Taking on the IP Thieves
Using a one-to-one approach, Microsoft has taken a leading role
in the fight against software piracy in China. But many experts
question whether any U.S. effort is strong enough to reduce intellectual
property counterfeiting and theft in the world's most populous nation.
Microsoft officials have said that while China is the world's second-largest
PC market, it's only the 25th largest for legal software purchases.
The Business Software Alliance, an international trade group, estimates
that 90 percent of the software used in China is pirated.
Microsoft recently stepped up its anti-piracy campaign through
a combination of high-profile diplomatic meetings with Chinese officials
and cooperative agreements with Chinese technology companies.
In April, Microsoft Chairman Bill Gates met briefly with Chinese
President Hu Jintao on the Microsoft campus in Redmond. Although
part of their discussion was off the record, Hu publicly praised
Gates as "a friend of China" and added: "I'm a friend
of Microsoft." Gates, in turn, told the visiting head of state
that "we are encouraged by the efforts of the Chinese government
to strengthen intellectual property protection."
Speaking with reporters later, Hu -- an engineer by profession
-- reiterated his support for combating software piracy.
by the Numbers
90 percent Estimate
of how much software in use in China is unlicensed
$6.6 billion Amount of U.S. industry's
losses due to piracy worldwide
$3.5 billion* Amount of Chinese industry's
losses due to piracy worldwide
* in U.S. dollars
SOURCE: Business Software Alliance and IDC Global
Software Piracy Study, 2005
Around the same time, two leading Chinese PC manufacturers formally
pledged to work with Microsoft in promoting IP protection in their
homeland. TCL Group and Tsinghua Tongfang Co. Ltd. signed agreements
promising to install only "genuine," or valid, licensed
copies of Microsoft software on PC products sold in China. Tsinghua
Tongfang expects to purchase $120 million in Microsoft Windows licenses
over the next three years; TCL Group plans to spend about $60 million
on Microsoft licenses over the same period.
There are other signs of progress.
Also in April, the Chinese government decreed that newly manufactured
computers must be equipped with licensed software (previously, some
PC-makers sold "naked" machines that buyers could run
with their own, presumably pirated, operating systems and other
software). But it wasn't clear how that mandate would be enforced.
In addition, the Chinese government is offering rewards for tips
about large-scale counterfeiting operations and has opened regional
centers for handling complaints about IP rights violations.
Gates has cited such measures as evidence that China, like South
Korea and Taiwan before it, is making incremental progress toward
adopting Western IP protection standards and licensing practices.
But he adds that China won't change overnight: "It will be
a decade before we get to that level," he said earlier this
Still, some experts question whether such change will come at all.
An October 2005 PricewaterhouseCoopers report, "Redefining
Intellectual Property Value: The Case of China," suggests that
IP abuses may even increase as China's power and influence grow
in the next few years. "China is defining its own approach
to IP management, consistent with some traditional and widely accepted
tenets in China, but starkly different from what has been accepted
practice in mature economies," says Mark Haller, a PwC lead
partner and report co-author. As a result, Western companies like
Microsoft and its many partners need to keep close tabs on the China
Anne Stuart, the former executive editor of Redmond Channel Partner, is a business technology freelance writer based in Boston, Mass.