University of Sunderland, Master of Computing
Master-Programme: E-Technology for Business
Master Module: Research, Ethical, Professional and Legal Issues
Date of Hand in: 11.01.2006, 4.00 p.m.

The Repercussions of Software Piracy: Damages,
Approaches of Control, and Benefits from
Reducing Piracy Rates

by: Ekrem Arslan

Table of Contents

Abstract 3

1. Introduction 3

2. The Scope of Software Piracy 4

2.1 The Software Pirates 4
2.2 Why Software Piracy? 5
2.3 Economical Damages 6

3. Approaches of Control 7

3.1 A Directive of the European Union 7
3.2 Other Approaches of Control 7

4. Economic Benefits by Reducing Software Piracy 8

4.1 Consumers 9
4.2 Workers 9
4.3 Innovators 9
4.4 Entrepreneurs 10

5. Conclusions 10

6. References 12

Abstract

Copyright infringement of software vastly known as software piracy has become an economical menace. Particularly, the East Asian parts are the basic distributors of unlicensed software and denote the highest piracy rates world wide. The counterfeits have become high quality products that they can even compete with original software. Reasons, why software piracy exists and who the pirates are, are appraised in this report. The tremendous damages of high piracy rates on, for example, governmental loss of tax revenues, loss of jobs, are shown. Attention is paid, whether the Directive on the enforcement of Intellectual Property Rights (Directive 2004/48/EC) passed from the European Union, which has ingredients of different international treaties such as the WIPO, the TRIPS and the WTO, is able to stem software piracy. This leads to show why only the implementation of laws causes no objective effect on the surge of software piracy. The influences of attributes such as attitude, income, and education, which play a significant role to curb piracy rates across the globe, are scrutinised. Furthermore, benefits from a reduction of piracy rates are evaluated as well.

1 Introduction

Almost every second household in the European Union is connected to the internet. The internet connection is getting faster and faster, and as a result it speeds up the download rates enormously. From the angle of an internet user there are plenty of benefits being connected with the internet e.g. collecting and exchanging information. Besides these advantages, there are damaging effects being connected world wide with other users. Particularly the software industries and to an inceasing degree other major parts such as the entertainment industry have to compete with high quality counterfeits, most of them from abroad, which cost them billions of dollars every year. Which began with peer-to-peer networks like napster, is nowadays broadened to a variety of other file sharing applications which serve the internet user, not only with legal issues. Peer-to-peer networks have become a market place for sharing illegal data containing audio, video, software etc. In short, any data in digital format is available.

In this context copyright infringement of software vastly known as software piracy produces heavy economic losses for the concerned industries. There are ways to prevent software piracy such as simply copy protections. But they have to be improved frequently because hackers often identify gaps to circumvent the copy protection. Copy protections, hence, a technical approach to curb software piracy, should be excluded from further investigations. Taking actions such as passing laws against illegal distribution of software or any kind of digital data are other measures. Are the industries the only victims of software piracy? It is a matter of a chain reaction because at the end the ultimate consumers suffer of the misconduct. They have to pay, for example, raising prices for watching films or for buying music cds. In the following sections, an examination and critical evaluation of the state of software piracy, the governmental approaches of piracy problems, which will provide answers to the following questions:

• What does the scope of software piracy comprise?
• What are the pirates’ reasons, and why?
• What damages can be allocated to software piracy?
• What strategies are appropriate to contain software piracy?
• What are the benefits from stemming piracy rates?

The investigations lead to a conclusion about the effectiveness of anti piracy approaches and their ability to curb software piracy rates.

2 The Scope of Software Piracy

Software piracy is the illegal duplication of computer software whereas the developer does not receive any money for their work. There are several kinds of appearances of software piracy. Hacking into software and cracking the copy protection by disabling it, is one kind. Herein sticking to carry on the idea, to make software a registered version, hackers develop tools which generate key codes to unlock a trial version (Housley, 2004). Another form of software piracy is when a software pirate purchases software once and installs it on multiple computers. The internet has become the main and most rapidly growing platform where pirated software is distributed (www.spa.org). The particular relevance of software piracy becomes clear when considering that every third copy of software which is in use is unlicensed, and thus pirated (Pratt, 2005). Beyond, Asia exhibits the world’s vastest piracy rate. Worldwide, individual countries disclose piracy rates which range from 21 % (USA) to 92 % (Vietnam) (BSA and IDC, 2005a). In 2003, an annual loss of $ 11-12 billion of revenues by the software industry, which was a raise of more than 50 % from 1995, was accounted of software piracy (Higgins and Wilson and Fell, 2005). Hence, this indicates the frightening evolution of software piracy. Why is software piracy in the eastern parts of the world more prevalent? It is linked with many factors such as income, culture, regional laws, education, attitude etc. Furthermore, China’s boosting economy and its vastly growing online population contributes supplementary the world’s software piracy. Whereat the number of netizens was just 620.000 in 1997, by late 2005, it was expected that China’s online population reach 134 million (Guo, 2005).

2.1 The Software Pirates

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