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29% of software used in UK is pirated

The Business Software Alliance today published the results of its 2003 Global Piracy Study conducted by IDC, which reveals a software piracy rate in the UK of 29%. The majority of problems were identified among businesses that neglect their licensing obligations.07 Jul 2004

Pirated software represents lost sales for national and international software publishers based in the UK of around $1.6 billion, according to the BSA.

Conducted for the first time by global technology research firm IDC, this year's BSA global piracy study incorporates major software market segments including operating systems, consumer software and local market software. The inclusion of these new categories, says the BSA, paints a broader, more accurate picture of the software piracy problem.

In the EU region the piracy rate was put at 37%. The cost to software publishers in the region is valued at over $9.7 billion. The figures are similar to those of recent years; but due to the different methodology used this year, the new results suggest that piracy is getting worse, according to IDC.

For its analysis, IDC drew upon its worldwide data for software and hardware shipments, conducted more than 5,600 interviews in 15 countries, and used its in-country analysts around the globe to evaluate local market conditions.

The BSA today announced a five-point plan to tackle the issue of software piracy in the region. It includes engendering respect for IP, starting from an early age in all schools, universities and businesses. In Ireland a scheme is already underway to promote the value of software and the need to be licence compliant to teachers and secondary school pupils.

Another part of the plan is to increase appreciation of software as a fundamental business asset. Mike Newton, UK spokesperson for BSA, gave the example of a typical finance director: if asked how many company cars the company has, he will know the answer; if asked how many software licenses the company has, he won't.

Duncan Brown, the IDC's UK Consulting Director, told OUT-LAW that they believe only 5% of the software piracy problem is with the home user – who may be downloading illegal software using P2P or installing from counterfeit discs.

The remaining 95% is business piracy, said Brown, and, at least within the UK and Western Europe, the biggest problem seems to be license-creep. This typically happens when software is installed by a company on more PCs than it has purchased licenses for.

Some businesses do fall into the trap of buying counterfeit software, often without knowing it. "They think they've bought legitimate software," explained Newton, "but they haven't."

Newton said that many successful sellers of counterfeit products will price their products only slightly below the normal retail price of the official product to fool purchasers into thinking they are simply getting a good but genuine deal.

The BSA has developed tools to help businesses put in place the policies and procedures required for effective software asset management, or SAM, including the JustAskSam web site.

Enforcement continues to be an important part of the BSA's remit. Newton told OUT-LAW that the BSA averages one settlement every week with a company that has been found breaking copyright laws through software piracy and wants to avoid a court appearance.

Legislative change

Newton and his team are also campaigning for a change to European laws.

At present, many European countries allow copying of copyright works for private use, and compensate rights holders with a levy on blank media. The UK does not allow such copying, so does not have such a levy on blank media. The recent Copyright Directive left each Member State of the EU free to decide whether or not to allow private copying, asking only that there is fair compensation to rights holders if copying is allowed.

Newton says that such levies on digital media are outdated. "These levies were introduced to add a few cents to the cost of a cassette, to compensate the music industry for home copying of albums," he explained. "But now that you can copy thousands of pounds' worth of software onto one DVD, these levies just don't make sense."

The BSA instead wants a uniform approach across Europe, so that private copying is forbidden, as in the UK.

Without this harmonisation, says Newton, the uptake of Digital Rights Management (DRM) is being stifled.

Effective DRM prevents private copying of copyright-protected material; so there should be no need for the levy approach to compensating media companies.

Another argument against levies is that, with DRM, consumers have a good argument that they're being taxed for something they cannot do even if they want to. Without DRM, there are still many who would not use their blank media or recording devices to infringe copyright, so they also have an argument for not paying compensation.

The BSA is also calling on EU Governments to ensure swift, faithful implementation of the recently adopted Enforcement Directive.

The UK is still to consider how to implement the Directive. No major changes are required to comply with the Directive, but the BSA recommends using the Directive as an opportunity to review certain legal procedures in the UK.

OUT-LAW spoke to Graham Arthur, a lawyer with US firm Covington & Burling, who advises the BSA. He gave an example of a change to English law that would help his client.

Arthur explained that if, say, a company gets a tip-off about a warehouse full of counterfeit DVDs, the company can ask the police for help.

If the police cannot or will not get involved due to lack of resources, the company may want to act in its own right. So the company would apply to a court for an order giving it the right to inspect the warehouse.

However, under current procedures, Arthur says the identity of the whistle-blower would need to be revealed to the court. And when the court papers are presented at the warehouse for the surprise inspection to begin, the identity of that person will be revealed.

Clearly, that is a significant deterrant for anyone who may be thinking of sharing their inside information with an organisation like the BSA.

But that's not the position in Ireland or in much of Continental Europe, explained Arthur, where it is possible to keep confidential the identity of the individual. It also differs from the position in Scotland.

The Directive, he argues, presents a good opportunity to change that procedure. It also presents an opportunity to reconsider the remedies available to those whose software is used without licence.

"If you use software for several years without a licence, you can escape simply by buying a licence for that use," said Arthur. "But the current level of damages that UK courts will award does not reflect the cost of the investigation; arguably, it only covers the licence fee."

He contrasts this with the position in Ireland, where the damages will be whatever the court sees fit, because Irish legal procedure has more scope for so-called additional damages and exemplary damages.

"We have additional damages," said Arthur of English law, "but the courts interpret this very narrowly in the case of end-user piracy."

The Enforcement Directive only requires that the UK has a damages remedy. It already does. But Graham Arthur and the BSA are making the point to the UK Government that now is a good time to review that remedy. The BSA would also like the right to bring actions in its own name - rather than in the name of its individual member software companies.

"We don't want to see wholesale changes to intellectual property rights," concluded Arthur. "But discrete fixes to the laws and procedures that govern how those rights are protected would be very helpful."