Introduction
Background
Information Technology (IT) is one of the most important elements in the development of the world economy. The software industry forms one of the most essential components of IT. The size of the global software market has undergone a significant growth over the past few years. According to a report by Gartner Incorporation (para. 1), the software market averaged $245 billion in May 2011. However, one of the major challenges facing the software industry is piracy which entails infringing the copyright laws associated with products such as music, movies or software.
In an effort to curb software piracy, different governments have instituted various Intellectual Property Rights (IPRs). One of the commonly used IPRs in the software industry entails the patent laws. Patent laws give inventors a monopoly over their inventions by prohibiting illegal publication and distribution of software programs either through counterfeiting, rentals, soft lifting and hard disk loading (MacQueen, Waelde & Laurie 4).
Considering the fact that development in IT is increasingly being considered as one of the most effective ways through which a country can gain a high competitive advantage, some countries are considering software piracy as an effective way through which they can attain their desired competitive advantage at minimal cost (Jones 24). The rate of software piracy is highest amongst the emerging economies.
This arises from a number of factors such as affordability, poor enforcement of IPRs, technical barriers and the comparative value associated with pirated software (Deloitte 2). Most of the developing economies have a relatively low per capita income. As a result, the consumers have other spending priorities rather than purchasing legitimate software. Additionally, individual consumers attach the same value of legitimate software to pirated software.
The Peoples Republic of China (PRC) is categorized amongst the countries with the highest rate of software piracy. In 1998, the rate of software piracy in China was 96 %( Jones 24). However, China has continuously implemented measures aimed at curbing software piracy due to pressure from other countries to comply with International IPRs. As a sign of its commitment towards IPRs, China has joined a number of international IPR conventions.
This has enabled it to understand the importance of IPRs in dealing with software piracy. As a result, China has experienced a decline in the rate of software piracy over the past few years. By 2008 the rate of software piracy was 80% (Deloitte 24). This shows that the rate of software piracy in China is still high despite the measures implemented.
China is ranked as the 2nd largest market for personal computers and the 10th with regard to software. This shows that there is a high market potential for software. The gap with regard to software market can be associated with the high rate of software piracy.
One of the factors that have contributed to the high rate of software piracy relates to existence of an imbalance between demand for software products such as movies and other entertainment products and their supply. The Chinese government has implemented a quota system that is aimed at regulating importation and distribution of entertainment products for example television shows. This has led into a shortage for entertainment digital entertainment products such as movies. As a result, most individuals have resulted into the black market for software products.
Software piracy negatively affects the growth of the world economy. This arises from the fact that a significant proportion of tax revenue and wages are lost annually. Additionally, software piracy acts as a barrier towards creativity and innovation. This is due to the fact that motivation for creativity and innovation is significantly reduced.
Personal experience
In 2007, I had an opportunity to travel to China to my relative who relocated there. One of the issues that I noticed is the ease with which one can purchase pirated products. This made me to ascertain that China is one of the countries with the highest rate of piracy. Some of the most pirated product categories which I noticed included software, fashion clothing, electronics and jewelry. With regard movies, it was relatively easy to purchase them from street vendors.
One the factors that made me to identify that the movies were pirated is the cost at which they were sold. For example, one could purchase movies which were still in the theatres for only $1. Some of the movies were of the same quality with the original ones while others were of poor quality. The poor quality of the pirated DVDs and CDs was as a result of failure by the counterfeiters to access the original copy. As a result, they would video tape movies in the theater screens from which they would make copies.
However, pirated computer software and video games were not easily accessible from the street vendors. One would be required to purchase them from a particular central area where they were abundant. The discs which contained the video games and the computer software had no labels which made one to easily identify them as counterfeits. Additionally, the distribution of the discs was made in simple sleeves.
In these stores, one would be able to select a variety of software which would be burned into one CD as per the customer’s request. In order to gain firsthand experience on the extent of computer software piracy, I enquired the cost of a number of computer software which included FrameMaker, Photoshop and Adobe Acrobat. The cost of the software was only $20 while the genuine ones cost more than $700. My relative informed me that software piracy is considered to be a part of the Chinese culture.
This arises from the fact that copying in china is not associated with any form of stigma. Most individuals have developed a perception that they ought not to pay more for software whereas they can access a fake one which works just like the original one at a low cost.
Software patent laws in China
Over the past two decades, China has increasingly been committed towards ensuring adherence to IPR laws. For example, from 1980 to 1995, China has implemented a number of trademark laws, copyright, patents and computer software regulations in an effort to counter software piracy. Despite this, software piracy is so prevalent that one can consider that there are no software patent or copyright laws in China.
Since its ascent to the World Trade Organization (WTO), China has increased its crackdown on organizations manufacturing pirated software. Additionally, the Chinese government has invested a significant amount of money towards development its legal systems and regulatory codes in an effort to enforce software privacy. For example, the Chinese government is committed towards ensuring that all state-owned enterprises and other government agencies use legal software in their operation.
This has played a critical role in the decline in the rate of software piracy (Business Software Alliance para. 6). However, China has continued to experience an increase in loss of its revenue due to software piracy arising from infringement of IPRs (Hille para. 1). This indicates that the software patent and copyright laws implemented by the government are not sufficient.
The inefficiency of these laws arises from a number of factors such as overreliance on administrative measures. For example; the administrative measures incorporated by China are evidenced by the fact that it has seized about 10 million boxes of illegal video products. Additionally, more than 4,000 video selling shops have been closed (Zhang & Xie 2).
In an effort to enhance the IPR laws, the Chinese government has established State Copyright Bureaus in all the provinces and municipalities. Despite these efforts, the Chinese government effort in fighting software piracy has been hindered by the fact that it over relies on administrative measures rather than criminal measures (Zhang & Xie 3).
Additionally, the government’s effort has also been hindered by increased levels of corruption and protection of the perpetrators at the provincial level. The government’s effort has also hindered by lack of resources necessary to enforce the laws implemented. The prevalence of software piracy is also increased by lack of sufficient knowledge amongst the citizens regarding the effect of software piracy on the country’s economy and social stability.
Ethical perspective
Most Chinese do not perceive software piracy as being morally or ethically wrong. Additionally, the ethical perspective regarding fighting software piracy in China revolves around two main issues. These relate to protecting the investments by companies, protecting their employees and the poor citizens. Therefore, implementing stringent IPR laws by the government to curb software piracy would result in social instability.
This arises from the fact that numerous individuals would be arrested and shops and companies closed culminating into an increment in the level of social instability. However, another dilemma arises from the fact that allowing software piracy to thrive would negatively affect the rate of innovation by hi-tech companies. This arises from the fact that they would cease to produce new software culminating into a decline in the rate of development in the global economy.
Conclusion and recommendations
From the above analysis, it is evident that there is a high market potential in the Chinese software industry. However, for this to be achieved all the stakeholders have to deal with the challenge of software piracy. Some of these stakeholders include the government, parents and learning institutions. Additionally, it is critical for the Chinese government to implement deterrent measures, educational campaign and other measures in order to enforce the laws.
It is also important for the government and the software producing companies to implement preventative measures. Some of these measures include incorporating hardware and software schemes which will curb reproduction of software. For example, companies such as Microsoft Incorporation have implemented a key that requires to be sent through their database before particular software can operate.
Another measure that can be implemented to counter software piracy entails implementing regional price adjustments. The price point set should be legal and affordable to individuals within a particular region. This strategy will encourage individuals to purchase legitimate software.
Works Cited
Business Software Alliance. China. 5 March 2011. Web.
Deloitte. Monetizing consumer software in high-piracy market including China and India. New York: Deloitte Development, 2010. Print.
Gartner Incorporation. Gartner says worldwide enterprise software market grew 8.5% in 2010 to reach $ 245 billion. 5 May 2011. Web.
Hille, Kathrin. China not doing enough on software piracy. 24 Oct. 2011. Web.
Jones, Brian. Software piracy and the global economy. 23 Nov. 1998. Web.
MacQueen, Hector, Waelde, Charlotte and Laurie, Gen. Contemporary intellectual property: Law and policy. Oxford: Oxford University Press, 2007. Print.
Zhang, Fan and Xie, Dennis. Chinese copyright protection has storied history, strong future. 6 June 2008. Web.