Counterfeiting is a common form of corruption and cost businesses well over US $1 trillion in 2008. One of the most highly scrutinized areas of counterfeiting in today’s business world is the theft of intellectual property. Intellectual property is the ownership of ideas, as well as the control over the tangible or virtual representation of those ideas. The piracy of this intellectual property has become a major form of illegal business.
Software is intellectual property, as are books, movies, and music. Music performers, authors, and software developers use copyright laws to protect their work and their investment in the field. Global software piracy has reached financial values of astronomical proportions. According to estimates by the Business Software Alliance, just under five percent of all software purchased annually is pirated, resulting in revenue losses in the billions of dollars. IDC, a global market intelligence and information technology and telecommunications advisory firm, estimated that a 10 percent reduction in worldwide software piracy over a four year period would put US $400 billion back into economic growth. This economic growth would also add more than 1 million jobs and generate billions in new taxes.
Firms that expand globally with their intellectual property are increasingly mindful of the potential ramifications of software piracy, which range from multimillion dollar losses to the hindrance of future software development. The accessibility of software and the ease of duplicating it make it highly vulnerable to unauthorized copying.
The Business Software Alliance (BSA) delineates five common types of software piracy: end-user piracy, client-server overuse, Internet swapping, hard-disk loading, and commercial counterfeiting. End-user piracy occurs when a person reproduces copies of software without authorization. Client-server overuse happens when too many people on a network are using a central copy of a program at the same time—a company has to be licensed for the number of users who can access the program simultaneously. Internet swapping, or the downloading of unauthorized copies of copyrighted programs from the Internet, is illegal if the software is accessed via pirate websites or peer-to-peer networks. Hard-disk loading occurs when a reseller loads software illegally with the aim of making the machine more attractive to customers. Commercial counterfeiting of software is the illegal duplication of copyrighted programs with the express intent of directly imitating the copyrighted software. Creating, allowing others to create, or obtaining any unauthorized copy of software, regardless of commercial or financial benefit, is considered copyright infringement and can be prosecuted under civil and criminal law in many countries.
Interpol suggests a connection between counterfeiting and both organized crime and terrorism. The Secretary General of Interpol has gone so far as to imply that profit from pirated CDs in Central America funded Hezbollah terrorist efforts in the Middle East. Countries considered highly corrupt according to Transparency International tolerate high levels of software piracy.
Given the significant ramifications to the world economy, counterfeiting and the theft of intellectual property will be watched closely in the future. The global electronic village demands a revenue model that ensures adequate income to those developing intellectual property while simultaneously providing consumers with access to such intellectual content.
Fighting Fakes: Foiling Counterfeit Products, Business Week, May 26, 2007, http://feedroom.businessweek.com/?fr_story=FEEDROOM196813&rf=sitemap, retrieved January 23, 2009; By: Frederik Balfour, Fakes! BusinessWeek, February 7, 2005, i3919, 54-64; By: William F. Crittenden, Christopher J. Robertson, and Victoria L. Crittenden, Hard Facts about Software Piracy, Business Strategy Review, Winter 2007, pp. 30-33; www.bsa.org