenue for decreasing costs and increasing the value of their merchandise. Loading of counterfeit software onto new computers is a known technique called “Reseller Piracy”. This type of piracy hurts both the consumer and software developers. In a market being saturated by more and more discount computer retailers, this type of piracy is increasing.

Outside of money, other motivations for software piracy might not be as clear. Many organizations are not for profit, distributing terabytes of software across the Internet at little or no cost. One famous and now defunct “warez” organization called “Drink or Die” was raided in 2001. The members were from all over the world including Chris Tresco, a MIT systems administrator. After his arrest Chris spoke out about some of his reasons for choosing to violate copyright laws and distributing stolen software for free. He answers by saying, “My motivation was purely and simply putting technology to work. I knew I was doing wrong.” [4] Tresco's viewpoint is very similar to others that belong to organizations that distribute illegal software without profiting. Many realize it is wrong, but are engaging in it for the personal satisfaction, the technology, and the close membership with a private close knit group of individuals.

Many acts of piracy occur because of a lack of education and choice. Copyright and intellectual property laws are new and are being appended constantly. Especially outside of the United States, recognizing copyrights laws, intellectual property and the economic severity of software piracy is still not fully understood. Even in the United States copying software is still conceived as harmless and within the rights of the user. Many consumers are unaware what rights they are entitled to when purchasing software. There is a fundamental lack of communication between copyright holders and users about what intellectual property is and why it needs to be protected. Software companies have acknowledged that educating and allowing consumers the opportunity to learn about and report piracy will help reduce piracy rates. Educating users about the damages and risks of distributing or using illegal software will heighten social awareness and change the overall social viewpoint about software piracy.

Types of Software Piracy

While all types of software piracy are illegal, software piracy can be categorized based on scale, severity, monetary motivation, and the ability for enforcement. These characteristics are all types of software piracy. The types of software also dictate different types of piracy. The wide spectrum of software licenses add a new level of user confusion which is fueled by lack of education and awareness.

A common form of software piracy called “End User Piracy”, or otherwise known as “Soft-Lifting”. This type is usually seen throughout businesses, schools and universities, or wherever multiple copies of the same software package is used. Soft Lifting is the act of distributing software among multiple end users and multiple machines or systems. Unless specifically specified, most software packages licensing are good for one user for use on one system. Commonly software is passed along from user to user and installed on multiple systems, breaching copyrights and license agreements. A copy for backup purposes is generally allowed. Many times this right is used to justify multiple copies and distribution by end users. This type of piracy is difficult to detect on the small scale, but many medium to large size business have in place controls and regulations as to how and what software is installed on company systems. Companies risk large penalties for not staying up to date with software licenses and for making illegal copies of software.

Another type of piracy is motivated by low cost and strong competition between hardware retailers. This type is usually referred to as “Reseller Piracy”, or “Hard Disk Loading”. It is a technique that is most prominent among resellers who, due to high competition and consumer demand for low cost hardware, distribute multiple copies of software packages on new systems. The customer is left with a system that is loaded with illegal versions of software without original installation media or documentation. This technique is beneficial for resellers because they are able to add additional value to their inventory at little or no cost. Unfortunately, many times, the real cost is to the end user expecting retail versions of software with documentation and full support from the software vendor. It is also detrimental to the software company who loses potential revenue and potential customers.

Software counterfeiting has been the most rampant and common type of software piracy. While Internet piracy has become extremely popular and easy, the act of duplicating software onto media will still be the most popular type of piracy. The availability of extremely low cost, compact disc recording drives, and low cost recordable media, makes software counterfeiting an extremely cheap operation. Counterfeit software can be made to look almost identical to the original, including accompanying documentation and packaging.

Over the past years growing access to high speed Internet connections and the popularity, ease of use, and anonymity that the Internet brings has made the Internet a perfect medium to transmit illegal software across borders and around the globe. Today, with software that allows users to connect across encrypted decentralized networks, and other peer to peer software, any computer user can transmit and access illegal software. New techniques to transmit data which were once dominated by methods such as BBS and IRC are available. Applications such as Napster, eDonkey, and Kazaa, introduced an age that allowed piracy to become as easy as running the application and entering a search query. Through the Internet each user has the ability to pirate software on the global scale to millions of other users. Piracy on such a large scale is a reality that many companies, law enforcement, and legislatures are uncertain how to handle.

Impact of Piracy

In a software market that is projected to grow to over $70 billion from $40 billion[5] within the next five years, the industry is poised for tremendous losses due to piracy. In a study, the Business Software Alliance estimates that 36% percent of software installed in 2003 was illegal. (See figure 1.2) Total losses are projected to be in excess of $29 billion[6]. In the United States the piracy rate is 22% percent, the lowest rate across the globe. Vietnam and China have the highest rates, well over 92% percent. (See figures 1.1, 3, and 4) By region, the piracy rates in Latin America, Asia, and Eastern Europe are the highest. But the United States is responsible for the largest revenue losses due to the high concentration of computer users and software. However, there is some speculation about the validity of software company’s losses due to piracy. Many piracy activists argue that the majority of pirated software is not loss revenue since legitimate copies would not have been purchased. But software companies are losing money and with the current trends of software piracy, software makers are being forced to raise software prices. These higher prices are needed to offset lost revenue due to piracy and the cost associated with combating piracy. But higher software prices limit the availability of the software to the public and fuels even more software piracy. With piracy rates expected to increase, software companies are desperately seeking ways to curb recent piracy trends.

Combating Piracy

Combating software piracy is now a main concern of all software makers. Independent organizations such as the Business Software Alliance, BSA, and a software industry watchdog group exist to help combat incidents of piracy. There are many approaches to combating software piracy. Microsoft has recently announced that they will extend their product activation technology to more of their own products. Microsoft will also continue to educate users about software licenses. Microsoft believes this will help reduce the number of casual copiers of Microsoft media[7]. "Through education efforts and the use of technology solutions such like Product Activation, we're working to make sure that customers who choose Microsoft software products acquire genuine software and are eligible for technical support and product upgrades." While technology like Product Activation, serial numbers, and other software approaches reduce the number of copies made by casual users, these measures are still not enough to deter serious counterfeiters.

More expansive technologies to prevent piracy are being developed and tested. Proposals for Digital Rights Management software to be included into commercial hard disks are receiving strong opposition from user rights groups. These groups are concerned with limiting consumer's use of hardware that they purchase. Any anti-piracy technology must ensure usability and not inhibit how the technology can be used legally by consumers.

In eastern Asia, where piracy rates are astronomical, a solution for combating piracy will have to go beyond copy protection technology and education. Most anti-piracy technologies are bypassed shortly after release and enforcement is difficult. It is especially true in China, where social attitudes about copyright and intellectual property differ immensely from western ideals. Intellectual property such as art in China is encouraged to be copied and learned from. Unfortunately, this type of thinking is not beneficial for software companies. Software consortiums and companies look to education and software incentives to entice consumers to purchase their software instead of using illegal versions. Increased technical support, free upgrades, larger choice, and extras are helping the fight against piracy gain momentum in the Asian markets.

A Change in the Industry

Many software makers see piracy as something that can only be reduced and never eliminated. Companies such as Microsoft are trying to change their business model to reflect how software can be used in the future. Microsoft and other companies are looking to be a provider of integrated products and services. In this way, each company will have direct control over who uses their services and products. A strictly service based relationship with users could remove the threat of software piracy all together.

As the software market continues to evolve from a market of innovations to a market of commodities, the need for software will change as well. Free software is slowly flooding the market with competitive software systems that perform equally, if not better, as their non-free counterparts. As the insurgence of free software continues to flood the market place, the need for expensive software may reduce. With higher availability of free software, third world countries, dependent on pirated software, will have legal alternatives. This is also true for other countries and users who now have a choice between illegal software and a free, robust software alternative, such as open source.

Conclusion

Software piracy will never be reasonably reduced to marginal rates. Given enough time any technological anti-piracy methods can be broken. Large software companies such as Microsoft have the means and capital such that piracy will not seriously jeopardize the company. It can also be said that these corporations such as Microsoft even benefit from the increase exposure and larger user base that pirated copies of their software create. The increased exposure in Asian markets, where Microsoft alternatives such as Linux is gaining momentum, from piracy helps Microsoft continue to dominate the Asian software markets. Unfortunately, smaller companies feel the impact of lost revenue more severely and are unable to recoup their losses, or have the financial strength to continue to survive. Software piracy hurts these companies the most. It also limits smaller companies from adding innovation and choice to the software market.

The best solution to deter software piracy may be for software companies to find a way to survive and even thrive along with software piracy. The software industry is a large market and if software makers can adapt their business model so that it deters piracy and at the same time keep software prices reasonable, software piracy can be overcome, but not eliminated. It is possible to change the software business model to make the demand for piracy decrease. Through education, enforcement, and new software business models, software piracy can be marginalized and the focus of software companies can once again be innovation and value.

Figures

1 Figure 1.1: 2003 Piracy Rates by Country[8]

|Countries with Highest Piracy Rates |% |Countries with Lowest Piracy Rates |% |

|Vietnam |92 |United States |22 |

|China |92 |New Zealand |23 |

|Ukraine |91 |Denmark |26 |

|Indonesia |88 |Sweden |27 |

|Zimbabwe |87 |Australia |27 |

|Russia |87 |United Kingdom |29 |

|Algeria |84 |Japan |29 |

|Nigeria |84 |Belgium |29 |

|Pakistan |83 |Germany |30 |

|Paraguay |83 |Switzerland |31 |

2 Figure 1.2: 2003 Worldwide Software Piracy Figures[9]

|Total software installed on computers |$80 billion |

|Total software paid for |$51 billion |

|Total packaged software loss |$29 billion |

|Global piracy rate |36% |

3 Figure 1.3: Software piracy losses 2003, by selected countries[10]

[pic]

4 Figure 1.4: Software piracy losses 2003, rate per 100,000 population by selected countries[11]

[pic]

Biography

In May of 2004 Lee Seversky will complete his Undergraduate studies at the SUNY Binghamton University, graduating from the Watson School of Engineering and Applied Science with a B.S. in Computer Science. Lee Seversky’s interests are currently in the area of computer graphics and 3D modeling and simulation in real time. He is a proponent of free software and the open source movement and a user of LINUX and *NIX systems.

Bibliography

PIRLAW: Business Software Alliance, SOFTWARE PIRACY AND THE LAW, 2002

ACMETHICS: Association for Computing Machinery, ACM Code of Ethics, 2004

ORGANIZE: John Geralds, Microsoft warns of organized piracy, 2002

DRNKDIE: Chris Tresco, Former DrinkOrDie Member Chris Tresco Answers, 2004

PIRACYLOSS: Todd R. Weiss , Study: Global software piracy losses totaled $29B in 2003 , July 7, 2004

IMPACT: Matt Quinn, Software Piracy Hits $29 Billion in Losses, 2004

MICRSFT: Microsoft Corp., Microsoft Anti-Piracy Solutions Extended to Upcoming Versions of Office, Windows and Visio Products Worldwide, 2002

COPYCAT: Steven Chew, Jr., COPYCAT: The Effects of Software Piracy on the Global Economy, 2000

SIIA: Software & Information Industry Association, SIIA: Anti Piracy, 2004,

CHALLENGE: Sundeep Bhasin, Software Piracy- A challenge to E-world, 2002

[COPYCAT]

[SIIA]

[CHALLENGE]

-----------------------

[1] [PIRLAW]

[2] [ACMETHICS] Section 1.5 of the ACM code of ethics

[3] [ORGANIZE]

[4] [DRNKDIE] An interview shortly after Chris Tresco was sentenced for participating in the Drink or Die organization.

[5] [IMPACT]

[6] [PIRACYLOSS]

[7] [MICRSFT]

[8] Source: Business Software Alliance and IDC 2004, Key Findings First Annual BSA and IDC global software piracy study.

[9] Source: Business Software Alliance and IDC 2004, Key Findings First Annual BSA and IDC global software piracy study.

[10] Source: Business Software Alliance and IDC 2004, First annual BSA and IDC global software piracy study.

[11] Sources: Business Software Alliance and IDC 2004, First annual BSA and IDC global software piracy study.

U.S. Census Bureau 2004, IDB summary demographic data. U.S. Census Bureau, Washington DC.

................
................

In order to avoid copyright disputes, this page is only a partial summary.

Google Online Preview   Download