Piracy economic impact

Intellectual property-based industries are significant drivers of the high as 50%, is known as casual copying. Casual copying is the sharing and installation of software on multiple PCs in violation of the software’s and user license agreement (EULA). Software and software-related services alone account for a $140.9 billion market, payment of $12.3 billions in taxes and the creation of more than 2.7 million jobs. However, software counterfeiting threatens the ability of the industry to maintain its significant contribution to the U.S. economy.

According to a 2000 software piracy study by International Planning & Research Corp., software piracy resulted in:

· 24% percent of the business software applications installed on PCs in the U.S. were pirated;

· 118,026 lost jobs;

· $5.6 billion in wages lost;

· $1.6 billion in lost tax revenue.

Worldwide, the software industry generates more than
$28 billion in tax revenues annually. If privacy were eliminated in the U.S. and reduced abroad, it is estimated that the industry would produce an additional 1 million jobs by 2005 and contribute $25 billion in tax revenues.

In 2000:

· The worldwide piracy rate was 37%;

· $11.75 billion in revenue was lost.

Microsoft has developed product activation as one solution to reduce casual copying.

The majority of customers acquire Windows with the purchase of a new computer, and most new computers pre-loaded with Windows XP not require activation at all. Microsoft provides OEMs (Original Equipment Manufacturer) with the ability to «pre-activate» Windows XP in the factory and estimates that upwards of 80% of all new PCs will be delivered to the customers pre-activated.

«Pre-activation» of Windows XP by the OEMs will be done in different ways depending on the OEM’s own configuration options and choices. Some OEMs may protect Windows XP using a mechanism which locks the installation to OEM-specified BIOS information in the PC. Microsoft expanded and integrated the existing OEM CD BIOS locking mechanism with product activation, and called this method of protection «System Locked Pre-installation», or SLP.

Successfully implemented, SLP uses information stored in an OEM PC’s BIOS to protect the installation from casual piracy. At boot, Windows XP compares the PC’s BIOS to the SLP information. If it matches, no activation is required.

In the unlikely scenario that the BIOS information does not match, the PC would need to be activated within 30 days by contacting the Microsoft activation center via the Internet or telephone call.

OEMs may also activate Windows XP by contacting Microsoft in the same way the consumer would activate.

In 1998 38% of software in circulation was pirated, causing approximately $11 billion in losses to the global software industry. Software piracy is a serious worldwide problem – particularly where the piracy rate in some countries is close to 100%. Contributing to the staggering piracy rate are disparate intellectual property and copyright laws coupled with the aggressive growth of the Internet. And although industry organizations have been successful in many of their efforts to combat software piracy, governments around the world must take steps to improve their intellectual property laws and enforcement system.

Without a global commitment to reducing piracy, the potential for world economic growth is seriously crippled. The high piracy rate inhibits the development of the software industry and precludes it from reaching its full worldwide potential by cheating legitimate budding software developers and companies of the rights and rewards of their hard earned intellectual property.

Countries with the highest dollar losses due to software piracy:

United states, China, Japan, Germany, United Kingdom,

France, Brazil, Italy, Canada, Russia.

Losses for these countries totaled $7.3 billion, or 67% of worldwide losses in 1998.

1. Read and try to understand the given above text.

2. What’s your opinion concerning software piracy? Will it exist always?

Thank you for your hard work!

5. Relax a bit

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