Businessweek Archives

Taking On The `Superpower Of Piracy'


International International Business

TAKING ON THE `SUPERPOWER OF PIRACY'

Software pirates beware! There's a sting operation under way in Moscow to nail you. The operation is being orchestrated by a branch of the Business Software Alliance (BSA), a U.S.-based trade group, with the cooperation of three Russian software companies. The plan is to gather evidence against producers and users of counterfeit goods, and then make them a test case under Russia's new copyright laws.

Tired of rip-offs, such software companies as Microsoft Corp. and Lotus Development Corp. are taking a hard line now that the Russian computer market is set to boom. The industry estimates Russian counterfeiting cost it $75 million last year. So widespread is piracy that many Russians apparently don't realize it is illegal to copy computer programs without paying a licensing fee. "We hope that by bringing cases against commercial pirates, end users will get the message," says Virginia L. Clough, the BSA's representative in Moscow.

As recently as three years ago, there was no software market in Russia. Few people owned personal computers. And Western software companies were hesitant to enter a market that provided no copyright protection laws.

DISTRIBUTION DERBY. But since the collapse of the Soviet Union, buying imported computers has become something of a national pastime. The computer market in Russia is now growing an estimated 30% to 50% annually, with sales hitting 80,000 computers per month.

Legitimate software sales are skyrocketing, too. Take the BiblioGlobus store near the old KGB headquarters, where shoppers crowd up to a brightly lit counter. Behind the harried clerks, shelf after shelf is lined with colorful boxes of Lotus 1-2-3, Microsoft Word, and Borland Paradox--all marketed by a small Russian company called CompuLink. Since June, Moscovites have been snapping up more than $20,000 worth of computer software per month from CompuLink.

This spectacular growth has convinced software producers they had better move quickly to guard the market by putting the squeeze on the pirates. Since 1992, there has been a law on the books that protects the copyrights of computer programs and databases, with violators subject to fines of about $400. "Now we have to make people aware of it," says Jane Kitson, president of Lotus Development Russia. According to the BSA, 98% of the programs used in Russian computers in 1993 were pirated.

Already, more Russian distributors are going legal. Industry executives estimate Russians are now purchasing more than $1 million of licensed software per month. Microsoft sales grew by 1,000% between July, 1993, and June, 1994, says Robert Clough, managing director of the company's Moscow office. Says Clough: "Russia is still a superpower of piracy, but it's getting much better."

But the big software producers are fighting piracy in Russia with carrots as well as sticks. They are trying to woo Russian computer nerds with discounted prices. A Microsoft Word package that would sell for $350 in the U.S. goes for about $200 in Russia. "We are taking less money so that the dealers can grow," says Microsoft's Clough.

WARNING LETTERS. Western software makers are not the only producers concerned about piracy. Two Russian software companies, 1C and Paragraph-Interface, have joined BSA. 1C is the biggest domestic software distributor, with 750 dealers in the Commonwealth of Independent States. At the insistence of the two Russian companies, the BSA is sending Russian banks and businesses informational letters warning them that it is illegal to copy software. Most companies now purchase one legal copy in order to get technical support, but then copy to hundreds of other company computers. "Now we need to show there will be sanctions imposed on those that don't pay," says Alla G. Polegenkaya, general director of Paragraph-Interface.

President Boris N. Yeltsin has set a good example by directing the Presidential Council and the State Duma to use only licensed programs. And a few Russian companies are deciding to pay up. For example, the giant gas conglomerate Gazprom recently spent over $500,000 on software. But most cash-strapped Russian companies still aren't willing to spend money for something they can duplicate for free by pressing a button. Legitimate software producers are hoping a well-publicized sting will change their minds.Patricia Kranz in Moscow


We Almost Lost the Nasdaq
LIMITED-TIME OFFER SUBSCRIBE NOW

(enter your email)
(enter up to 5 email addresses, separated by commas)

Max 250 characters

 
blog comments powered by Disqus