What are the Prospects for Stopping Software Piracy?
A research paper written by Matthew Repicky in partial fulfillment of requirements for a course in computer-related crime at the Rochester Institute of Technology, May 2002.
Abstract:
Individual processes involved in the creation, duplication, distribution and use of pirated software are explored to determine which path or paths of social response are best suited to controlling the problem of copyright infringements on the intellectual property.
Introduction and Literature Review
Software piracy is a worldwide problem causing financial losses to major software companies. In the Unites States the nationwide total for retail losses due to software piracy totaled $2.6 billion (BSA 2001). According to the same report Japan and China had the 2nd and 3rd greatest losses of $1.6 billion and $1.2 billion respectively. Software piracy is the illegal duplication of copyrighted information or the failure to abide by the license agreements of legally obtained software. Inside of this broad definition lie three steps in the process of software piracy, including the most common occurrence of software piracy known as ‘softlifting.’ The first step of software piracy is acquiring software and copying it from its original form or creating new software based upon the intellect behind the original product. The second step involves the distribution of the illegal product, most commonly using means of the Internet or copies of the program on a CD-Rom. The third and final step in software piracy and copyright infringements involves the receiving of known pirated software or using legally purchased software in a way that the license does not permit. This third step is referred to as softlifting.
Depending upon what surveys you look at and when they were conducted, it is estimated that for every legally purchased and used copy of software there is anywhere between two to ten instances of software piracy for the same product. Realistically, these figures are merely
guesses, because a measure cannot be obtained for something that isn’t reported. A closer figure would most likely be the current national average rate for software piracy 24 % (BSA 2001). That means that nearly one in every four of all software in the United States is pirated. The
numbers out of this report are still estimates; however, they are developed through a comparison of gathered data for supply and demand of applications and are not mere guesses.
Why people pirate software has been analyzed for several years. Anonymous questionnaires like the kind in Table 1 have been used to compile data on why people pirate software and why people purchase software. The data that has been collected suggests that there are nine major reasons for software piracy, listed in Table 3. The data also suggests ten reasons for purchasing software as opposed to pirating it, listed in Table 2. All of these major reasons can be simplified to a decision process using the price (p) of the product, the cost (c) involved in pirating the software and the value (v) that the product has to the user.
BUY if P </= (min (V, C), PIRATE if C < min (P, V), and DO WITHOUT if V < min (P, C).
The nine reasons behind software piracy from Table 3 lend weight to lessening the cost of software piracy, justification for piracy because the price of the product is too high and lessening the estimated value of the program to further prove that the price is too high for the value of the program. On the opposite side the ten reasons to purchase software from Table 2 factor into the formula by raising the cost of piracy. Each reason from the table relates to increase of risk, sacrificing something that comes with the purchased product, or making it harder to obtain the pirated software which increases the overall cost of piracy. This simple set of choices represents the major part of the decision making process that each person goes through when choosing whether or not to pirate software. The first case, when the price is less than the value that the product has to the customer or is less than the assigned cost of pirating software, the person would buy the product. The cost of pirating software does not mean literally going out and
buying pirated software. It mostly relates to the fear of getting caught and the difficulty to obtain a pirated copy of the product. If the cost of pirating the software is less than the price or value of the product, then in most cases the person would pirate the software. And finally if the value that the product has is less than either the price of the product or the cost of pirating it, then the person would neither purchase nor pirate the software, but instead do without it.
There are both civil and criminal laws in place to combat software piracy. One might have to pay $250,000 along with the possibility of up to 5 years in jail if pressed with criminal charges. Along with the possibility of criminal charges, civil charges may also be brought against any offenders by the owners of the software. Civil penalties can include actual damages, which can be the loss that the developing company sustained from the illegal piracy along with the profits that can be tied with the use of the pirated software, and statutory damages which can be up to $150,000 for each program illegally pirated.
Currently two organizations, Business Software Alliance and Software & Information Industry Association, perform audits on companies to determine whether the software that is being used has legitimate licenses and complies with copyright laws. If companies do not voluntarily submit to these audits civil lawsuits are often filed and proceedings continue from there. BSA is the voice of some 19 software developers including Microsoft, Adobe, Compaq, Dell, Intel and Apple.
Auditing large and small corporations is one thing, but to prevent software piracy in the homes and among individual users becomes a whole separate problem. Using the Internet or borrowing legally purchased software from an associate or friend allows an unknown number of people to pirate software. To stop software piracy for this faceless and unknown multitude of
people is nearly an impossible task. Onto whom should the burden be placed of checking to find out where the use of pirated software is taking place?
The scope of software piracy has to be broadened beyond just the actions occurring domestically in the United States. Software piracy needs a global solution to a worldwide problem. With the Internet breaching nations’ borders, pirated software distributors can provide the software to home users in a totally different country from where they are or where the site is that has software. Currently law enforcement concentrates on the makers and distributors of pirated software which may be the only answer; however, with the anonymity of the Internet and the rate at which sites change, move and are replaced, catching and stopping the software pirates is not an easy job. The question therefore is: What are the prospects of stopping software piracy?
Methodology and Analysis
To construct an analysis of how to best stop software piracy in all its forms, five social responses have been applied to theoretical situations and the reasons for pirating or purchasing software from Tables 2 and 3. The goal is to determine if any one or combination of the social responses can stop the three steps in the process of software piracy.
The first social response is education. The goal of education is to instill in people the moral fibers that they are lacking when it comes to software piracy. Educating people that pirating software hurts the developing company by lowering its profits, hurts consumers by rising of the price of the product and that it affects the economy in causing job losses and the loss of taxes that should go back to the government. Where education needs to be the most effective is in the instance of Table 4. Table 4 shows both people who pirate and do not pirate software
and compares their reactions to the same statements. Not only is it necessary to teach the people who do not pirate software what is the difference between legal and illegal, there exists a need to provide the lacking morals in those software pirates that know that what they are doing is wrong but continue to do it anyways. The test of this social response is carried through with the reading of an article collected from Issues in Accounting Education, “Instructional Case: Software Piracy – Who does it impact?” The article is meant to teach accounting students the issues in legality related to software piracy; however, it could be a good instrument to teach people the effect their actions have on others. A main misconception of software piracy is that it is a victimless crime. Using this article it is possible to show that there are possible consequences to each action. Unfortunately to those people who read the article and then answered whether or not it would affect their pirating software in the future, they answered that it would not dissuade them from continuing in software piracy.
The second social response is public law enforcement. This directly relates to the attitude that the thief believes he or she has ‘little chance of being caught’ (Table 3). This is still true for the most part. The individual user has very little to fear because law enforcement cannot nearly track each and every instance of software piracy. Law enforcement can merely tackle the larger distributors and makers or copiers of the software. The best case example of this is right here at RIT. Six computers were seized from six students that were connected in a warez group. This action was taken and done successfully; however, the current state of software piracy on campus has not stopped nor even quelled from its original state, but has probably become worse than ever before.
The third response comes from the private sector, meaning business. Businesses can file lawsuits for each case of software piracy that they can prove. The trial of every instance of software piracy, once again, is nearly impossible and shares many of the problems faced by the enforcement of the laws. For this reason development companies generally stick with large lawsuits that they can win against other companies and receive restitution in a large sum of money. A major example of how this works is in the Lotus Development Corporation’s lawsuits against Rixon Corporation and a health care organization in Tennessee for over $10 million well over 15 years ago (Christensen 1991). The lawsuits were settled out of court. Similar lawsuits are still filed today if and when major companies fail to comply with software licensing. Another way businesses can help stop software piracy is to track down Internet sites that are distributing the copyrighted product, and take steps to get those sites shut down. Microsoft has brought legal action against internet sites located in 27 countries on 6 continents (Phillpot 2000).
The fourth response comes from technology. The development of new technologies will bring a halt to software piracy by securing the information and forcing users to conform to using the software according to the licensing agreement. New technology is a promising way to keep people from copying the CDs that products are distributed on; however, we have seen
technologies introduced in the past which have been ineffective and have been bypassed by software pirates in order to once again distribute the information freely. From the user
[RIT]Browndog in a chat window in Direct Connect, a file sharing program: “New Technology to stop software piracy is such a joke, just as soon as it comes out so will the ability to break it.”. It may sound like overconfidence in the ability of software pirates to outdo the software
developers, but as patterns have shown from the past it is true. An example of failed technology is Microsoft’s Windows XP. It was initially designed so that it would not be able to be pirated
for use on many systems because each copy would be registered with Microsoft. It is capable, however, with the pro version of Windows XP to not register the operating system and just continue use like normal. The only requirement is that a valid key is obtained. An example of a successful technology shift is in the multi-player game Half-Life. Prior to recent updates, in previous versions of the game it was possible to play the game online with up to three computers at the same time using the same CD-Key. This was made possible because there were three servers that checked for unique keys, but did not share with each other which keys were in use. This along with the ability to set which server to use for authentication allowed for three users to connect to the three different servers at the same time with the same key. Once each user was authenticated, they could play on any of the game servers on the Internet. With the change from version 1.1.0.7 to 1.1.0.8 Sierra, the developers of Half-Life fixed the problem and made it such that every CD-Key can only be in use by one person at one time. This meant that people who were sharing keys would have to go and get their own if they wished to play online while their friends are online. The success was noticeable in Media Play, Best Buy and Comp USA, stores located nearby RIT, Rochester Institute of Technology, where the shelves quickly sold out of copies of the game.
The fifth and final response is to lower the prices. This may seem like giving in to software pirates and for the most part it is. However, if the price becomes less costly than pirating of the software or the value of it to the user, then it is most likely that the user will purchase the software. The main goal should not be to just stop software piracy, but also to try to convert people who are pirating software into buying legal copies of their software for the future and also attract those people that decided to just do without the program. Of the reasons listed in Table 3 to pirate software, the highest ranked reasons are that software is too expensive,
the user just wants to try out the software, they can’t afford the software, and they are only planning on using it for a short while. Two of these reasons are associated with the price (p) of the product and the other two are associated with the value (v) of the product to the user. From this table it is apparent that the problem is that users feel the program is not worth the price tag that accompanies it. This comes back to the original three pathway decision process where the users are pirating because the cost to pirate (c) is less than the both the price and the value of the software. It is evident that when the compulsion to pirate software is at its highest is when the user wants to try out the software for a short period of time, meaning that the program is not of very high value to the user and the price of the software is more than the user feels that the software is worth. Therefore from the formula, p > v so the user is not going to buy the product no matter what cost it is to them to pirate the software. The final determining factor to whether or not the user will pirate the software is dependant upon whether the value is greater than the cost to pirate, c < v. Whether c < v will determine on each particular user and his or her qualms about pirating software and how difficult it is for him or her to obtain pirated software.
Findings, Conclusion and Recommendations
The best way to prevent software piracy is not going to be found in any one of these social responses. Instead a possible solution could be found in a combination of responses each aimed at a different step in the process. Lowering the prices for the product is the first step and one of the most effective means of controlling software piracy aimed at the users of the software. Along with the lower prices, targeting the distributors of software piracy using either law
enforcement or through better technology, making it impossible to copy software, will provide the ability to slow down if not stop software piracy. By lowering the price (p) and raising the
cost (c), the decision path of buying the software becomes the most fitting expression. If p < min(v, c) where v stays the same, but c increases and p decreases, then the chances increase that p will become less than c and the user will purchase the software.
The only other possibility to stop software piracy is to cause software pirates to fear what they are doing. If software pirates fear that what they are doing will get them into trouble the majority of them will stop pirating and start buying their software. Currently, software piracy is like stepping onto a people mover at an airport. You just step on and let it take you past all the slower people walking, bypassing the traffic. There is no effort involved and no worries either. With software piracy the ability to remain anonymous and yet quickly get free software is too appealing without any drawbacks. The only way to scare a software pirate is to take away all the programs they have, their computer, and their ability to get more.
Apendix:
Table 1. Research Instrument
In the first column, please rank the reasons/motivations/justifications for purchasing a software package; in the second column do the same for copying without purchasing a software package. (1 is the most important motivation, 2 is the second most important, etc.). Put the number 0 next to any reasons that in your opinion are not important or do not apply.
Reasons to purchase
Required for school work or workplace --- Use the software all the time --- Availability of manual --- Can use technical support in case of problems ---
It's the law ---
Can't find someone who has it ---
It's school/company policy ---
Don't have to worry about computer viruses --- Stay informed of upgrades --- Prestige of having own copy --- Other (if any) ---
Reasons to copy
Only use it for a short time --- It is easy to copy software --- Software too expensive --- New version is coming up --- Want to try out the software --- Software license too restrictive --- Little chance of being caught --- Most people I know copy software --- Can't afford the software --- Other (if any) ---
Table 2. Why Individuals Purchase Software Legend for Chart:
A - Order of importance
B - Reason to purchase software C - Mean
D - Standard deviation
E - Signif. test t stat. (p value)
A B C D E P value
1 Required for school work or workplace 1.697 1.358 N/A
2 Use the software all the time 2.373 1.748 -6.371 -0.0001 3 Availability of manual 4.04 2.225 -8.201 -0.0001 4 It's the law 4.301 2.731 -1.25 -0.213 5 Can use technical support in case of
problems 4.327 2.345 0.084 -0.934
6 It's school/company policy 4.537 2.62 -1.195 -0.234 7 Can't find someone who has it 4.738 2.746 -0.349 -0.728 8 Don't have to worry about computer viruses 5.631 2.57 -2.61 -0.01 9 Stay informed of upgrades 5.667 2.881 -0.968 -0.334 10 Prestige of having own copy 7.314 3.246 -7.096 -0.0001 Table 3. Why Individuals Pirate Software
A B C D E P value
1 Software too expensive 1.899 1.317 N/A
2 Want to try out the software 3.213 2.122 -7.391 -0.0001 3 Can't afford the software 3.286 2.259 -0.437 -0.662 4 Only use it for a short time 3.31 2.239 -0.307 -0.759 5 It's easy to copy software 3.702 2.205 -1.634 -0.104 6 New version is coming up 4.482 2.492 -.2.755 -0.007 7 Little chance of being caught 4.908 2.591 -1.627 -0.106 8 Most people I know copy software 5.543 2.532 -3.357 -0.001 9 Software license too restrictive 6.178 2.49 -1.953 -0.053
*Table 1-3 comes from Cheng, Hsing K.; Sims, Ronald R.; Teegen, Hildy “To Purchase or to Pirate Software: an Empirical Study”, Journal of Management Information Systems, Spring 97 Vol. 13 Issue 4, p49. Business Source Premier. EBSCO. Wallace Library
TABLE 4. KNOWLEDGE AND AWARENESS OF COPYRIGHT LAWS
Legend for Chart:
A - STATEMENTS CONCERNING COPYRIGHTED SOFTWARE:
B - PERCENTAGE AGREEING WITH STATEMENTS, WHO PIRATE SOFTWARE C - PERCENTAGE AGREEING WITH STATEMENTS, WHO DO NOT PIRATE SOFTWARE
B C 1. It is illegal to purchase and 29.6% 30.6% use on multiple machines.
2. It is illegal if purchased by school 49.5% 55.6% and used on my home computer.
3. It is illegal if purchased by employer 69.1% 80.6% and used on my home computer.
4. It is illegal if purchased by friends 73.2% 99.9% and used on my home computer.[a]
5. It is illegal to possess 32.3% 25.0% unauthorized software.
6. The copyright laws are 3.3% 5.7% enforced strongly.
7. I have read the licensing agreement 50.0% 51.4% on software packages.
a significant at p < .055
*Table 4 comes from Christensen, Anne L.; Eining, Martha M. “Factors influencing software piracy; Implications for accountants” Journal of Information Systems Spring 91, Vol. 5 Issue 1, p67. Business Source Premier. EBSCO. Wallace Library
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