Software Piracy: Will Russia Crack Down?

Moscow has started to prosecute copyright infringers, as software makers put pressure on countries where piracy is tolerated

Romania's information technology sector is said to be one of the most promising industries among the new European Union members. Foreign investors appreciate the high level of technical education combined with low wages.

Even Microsoft founder Bill Gates appeared to have an interest in the market when he visited Romania in February. President Traian Basescu took the opportunity to thank Gates, joking that pirated Microsoft software had helped Romania build a vibrant technology industry.

About 70 percent of software used in Romania is said to be pirated, but the country may be exceptional because its president actually acknowledges the practice.

"Mr. Basescu's remark is really annoying, but the problem is an international one," said Jan Hlavac, spokesman for the Czech office of the Business Software Alliance (BSA), which supports software companies in their fight against copyright infringement. "Some countries have more bootlegs and some less, but all countries everywhere in the world have users of illegal software."

Through campaigns and research studies, the alliance tries to make computer users and governments aware that illegal software copies are stolen goods and that the losses are immense for the information-technology sector.

A December 2005 study by the U.S. research firm IDC showed that a 10 percent reduction in software piracy in the EU could boost the IT industry's growth rate from the current 30 percent to 38 percent through 2009.

Because piracy also depresses demand for software design, customization and support, the study estimated that a 10-percent reduction could add about $400 billion to economies worldwide and $67 billion in tax revenues.


Today software producers operate in a weak legal environment, with little international coordination on intellectual property rights.

"Every country can decide for itself how strictly it wants to chase software piracy," said Matthias Rumpf, a spokesman for the Organization for Economic Cooperation and Development. "The only way to make them more sensitive to this problem is political pressure.

Copyrights are part of commercial law, so the EU could apply sanctions against countries where software piracy is tolerated, Rumpf said. But countries where piracy is commonplace -- including Russia and Croatia -- have yet to be punished this way.

The problem is compounded in these countries by laws that do not deal with computer hackers. The BSA ranks Russia second only to China in software piracy. Not surprisingly, then, in a market near Moscow's Bagrationovskaya metro station, shoppers can find music, films or software for absurdly low prices, sometimes before legitimate copies show up in shops.

Microsoft's new Windows Vista, which was to be more secure than the older Windows XP, was cracked by Russian hackers a few days after coming on to the market. It was quickly available on the black market in Russia, the Czech Republic, Poland and Croatia, according to the website Microsoft invested $6 billion in Vista's development.

In January, just as Vista was being unveiled to consumers, Microsoft reported that more than 22 percent of all Microsoft installations are illegal, meaning that 512 million users worldwide in January were using the company's software without a valid license.

The company considers these numbers to be conservative, as the program used to conduct the research can check only computers whose users give their consent.


The software industry seems helpless against piracy. "There's no way for us to control if someone is using pirated copies of our software," said Matthias Gilke, spokesman for software maker Quark. "The only way to stop it is to prevent the sale of illegal software."

Copy protection is of little help, because it only prevents the typical consumer from making copies. But since it is an easy barrier for hackers, it doesn't make sense to invest too much in the technology, Gilke said. "We have copy protection on our software, but we prefer not to concentrate too much on it.

It's impossible to stop illegal copies and more important to concentrate on the satisfaction of the clients that are willing to pay. We don't want the high level of copy protection to interfere with the work flow of these legal clients," he said.

There is almost no way to find illegal users. The police in the Czech Republic are well-educated about the problem Hlavac said, but they can still check a computer only when there is a well-founded suspicion that it is running illegal software. "We need evidence, no matter from whom. The common way is that someone reports to the police or to us that illegal software is used in a certain company. Usually former employees do so to take revenge. In that case the police will check the computers in this company and we have an angle to sue it," he said.

Even when caught in the act, prosecution is difficult because often the informants are unwilling to testify in court.


Microsoft is so huge that it can survive piracy. But for small software producers the problem of piracy is more serious. The fast-growing markets are too important to pass up, but they are also risky, Gilke said.

"In countries like Russia we don't have the right to sue someone if he uses our software illegally; there's no legal basis to punish hackers, Gilke said. "And in other countries it would be financially unrealistic to really chase every illegal user. We profit from the big lobbyists like Microsoft, which exert political pressure on countries where the copyright is not respected enough."

Such pressure can have unexpected results. Russia, eager to join the World Trade Organization, has started to crack down on copyright infringement. Although it is still a high-piracy country, illegal use of software dropped by 4 percent from 2004 to 2005, according to a May 2006 study by the BSA and IDC.

In that context it seemed like a cautionary tale early this year when Russian authorities tried to prosecute Alexander Ponosov, a school principal from a small village in the Ural mountains. Ponosov had bought 12 new computers for his school that contained illegal copies of Microsoft software. He said he did not know the software was illegitimate.

The public was outraged, and Microsoft was quick to note that it had not requested that the teacher be prosecuted. Former Russian President Mikhail Gorbachev wrote an open letter asking for mercy for the principal. President Vladimir Putin called the case absurd. Leonid Reiman, Russia's IT minister, argued that the sellers, not the buyer, should be prosecuted.

Situations like Mr. Ponosov's arise often because buyers cannot afford to pay the full price for software, industry advocates acknowledge. The retail price for Vista is 300 euros.

Gilke suggests clemency for cash-starved start-up companies. "A quite common way to convince companies that use illegal software is to offer them amnesty [by saying], 'If you buy the legal update of our product and will pay for this, we will turn a blind eye to the fact that the basic version is an illegal one.' That means these companies might get the fully legal program even cheaper than it would be to buy it in the shop."

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