Piracy threat

Software piracy is on the increase, but what is the extent of the problem in the Middle East and how are regional authorities managing it?

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By  Sarah Gain Published  August 24, 2005

|~|PIRB---PHOTO-2---Al-Shanfar.jpg|~||~|Software piracy is defined as the unauthorised duplication of computer software. Although most computer users today are aware of the illegality of illicit use and duplication of software, many show a general disregard for the importance of treating software as valuable intellectual property. Copying software is an act of copyright infringement and is subject to civil and criminal penalties. Using pirated software within an organisation, and distributing it are both illegal.

All software is copyright-protected and the copyright is enforceable for 95 years. Those who infringe copyright are liable for any damages suffered by copyright owners and profits attributed to the infringement, which in the United States can result in penalties of up to US$150,000 per title or up to US$250,000 and five years in jail.

The Middle East has not always upheld robust and clear copyright laws. However, the situation is gradually improving thanks to frontrunners like Jordan and the UAE, whose rulers have realised that in order to lure software companies to invest on their shores, they must be assured their copyright interests will be protected.

As a result, the law has clamped down heavily on all forms of piracy in these countries maintaining a sustained vigil over small retailers, where the mass illegal duplication of software was big business, and over companies themselves, where use of unlicensed software was rampant. Despite all efforts, however, when the Business Software Alliance (BSA) published the results of its 2004 Global Piracy Study in May, the piracy rate in Europe, the Middle East and Africa (EMEA) was still high at 39%.

Although the actual figure showed a drop of two percentage points on the 2003 rate of 41%, the result does not indicate any significant improvement and the cost to national and international software publishers actually rose in the region as the value of pirated software was revealed to be US$15.7 billion — an increase of US$3 billion.

The study, which was carried out by global research firm IDC on behalf of the BSA, shows software piracy continues to be a major challenge in EMEA. Incorporating major software market segments including operating systems (OS), consumer software and local software, IDC enlisted analysts in over 50 countries to review local market conditions.

Beth Scott, vice president of BSA EMEA says, “Although some progress has been made in EMEA, unfortunately, this small decrease demonstrates that software piracy remains a major obstacle to economic growth and the development of the information economy in EMEA. We need governments to do their part through improved copyright legislation, which promotes innovation in creative industries, as well as public support and action to encourage respect for IP (intellectual property).”||**|||~|PIRB3---PHOTO-2---Al-Shanfa.jpg|~|It is hoped the Al Shanfari Group’s signing of the BSA’s code of ethics motivate other companies in Oman to install original software across their operations.|~|Piracy, the study revealed, is still most prevalent in countries and regions where the software market is growing. The 50-plus countries within the EMEA region represent a unique microcosm of global piracy, according to Steven Frantzen, IDC managing director for Central and Eastern Europe, Middle East and Africa, who points out, “Software piracy is a particular concern to local economies where for every US$1 of software sold, an additional US$1-2 goes to local services, distribution and supply companies.

"Local software creators and emerging markets face both a huge opportunity and a huge challenge if they are to break through the piracy barrier to achieve their growth potential. For growing local solutions providers, piracy represents an almost insurmountable barrier to competing at the national and international level. If local governments want regional businesses to succeed on a wider scale, they need to promote respect for IP, the BSA/IDC report states.

Also keeping a close watch over the international battle to eliminate piracy is the International Intellectual Property Alliance (IIPA). The IIPA is a private coalition established in 1984 to represent the US copyright-based industries in their efforts to improve international protection of copyrighted materials.

In its mission statement, the alliance states, “The IIPA’s goal is a legal and enforcement regime for copyright that not only deters piracy, but also fosters technological and cultural development in these countries, and encourages local investment and employment. As technology rapidly changes, IIPA is working to ensure high levels of copyright protection become a central component in the legal framework for the growth of global electronic commerce. Strong legal protections against the theft of intellectual property are essential for achieving the full economic and social potential of global e-commerce.”

The piracy watchdog maintains detailed reports about the annual progress of countries around the world in terms of anti-piracy law enforcement and makes recommendations for necessary improvements. In its 2005 report about the Kingdom of Saudi Arabia (KSA), for example, the IIPA recommended the country remain on its watch list, stating, “The enforcement system in KSA remains one of the least transparent in the world.”

The IIPA claims raids in recent years have not had a deterrent effect on piracy in KSA. The fines that are imposed, according to the IIPA report, are too low to act as a serious deterrent. Despite the fact KSA copyright laws, which came into effect in 2004, strengthened penalties available in piracy cases and gave rights holders hope the administrative and judicial system would be more transparent, piracy continues to be a serious issue. “Without the active involvement of the police, the entire chain of pirate distribution, including duplication, distribution and storage sites, remain untouched,” states the IIPA.

Similarly, Egypt has long been noted as a market essentially closed to most US rights holders due to major barriers to legitimate business — piracy being the chief issue. Unfortunately, according to the IIPA’s 2005 report, the situation worsened last year, with major organised criminal syndicates strengthening their hold on the retail market, flooding it with illegally copied products.

While the Egyptian government took some action against piracy in 2004, and the Anti-Piracy Police department in Cairo became more active, the lack of raids on larger criminal operations meant the Egyptian piracy trade cost US copyright industries US$72.5 million.||**|||~||~||~|For Kuwait the devastating effects of retail piracy and pirate optical disk distribution centres remains a key concern for the IIPA, despite the fact the country’s government — specifically the Ministry of Commerce and the Public Department of Customs — has made overtures to identify more criminal targets and raised awareness of the problem.

Lebanon also remains under careful surveillance by the IIPA, although the organisation recognises the country’s government did co-operate with the BSA and other rights holders in conducting several raids. The IIPA believes this move demonstrates willingness on the part of the country’s authorities, and hopes this is the beginning of a full-scale crackdown down on illegitimate software production, distribution and use, but warns, “Unless the government does more, failure to adequately protect copyright [will have] a detrimental effect on the local economy.”

Bahrain, Oman, Jordan and the UAE, previously beset by problems of piracy have each successfully turned a corner in their crusades to eliminate illicit software in recent years, however, having strengthened their legal frameworks as a result of proactive involvement on the part of their respective governments.

The UAE in particular has been commended by the IIPA for its enforcement campaign, which was started in 1994 by the Ministry of Information and Culture (MoIC). “The UAE government has succeeded in doing what no other Gulf State has been able to do: get consistent deterrent results against copyright pirates [and make] significant progress in anti-piracy enforcement over the last few years,” the IIPA reports.

UAE authorities have intensified their campaign by carrying out a number of raids on software pirates operating in the country. Earlier this year, Sharjah Police seized three PCs, all operating on pirated Windows XP, Office XP 2003 and Norton Anti-Virus, and 500 pirated CDs, detaining four persons in connection with the case.

The raid against the two companies where the illegal use was detected, was conducted in co-ordination with the Arabian Anti-Piracy Alliance (AAA), which organises a host of awareness campaigns for retailers and distributors as well as end-users like government departments, private companies and individuals. The campaigns focus on the benefits of using legal software, such as protection of IT investments, high performance of computing systems and protection of important data, besides technical support services and the upgrade of original software.

"The raids reflect the seriousness of the authorities in dealing with this problem, sending a clear message to all parties involved in the distribution and use of pirated software that no leniency will be shown towards violators of International Property Rights (IPR). This will create a positive environment for the country's IT industry, and help boost the national economy," says Scott Butler, CEO of the AAA.

In another raid, this time at Abu Dhabi computer stores, the UAE authorities reaffirmed their commitment to press forward with the fight against the illegal use of software products. The MoIC, in co-ordination with the AAA, raided four computer stores in the Emirate, seizing five PCs, once again all operating on pirated Windows XP, Office XP 2003 and Norton Anti-Virus, along with 43 illegally copied CDs.

The authorities also arrested three persons and charged them with violation of IPRs and UAE's copyright and publishing laws. "We are highly appreciative of the series of raids carried out by the UAE MoIC and the police departments to protect IPRs and restrict the illegal use of software products," says Butler.

These co-ordinated efforts have fostered an increased awareness among end users and retailers about the negative effects of using pirated software, an impact that is slowly beginning to spread outside the UAE borders and around the Gulf States. While the UAE occupies a leading position among regional states in its success in bringing down piracy rates, countries elsewhere in the Gulf are recognising the need to follow the example set by the UAE, in order to establish a healthy economic environment, which will help attract more IT investment to the region as a whole.

Reduced overall productivity, data loss, reduced IT investments and the inability to avail the support services and updates offered by legally-produced software, are negative side effects of piracy that affect all companies, and it is to avoid such problems that Oman's Al Shanfari Group recently signed the BSA's Code of Ethics, which lays down that the signatory would “neither commit nor tolerate the manufacturing, use or distribution of unlicensed software” and “would only supply licensed software to internal and external customers.”

Adil Bin Saeed Al Shanfari, vice chairman of the group of companies, says the move will allow Al Shanfari to contribute to the sustained campaign by BSA and the Omani authorities to curb the piracy level in the country. “The decision reflects our commitment to follow ethical business practices, and we will ensure strict anti-piracy measures are implemented across our enterprise," he promises.||**|||~||~||~|Over the past three decades, Al Shanfari has emerged as one of the most prominent companies in the Sultanate, with interests in almost every aspect of modern Oman, from engineering, transport, logistics, manufacturing and automotives to commercial, tourism and property management.

The Group has played a major role in establishing and developing Oman’s infrastructure and as a result, its signing of the code of ethics is seen as a major boost for the BSA’s activities in the Sultanate. It is hoped the corporation’s move will motivate other companies in Oman to install original software across their operations.

"There is now a better understanding of the detrimental effects of software piracy, such as reduced IT investments and a consequent decline in employment opportunities, which ultimately impede economic growth. The [move by the] Al Shanfari Group will inspire others to follow suit. This positive measure will help the anti-piracy campaign in the Sultanate gather further momentum," says Jawad Al Redha, co-chairman, of the BSA in the Middle East.

The decision by the Omani business and the initiatives on the part of the UAE authorities are strong examples of the awareness among top-rung companies and governments of the importance of protecting IPRs and the benefits to be gained by using original software.

A proliferation of the use of pirated software results in considerable losses for manufacturers and distributors, bringing down job vacancies and forcing companies to reduce their investments, especially on research and development. On the other hand, international software manufacturers have been giving price benefits to countries that record low piracy rates and are increasing investment in such countries, benefiting end-users as well as national economies.

"Software manufacturers are suffering huge losses as a result of piracy. This forces them to cut down on recruitment and reduce their budgets for research and development. Besides, it persuades them to refrain from distributing their products in countries that record high levels of piracy. On the other hand, these companies are giving priority to countries steadfastly committed to protecting intellectual property rights and restricting software piracy, and the UAE heads this list," Butler explains.

The number of stringent actions levied by regional authorities against the manufacturers and users of pirated software will serve to reassure global companies that have set up facilities in the Middle East, boosting confidence in the ability of regional governments to keep piracy under check. If concerted efforts are not made, however, software piracy will continue to be a key obstacle for business growth for many Middle Eastern countries, leading to economic stagnation.

“In the trend to follow free trade policies, protecting IP rights and promoting the development and use of legal software have become critical to the integration of the global economic system, and to the support of local and regional development plans, as well as to providing an ideal environment that encourages developers towards more technological innovations," states Butler, “We call upon the Arab countries to adopt the successful anti-piracy measures in order to accelerate the transformation to a digital society." ||**||

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