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January 24, 1996

Trade Agreements Had Little Impact
On Overseas Software Piracy

It's been a year since the United States and China struck a last-minute agreement requiring China to crack down on counterfeit copies of music, films and software, narrowly averting a nasty trade war that would have imposed 100 percent tariffs on the sale of Chinese imports. Today, American software executives are questioning whether China has lived up to its commitments.

The agreement called for Beijing to inspect the country's software factories, but there is no indication that such an inspection ever took place, and many software copyright executives say there has been no perceptible improvement in China's software piracy rate. Twelve months later, roughly two dozen counterfeit software factories still pump out thousands of CD-ROMs every day, sometimes cramming as much as $30,000 worth of business software programs onto a single disk and selling it for as little as $25.

The Business Software Alliance, a trade group based in Washington, estimates that out of every 50 software programs in use in China, only one was obtained legally, and it estimates that losses to software piracy still amount to more than $500 million annually.

And China isn't the only place where provisions of trade agreements aimed at stemming piracy have been largely ignored, these executives say. In Mexico, for example, a provision of the Nafta treaty aimed at quelling bootleg sales of software and other intellectual property is also not being enforced. In 1994, the last year for which official figures are available, the software piracy rate in Mexico was 78%, roughly the same as the year before.

"Mexican implementation of Chapter 17 of Nafta has been seriously wanting," said Richard Neff, a copyright lawyer in Los Angeles who acts as the alliance's legal adviser on Latin America. "Occasionally, if you get the right contact, you can get them to run raids for you, but you never get indictments. They lose files and leak targets."

In response, the Business Software Alliance has joined the Motion Picture Association, the International Intellectual Property Association and other copyright industry groups in bringing pressure to bear on the Mexican Government, though what specific action they will take has not been decided.

Until a few years ago, import duties and fees on American software sold abroad contributed to the high piracy rates found in Latin and South American countries and throughout Asia, and there are still a few places where that remains the case. The Venezuelan Government, for example, continues to calculate the import duty on software based on the value of the entire package, including the contents, rather than on just the physical media, as most other countries now do, Neff said.

But overall, in most parts of the world, high import duties and tariffs have been largely eliminated, and in many cases the copyright laws improved. In Brazil, for example, where piracy losses were estimated at more that $550 million in 1994, the legislature is now debating a copyright bill that removes some of the more protective aspects of Brazilian import regulations and makes piracy a crime similar to tax evasion.

According to United States copyright officials, high software piracy rates abroad stem more from a lack of local intellectual property laws and the unwillingness of governments to enforce them, than from any duties or fees. The widespread absence of service and technical support for software that is purchased legitimately also means that there is even less incentive for people to pay the higher price for the real thing.

"More than anything else, it's the perception that it's a small country road and there are no cops in sight," said Edward Morin, director of the anti-piracy program at Novell Inc., a leading provider of computer networking software, in Provo, Utah.

Perhaps the United States' single greatest weapon against software piracy abroad is something called the "301 List," which is published each year by The Office of the United States Trade Representative. The report, among other things, lists those nations that are violating intellectual property laws with regard not only to software but to computer games, movies, videos and music. The report carries the threat of trade sanctions, and nations often go to great lengths to avoid being listed, Neff said.

Still, the piracy problem persists, and for American software companies it can make doing business in some nations next to impossible. In some countries, including Indonesia, the Philippines and Thailand, the piracy rate is close to 100 percent, leading software executives to only half-jokingly label them "one disk countries."

"These countries probably think they're the winners because they're using American software," said Robert Holleyman, president of the Business Software Alliance. "But they're really the losers, because they'll never develop an indigenous software industry."

Related Sites
Following are links to external Web sites of groups mentioned in this article. These sites are not part of The New York Times on the Web, and The Times has no control over their content or availability. When you have finished visiting any of these sites, you will be able to return to this page by clicking on your Web browser's "Back" button or icon until this page reappears.

  • The Business Software Alliance. This site includes data on software piracy in various nations.
  • The Office of the United States Trade Representative is responsible for developing and coordinating U.S. international trade, commodity, and direct investment policy.

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