Wen Dao

Xiao Wang's business is having some difficulties these days.

The peddler decided to quit the business and tried to find another job instead of selling pirated software near the Hilon Building, a computer marketplace in Zhongguancun in Beijing, the so-called Chinese Silicon Valley.

"It is harder and harder to do business now," he said.

He said more frequent visits from the police and other law-enforcement officials made his "work" more dangerous.

Another problem is that fewer and fewer people are interested in buying pirated Microsoft Windows operating systems, Wang's best-selling products.

Role of government

The main reason pirate software peddlers are suffering is the increasing awareness of the government in intellectual property rights (IPR) protection.

Chinese Vice-Premier Wu Yi said at the second China International Software and Information Service Fair on July 27 in Dalian that the country regards software as an industry with strategic importance and is formulating effective policies in areas including anti-piracy and anti-monopoly, to encourage its development.

She said that only with effective IPR protection could software companies be interested in staying in the business and contributing to the prosperity of the industry.

Wu is the highest-ranking Chinese official to show such determination in bringing an end to software piracy.

After setting up a comprehensive legal framework in IPR protection in 2001 and 2002, the country has shifted its attention to educating software users and enforcing the law.

Government departments are being told to show a good example in using copyrighted software only.

The Chinese Government has instructed all departments to make software budgets each year and include them in their assets.

Beijing, Shanghai, Jiangsu, Guangdong and many other regions buy software products every year through public bidding.

What attracts more attention from software companies is the country's software government procurement regulation, which has been in the pipeline for two years.

The regulation aims to specify detailed procedures in government procurement, define qualifications for domestic software, and determine what kinds of software should be included in the government procurement list.

Wu Jianmin, research manager with the Beijing Software Industry Promotion Centre, estimates that government procurement usually accounts for one third of the total software market in many countries. The ratio in China is only about 10 per cent, leaving a lot of room to buy more, boosting the industry and curbing software piracy.

But the regulation, the draft of which has been reviewed by related ministries several times and was expected to be announced in July, has not yet been implemented.

Wu said the delay was mainly down to two factors: definition of domestic software qualifications and categories of priority software in the government procurement list.

Industrial sources also said government agencies are still trying to achieve a balance between encouraging the domestic software industry and treating domestic and foreign companies equally under the principles of the World Trade Organization (WTO).

Ni Guangnan, an academician from the Chinese Academy of Engineering, suggested that only domestic and foreign software with more than 50 per cent of its value added in China is regarded as eligible for government procurement.

But the Ministry of Information Industry (MII), which overseas software industry development, said earlier this year that all software companies with investment in the country will be given equal treatment.

With the push from government departments, software piracy is on the decline.

A recent report by the Electronics Intellectual Property Rights Consulting and Service Centre (EIPRC) under the MII and the China Software Industry Association (CSIA) showed IPR protection awareness among Chinese organizations had improved.

The report, based on a survey of 238 software companies, 270 organizations and enterprises and 1,000 individual users, indicates that 78 per cent of organizational users buy software from software companies or authorized retailers.

Since the current focus of anti-piracy in China is on organizational users, the ratio is believed to reflect an improvement in curbing piracy.

At the same time, more than 60 per cent of the organizations surveyed believed software should account for 20 per cent of their IT spending.

Almost 70 per cent of organizations said they had special departments in charge of buying software and 72 per cent of them had special employees or departments in charge of managing software assets.

Turn to enterprises

With the increasing emphasis and education of copyrighted software and rules forbidding the use of piracy in commercial institutions from the Chinese Government, many enterprises are turning their eyes to users in companies.

Microsoft, maybe the software company that suffers the most from piracy, has decided to work with local partners to develop more authorized users.

The company signed agreements with leading Chinese enterprises such as China Mobile, China Unicom and Sinopec to provide software and solutions to them.

It also signed strategic partnerships with three domestic software companies - CS&S, Powerise, and Digital China - to win customers in key industries like telecommunications, finance, power, and government, where domestic companies are strong.

On the consumers' side, it teamed up with almost all computer makers in China to bundle its operating systems with computers.

Autodesk, another US software firm previously troubled by piracy in the world's most populous country, also changed its focus from sales to services this year.

The company aims to provide tailored solutions, an advantage that pirated products do not have, to construction, manufacturing and infrastructure industries.

Autodesk has opened two new offices in Wuhan and Chengdu to provide fast, quality services to customers and channel partners.

According to a report by the Electronics Intellectual Property Rights Consulting and Service Centre (EIPRC) and China Software Industry Association (CSIA), 87 per cent of software companies participating in the survey said they targetted enterprises, government agencies and education organizations, while only 13 per cent of them provided consumer-targetted products.

A long way to go

As well as tighter government efforts in using copyrighted software, another challenge for pirated software peddlers like Wang is the increasing unauthorized proliferation of software on the Internet.

As the Internet has grown more and more popular among the Chinese, it has also become a faster route for peddling the software.

A report by the EIPRC and CSIA indicates that organizational users get 10 per cent of their software from the Internet, while the rate was 34 per cent among individual users.

Despite the increasing adoption of copyrighted software among enterprises and organizations, unauthorized copies within organizations has become another issue meeting serious concerns from software companies.

The EIPRC-CSIA report shows illegal copying and unauthorized use of copyrighted software ranks the No 1 means of piracy in the eyes of software companies, even before pirated discs, pre-installation with hardware and Internet downloading.

Zhao Tianwu, director of EIPRC, said the results showed there was still a lot of work to be done to improve software users' awareness of IPR protection, which should include more than simply not buying pirated software disks.

More than 60 per cent of the organizations surveyed said education could raise people's awareness of IPR protection.

Forty per cent of them believed education with examples of legal and financial risks was the most effective way.

From the software companies' side, 72 per cent of them said the law should be enforced more strictly, or the legal system improved, while only 9.8 per cent of them said education through the media was more effective.

But Zhao believes all these things might need a lot of effort from the government, companies and ordinary users and it will take a long time to elevate people's awareness to a significant degree.

(China Daily 09/20/2004 page5)