China's software piracy rate may be far lower than earlier estimates as a Chinese research firm recently announced the country's piracy rate last year was only half of that claimed by Business Software Alliance (BSA).

BSA is an international commercial software and hardware industry anti-piracy group whose members include Adobe, Apple, Cisco Systems, Dell, EMC, HP, IBM, Intel, Siemens PLM Software and The MathWorks.

Chinese research firm Chinalabs.com says in a recent report that the software piracy rate in China was 41 percent last year, far lower than 82 percent piracy rate claimed by BSA in an earlier research report.

ChinaLabs also says sales of authentic software increased 47 percent in China last year while that of pirated software declined seven percent.

"For a long time, BSA's number was believed to be the most authentic figure that reflects the software piracy in China," says Fang Xingdong, chairman of ChinaLabs.

"But after a closer scrutiny, we discovered their figures have many limitations and only covers the piracy on personal computers," Fang says.

According to ChinaLabs, the piracy rate in China last year declined 10 percentage points from 52 percent in 2006. The piracy rate in operating system software declined 29 percentage points from 2006 to 39 percent last year.

BSA said in a statement last week that its study, which was independently conducted by IDC, covers all packaged software products running on personal computers (PC) and does not include other types of software such as that running on servers or mainframes or software sold as a service. IDC is an international analysis, research and advisory group for the IT, telecommunications and consumer technology markets.

"IDC's report focuses on the piracy study of PC packaged software, while ChinaLabs' study includes a broader mix of software market segments," BSA said. "We welcome China domestic organizations, including ChinaLabs, to conduct independent software piracy research for the purpose of fighting piracy and promoting software industrial development."

The software piracy number is one of the most sensitive issues between China and western countries, especially the United States, which has long complained that China's rampant piracy has meant huge losses for its booming software industry.

Zhang Qin, vice-commissioner of China's State Intellectual Property Office (SIPO), said in an interview with Sina.com after ChinaLabs' report was released that many foreign countries are "biased" concerning China's software piracy and the rate is unlikely to be as high as BSA claimed.

"If China's piracy rate was 82 percent as BSA claimed in 2005, which means piracy has eaten into more than 80 percent of China's software market. That means the real turnover (taking into account the revenue eaten by pirate software) out of the country's software industry would have taken up one fourth of China's GDP in 2005," he said.

China did not have statistics concerning its piracy rate until 2005. According to BSA, the country's piracy rate from 1994 to 2004 was above 90 percent.

Such a number has long been acted as one of the major bargaining chips for foreign countries pressing China in many of the bilateral political and economic negotiations, especially in talks concerning China's entry into the World Trade Organization (WTO).

However, China did not launch large scale of anti-piracy campaigns until the late 1990s and earlier 2000s when it started to realize that the counterfeit software was also hurting its own infant software industry. (Piracy has destroyed China's PC console game industry, forcing game vendors to develop online games that run on a groups of servers, which can better avoid being pirated.) The issue has also hindered its effort to transform itself from a manufacturing-base economy to an innovation-based one.

Since then, the country has put a lot of effort in fighting underground software factories and has ordered municipal and local authorities to buy computers with pre-installed legitimate software and required all domestic and imported computers to be sold with legitimate software pre-installed.

IDC said that by reducing China's piracy rate by ten percentage points over the past three years, more than $864 million in losses was saved.

"Considering the vast PC growth taking place in the Chinese IT market, this continued decline in China's software piracy rate is quite promising," BSA CEO Robert Holleyman said in a statement.

"BSA is encouraged by the commitment from the Chinese government to ensure legal software use. We look forward to continued dialogue between the US and China aimed at addressing issues that affect both economies."

Although all the figures are showing a decline in piracy in China, the office of the US Trade Representative last month still placed China at the top of its "Priority Watch List" of country's with major piracy concerns.

It said China was still showing "high levels" of copyright and IP infringement, and that leadership at the local level would be critical to improving the IPR climate in the country.

But industry watchers expect the software piracy debates to be reduced in future years as more software will become free via web-based applications or available in SAAS (software as a service), a model of software deployment where an application is hosted as a service provided to customers across the Internet.

(China Daily 06/09/2008 page9)

2013-07-17