Piracy and Counterfeiting as Obstacles to Development Jeffrey

Piracy and Counterfeiting as Obstacles to Development Jeffrey Hardee Vice President & Regional Director Business Software Alliance October 25, 2004

Agenda § Who is the BSA? § Piracy stunts opportunities § Software as an economic driver § No Short Cut: Policy, Public Awareness. Enforcement

Who is the Business Software Alliance? § A non-profit organization promoting a safe and legal digital world § BSA educates consumers on software management and copyright protection, cyber security, trade, e-commerce and other Internetrelated issues § Founded in 1988 § Presence in 65 countries worldwide

BSA Members

2003 Worldwide Software Piracy Figures § § Total software installed on computers : US$80 billion Total software paid for : US$51 billion ü For every US$2 worth of software purchased legitimately, US$1 worth is obtained illegally § § Total packaged software loss GLOBAL PIRACY RATE : US$29 billion : 36%

PC SW Piracy By Region § § § E. Europe: Latin America: Middle East/Africa Asia/Pacific: W. Europe: US/Canada § Worldwide 70% 63% 55% 53% 36% 23% 36%

PC SW Piracy Rankings Top 20 Pirating Countries Bottom 10 Pirating Countries

PC SW Losses By Region § § § W. Europe: Asia/Pacific: US/Canada: E. Europe: Latin America: Middle East/Africa: § Worldwide $9, 600 $7, 553 $7, 232 $2, 111 $1, 273 $1, 026 $28, 794

Value of Pirated Software Piracy of $100 Million or More* * Low piracy countries, because of the size of their markets can have high values for pirated software

Software Piracy in Asia Pacific Country Piracy Rate Piracy Losses ($M) Vietnam 92% $41 China 92 % $3, 823 Indonesia 88 % $157 Pakistan 83 % $16 Thailand 80% $141 Other AP 76% $37 India 73% $367 Philippines 72% $55 Malaysia 63% $129 Hong Kong 52% $102 Korea 48% $462 Taiwan 43% $139 Singapore 43% $90 Australia 31% $341 Japan 29% $1, 633 New Zealand 23% $21 Regional Average/Total 53% $7, 553

Global IT market large and growing – 2003 IDC Study • Globally – IT contributes $932 billion • Employs over 9 million people in more than 1 million companies • Raises $700 billion in tax revenues

Economic Benefits of Commercial Software – IDC Study • Software is a key driver of IT sector growth • In 2001, software and IT services accounted for more than 60% of IT sector spending • US$180 billion for the packaged software industry

Asia’s IT market growth led by software • • IT $175 billion industry • Between 2002 -2006, IT sector projected to grow by 54% • Employs 3 million people Generates $95 billion in taxes Software industry alone $25 billion sector and fastest growing component of IT industry BUT with 10 point reduction in piracy levels IT sector could grow by 94%, nearly twice as fast

Harnessing IT economic benefits • Key Finding: A country’s software piracy rate is a key differentiator between countries that enjoy vast IT economic benefits and those yet to unleash them.

What a 10 point drop in piracy could mean for Asia economies • Directly contribute an additional $170 billion to Asia’s economies • Create 1. 1 million new jobs • Increase local industry revenues by nearly $120 billion • Generate $15 billion in taxes

Invest in Protection • Asia would enjoy greater economic benefits if it invests more in IP protection • Governments should play an active role in combating piracy and supporting IT industry

BSA’s role in reducing software piracy Three-Prong Approach § § § Public Policy ü Copyright Protection ü TRIPS and WIPO Treaties: criminal penalties, statutory damages, ISP liability, temporary copy protection, ACM, RMI ü Optical disc legislation Education ü Educational campaigns to create IPR awareness ü Work closely with government and industry on joint activities to educate businesses on software piracy. This includes joint poster campaigns, road shows and direct mailer campaigns Enforcement ü Support law enforcement to counter piracy ü Conduct own anti-piracy activities

Types of Piracy Organizational end-user piracy • Businesses and organizations using pirate or unlicensed software in the office. Hard disk loading • Loading of illegal copies of software onto the hard disk of computers by computer sellers Retail Piracy • Sale of pirated software on a retail level Software Counterfeiting • Illegal manufacture and distribution of software Internet Piracy • Unauthorized downloading/uploading of software, Internet sites offering infringing software, unauthorized sharing of files

Organizational End-user Copying 6

Organizational End-user Network Use e Licens ent m Agree Company Network Legal Network Usage se Licen nt e greem A License Agreement

Organizational End-user Network Abuse Company Network Illegal Network Usage e Licens ent m Agree License se Agreement Licen nt me Agree

Examples Of Manufacture/Retail Piracy • Burned CDs (including compilations) • Counterfeit Product • “Hard-Disk Loading”

Mail Order CDs

File Sharing Services GNUTELLA • Once connected, the user becomes part of a large interconnected network of other users. A

File Sharing Services GNUTELLA • Matches are displayed as they are found, while the message D continues through the rest of the network. Search: “Norton Anti Virus” B H A E C Match! F G

Legal Tools - Berne Convention • Traditional rules: under the Berne Convention copyright laws should give right holders the following exclusive rights which other people cannot exercise without the author’s consent - Reproduction Right – right to authorize or prohibit copying of a work in any manner or form - Adaptation Right – right to authorize or prohibit translations, adaptations and other modifications of a work - Communication Right – right to authorize or prohibit public performance and broadcasting of a work

TRIPS Agreement • • • WTO TRIPS Agreement (Trade Related Aspects of Intellectual Property Rights) first major international treaty to go beyond the definition of basic rights to address procedures and remedies necessary to secure those rights against infringement TRIPS requires procedures and remedies that actually work in practice to deter and prevent infringement Members required to adopt enforcement procedures that “permit effective action” against infringements, including “expeditious remedies to prevent infringements” and “remedies which constitute a deterrent to further infringements” - surprise searches in civil and criminal proceedings (ex parte)

TRIPS Agreement - - Criminal penalties required “at least in cases of copyright piracy on a commercial scale” - • damages that compensate the right owner and deter infringements (recovery of full actual costs and higher (even “pre-determined”) damages in civil cases Expeditious remedies and procedures that do not entail unwarranted delays In short, TRIPS requires government commitment to enforcement by providing “effective action” and “expeditious remedies” to deter and prevent infringement.

WIPO Treaties • • WIPO Copyright Treaty (WCT) and WIPO Performances and Phonograms Treaty (WPPT) Adopted in December 1996 to bring copyright law into the electronic commerce age by granting new exclusive rights, including: - Making Available Right: the right to authorize or prohibit the making available of a work by wire or wireless means, such that members of the public may access a work at the time and place they choose - Protection of works in digital form: Berne convention covers reproduction in any manner or form and WIPO treaties confirm reproduction right “fully applies in the digital environment including electronic storage of digital works

- Technical Protection Rules: Treaties prohibit the circumvention of technological measures used by authors to protect against unlawful reproduction, distribution and use of their works - Distribution Right: The right to authorize or prohibit distribution of copies of a work

Optical Disc Legislation • License OD plants to operate under certain conditions • • • SID Code requirement • • Revocation of licenses for breaches Tracking of replication equipment Authority to inspect plants with powers of seizure of mfg equipment and discs PRC, Hong Kong, Taiwan, Malaysia, Macau, Singapore, Philippines

Developments in Region China - Document 18 and State Council Document 47 to promote growth of software industry refers to IP - Series of decrees on legal use of software - Improvements in copyright legislation and software regulations in preparation for WTO entry - Judicial interpretations - April JCCT Talks: 1) significantly reduce IPR infringement levels; 2) lower criminal thresholds and apply criminal sanctions to on-line piracy; 3) ratify and implement WIPO treaties ASAP; 4) extend ban on use of pirate SW to local gov’ts; 5) launch national campaign to educate citizens on importance of IPR

Developments in Region • FTAs – Singapore, Australia, Thailand • TIFAs - Malaysia • Korea – Strong enforcement • BSA joins with governments and local industry associations to increase public awareness (SAM training Singapore, Thailand, Indonesia…) • WIPO Seminars

BSA – IPOS Radio Ad on SAM

THANK YOU