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Software Piracy or counterfeiting is defined as the illegal copying of software combined with unauthorised duplication of genuine trademarks and documents. Software piracy takes place in many forms, the most common occurrence being in the following :

Office Copying 

Hardware Sellers

Computer dealers more particularly, the unauthorised hardware suppliers who assemble components and sell comptuers to the users with software already installed. Unfortunately, in most of the cases these computers are loaded with unlicensed softwares. In such cases, unless a license and software manuals are provided with the sale, it is likely that programs have been illegally copied.

Counterfeiting 

Counterfeiters try to fool the consumers by selling duplicate softwares. The purchasers feel that they have bought a legitimate product in the sense that the packaging and manuals look like original products. These may actually be fakes and carry the common risk of operational defects and viruses.

The Copyright (Amendment)/Act, 1994 has enlarged the scope of protection of computer programs. The Amendment Act confers the copyright holder with the additional exclusive right to sell, give on hire or offer for sale or hire any copy of the computer programs regardless of whether such a copy has been sold or given on will on earlier occasions. In other   words, even the legitimate owner (e.g. purchaser) of a copyrighted work can not sell or rent his copy of the work. The Amendment effectively eliminates the 'First Sale’ doctrine, under which a legitimate owner of a copyrighted work could further sell, transfer, lease or rent the work to another. Taking advantage of the First Sell doctrine, many rental companies used to purchase software programs (packages) and offer them for short term rentals - a practice which resulted in widespread reproduction of copyrighted works. The 1994 Amendments brings Indian law in conformity with the TRIPs Agreement. However, the TRIPs Agreement is less stringent than the amended Indian law in that it allows a purchaser of a copyrighted work to sell his copy and adds the caveat that, in respect of computer programs, this obligation does not apply to rentals where the program itself is not the essential object of the rental. 

Table 5.1 : Software Industry in India

Source: The Software Industry in India, 1997-98, NASSCOM

There has been quite a mismatch between the figures supplied by NASSCOM and those available from Directorate General of Commercial  Intelligence and Statistics (DGCI&S), Ministry of Commerce with respect to exports of computer software. The figure of Rs.2596 million  provided by the DGCI&S for the year 1995-96 forms only about 10.3 percent of the export figures provided by NASSCOM. It follows from the above that on-site development which measures expertise offered at the client site and off-shore services accounted for nearly 90 percent of the exports. Therefore, there is very little, i.e. about 10 per cent of the exports is accounted by package software. This has not proved to be a major stumbling block as India's exports are relatively small and the global market for software services is larger than that for packaged software. Ignoring the export of package software could be misleading if, over time, the market for packaged software becomes larger than that for software services. Such a situation can not be ruled out as the PC revolution spreads which in turn will increase greater demand for products that can be bought off-the shelf.

Perhaps, Indian software companies are happy in exporting mainly the services since they do not have to worry much about the copyright piracy as has been taking place in the packaged software. Marketing of packaged software costs tremendous amount of resources. Indian companies would find the going difficult against the well established companies abroad.

Source: The Software Industry in India 1997-98, NASSCOM

Different countries show vastly different piracy rates and losses. The more developed nations in general have lower rates of piracy as compared to the developing nations. But absolute level of piracy in software in the developed countries will be higher because of the larger size of the computer market. The largest information technology markets - the United States, Japan, United Kingdom and Germany have higher losses due to software piracy even though their piracy rates are relatively low. In the Asia-Pacific region revenue losses from software piracy were estimated at US $ 3.7 billion in 1996 out of which Japan's contributions was $ 1.2 billion. Vietnam and Indonesia have the highest piracy rate at 99 per cent and 97 percent respectively followed by China at 96 per cent and Korea at 70 percent. India's piracy rate at 60 per cent is better placed than many Asian countries. 

It can easily be assumed that the entire amount of Rs. 363 crores worth legal software installed in India belong to the imported softwares  especially belonging to the seven member companies of BSA. It has also been reported in the official statistics of Ministry of Commerce that during 1995-96, Rs.374.1 crores worth of computer softwares were imported. This is basically related to packaged software since figures provided by the Ministry refers only to those which are cleared through customs. As such work done by foreign companies through satellite communications and services rendered by them are not reflected in the import figures. 

From the discussions with some of the leading computer software companies, it was observed that the copyright violations with respect to Indian software are negligible. This is because Indian companies are mostly involved in customised softwares rather than packaged softwares. Though few companies are releasing packaged softwares in the field of accounting, antivirus etc., but their sales in the domestic market is negligible as compared to other imported packaged softwares in the field of Word Processing, Data Base Management Systems, Statistics, Graphics, etc. They are also of the view that copyright violation with respect to imported package software is relatively much higher.

It therefore follows from the discussions that the copyright violation (piracy) estimated for software in the case of India mainly relates to the packaged software sold by the SPA companies. The Indian software companies are not losing much on account of software piracy. However, Government of India has lost  import duty worth of about Rs. 54 crores (10% duty) which would have been collected if Rs.545 crores would have been spent on importing the packaged softwares.

In order to estimate the piracy rate as per the BSA/SPA methodology, one has to arrive at the actual number of software installed per PC both legal as well illegal and also the total number of legal softwares installed or sold per PC. It is not known how the actual number of software per PC is arrived at by BSA/SPA. It is also not known whether it is based on sample survey or information provided by their detective agencies. How accurate these estimates are ? Besides, it is also difficult to get information related to number of package softwares sold in a year. It is also not known whether grey market for PCs have also been included in their estimates. It may be possible for NASSCOM to get the information from their member companies particularly with respect to legal softwares sold but most of the prominent companies including those of multinational companies refused to divulge this information to NPC. Attempt to contact NASSCOM to get this kind of information also failed in many occasions. We, therefore,  tried an alternative approach to estimate the percentage of software piracy for the country as a whole for the year 1996-97.

About 20 organisations from manufacturing as well as service establishments (end users) were contacted through a structured questionnaire in each of the six cities where field survey took place. The organisations were told to furnish the information related to number and type of application software procured. Information was also sought with respect to number of independent PCs where these softwares were installed besides connections regarding LAN/WAN. Information was also sought with regard to mass appplication softwares like Word Processing, Spreadsheet, Statistical, etc. Some companies refused to provide any information while some of the companies provided incomplete information because of obvious reasons. However, some responded to the questionnaire. Based on the complete information received from some of the organisations the following could be observed from the table 5.3.

Table 5.3: Number of PCs Vis-a-vis No. of Application Software

The information received was with respect to 4068 PCs where 2297 number of softwares were installed. The table provided is for those PCs where pirated softwares are installed (i.e. where the ratio of independent PCs to application software is more than one. Out of 4068 PCs from which information was received, 2089 (51.3 per cent) PCs had more than one copy of software. It is observed from the table that on an average one software is installed in about 9 independent PCs. This is as high as 14 in the case of software packages related to Data Base Management System and Anti Virus, to as low as 1.6 for Graphics package. From the survey, it was also found that about 35.9 per cent of these PCs were connected to LAN/WAN. The following calculations as shown in table 5.4 were done to arrive at the computer software piracy in India more particularly in the case of the application software.

Table 5.4 : Estimate of Software Piracy in India

As per the Copyright Act relating to computer software, one legal software can be installed in only one independent machine. By this logic it is followed that on an average about 8 illegal softwares are installed in a PC. The price of $ 250 per software has been based on the BSA/SPA figure which has been given as $ 200 to $ 300 per software. (Ref. Interview of Ron Eckstrom, Vice President, Business Software Alliance (BSA) which appeared in Computer Today, October 1994).

The main reason of software piracy is the large difference in price of the original software vis-a-vis the pirated software. With technological development copying the packaged software into a CD-ROM has been an easy and inexpensive proposition. The counterfeiting of software in India is virtually negligible as compared to other developing countries of Asia. In India, softwares are basically copied from the legal ones and are installed in different machines. 

Based on discussions with some of the country distributors of imported softwares, it was observed that the multinational companies generally dictate the price and they are not flexible with respect to licensing policies. Multinational companies also charge the same rate for softwares in developing countries like India as would be prevailing in their own country. As such they do not have any differential price rate based on average purchasing power of a country. Besides, these companies also do not generally give corporate license for using a particular packaged software and as such each PC has to have one legal software. 

There are no commitments on the part of the chief executives of many user companies regarding the use of legal softwares. The chief executive of the organisation should give direction in buying legal software. In this direction, the companies themselves should carryout regular audit of the software. The raids by police personnel or by any other means to combat piracy particularly in software will not be much helpful if the users themselves are not disciplined.

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