China 'not doing enough on software piracy'

By Kathrin Hille | Financial Times

24 October 2011

The world's leading software industry body warned on Monday of a jump in revenues lost to software piracy in China as the country's government is failing to rein in rampant copyright infringement.

Robert Holleyman, president and chief executive of the Business Software Alliance, said pledges by the Chinese government to help foreign companies gain more revenues from software sales in China and high-profile anti-piracy campaigns had failed to deliver.

"All that activity led us to believe that we'd see some fairly rapid reduction of software piracy in China," Mr Holleyman said. "But none of what I've picked up with our companies indicates that they're seeing the kind of economic growth associated with the sales of software."

The remarks indicate that software market opportunities for companies such as Microsoft are unlikely to keep up with the pace of China's PC market growth, and that intellectual property rights infringement will remain an irritant in relations with the US and China's other leading trading partners.

In late 2010, the Chinese government, responding to growing criticism of its intellectual property rights protection record, promised in talks with the US that it would help increase foreign companies' software sales in the country.

Since last year, Beijing has also been running a high-profile crackdown on the production and sales of pirated goods. The duration and scale of the campaign initially gave rise to cautious optimism among foreign industry executives that real change could be on the cards.

The US government even expressed cautious optimism in its annual report on intellectual property rights protection, saying Beijing's special campaign against piracy might lead to "lasting improvements".

But Mr Holleyman said: "While [piracy as a] percentage of total software sales is coming down somewhat, the US$ losses are exploding." He added that he expected multinational software companies to launch more legal action against Chinese counterfeiters as a result.

In China, 78 per cent of all software sold in 2010 was pirated, according to BSA's 2011 Global Piracy Report, compared with a global average piracy rate of 42 per cent. While this is not among the world's highest piracy rates, China created the second-highest economic damage through piracy as the industry lost $7.8bn in revenues to pirates last year. In the US, the damage was $9.5bn.

But China is expected to overtake the US in that ranking soon as it is set to surpass the US as the world's largest PC market by unit shipments next year.

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