University of Colombo

Faculty of Graduate Studies

Postgraduate Diploma in Information Systems Management

2015/2016

PgDISM 501 - Information Policy

Individual Assignment

Title: Software Piracy: Critical Analysis

Student Name

Primal Prasanga Wadanamby

Registration No.

2015/PgDISM/120

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ACKNOWLEDGEMENT

I would like to extend my sincere gratitude for our lecturer, Dr. Prathiba Mahanamahewa, for

his continuous advice and guidance given to me throughout this module. Without his

immense guidance and supervision, it would be hard for us to continue studies properly.

My heartfelt gratitude also goes to my friends for their continuous support guiding me in all

aspects throughout the module.

Finally I would like to express my sincere gratitude for all the people who gave their massive

support to make this project a success.

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TABLE OF CONTENTS

ACKNOWLEDGEMENT ......................................................................................................... ii

LIST OF FIGURES .................................................................................................................. iv

LIST OF ABBREVIATIONS .................................................................................................... v

INTRODUCTION ..................................................................................................................... 6

FACTORS BEHIND SOFTWARE PIRACY ........................................................................... 7

STATISTICAL ANALYSIS ..................................................................................................... 9

REGIONAL HIGHLIGHTS .................................................................................................. 9

COUNTRY HIGHLIGHTS SRI LANKA ........................................................................ 12

LEGAL ANALYSIS ................................................................................................................ 14

LEGAL FRAMEWORK - INTERNATIONAL .................................................................. 14

LEGAL FRAMEWORK - LOCAL ..................................................................................... 14

CASES REPORTED LOCAL .......................................................................................... 16

SOLUTIONS ........................................................................................................................... 17

TECHNICAL ....................................................................................................................... 17

LEGAL ................................................................................................................................ 17

REFERENCING AND BIBLIOGRAPHY.............................................................................. 19

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LIST OF FIGURES

Figure 1 - Average Rates of Unlicensed Software Use ............................................................. 9

Figure 2 - Emerging Markets 2014 .......................................................................................... 10

Figure 3 - Global PC Shipments .............................................................................................. 10

Figure 4 - Commercial Value of Pirated Software .................................................................. 11

Figure 5 - Commercial value of unlicensed software by country ............................................ 12

Figure 6 - Hardware Penetration .............................................................................................. 13

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LIST OF ABBREVIATIONS

BSA Business Solution Alliance

IT Information Technology

OEM Original Equipment Manufacturer

PC Personal Computer

GDP Gross Domestic Product

DMCA - Digital Millennium Copyright Act

PIPA - Preventing Real Online Threats to Economic Creativity and Theft of Intellectual

Property Act

SOPA - Stop Online Piracy Act

WIPO - World Intellectual Property Organization

IPA - Intellectual Property Act

CCA - Computer Crimes Act

IP Internet Protocol

3D 3 Dimensions

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INTRODUCTION

With the rise of the information technology era, significance for technology related products

and services increased rapidly among countries, companies and individuals. In particular, the

globalization all around the world has created the necessity of information. Copying and

distribution of related materials had become a liable solution to fulfill such necessity. Even

without authorization of its owners, people have been tending to duplicate books, music,

video and software. Then the term Digital Piracy was introduced to the digital world due to

rapid increase of these copyright violations.

SPA (1998: cited in Gopal et al 2004) defined Digital piracy as illegal duplication of digital

goods, software, documents, audio and video for any reason other than to backup without

explicit permission from and compensation to the copyright holder (SPA: 1998 cited in

Gopal et al. 2004, p-03). Such acts have become major concern for both product

manufacturer in various industries and the policy makers. Especially in software industry,

piracy has been the foremost threat which loosened revenues and violated copyrights of both

companies and individuals.

In todays world, software piracy can be seen in multiple forms. Aladdin (2008) has

mentioned 9 forms of software piracy as below.

CD-R Infringement

Soft-lifting

Uploading and Downloading

Unrestricted Client Access Infringement

Software Counterfeiting

OEM Unbundling

Hard Disk Loading

Renting

Commercial Use of Non-Commercial Software

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FACTORS BEHIND SOFTWARE PIRACY

Continuity of software piracy is caused by numerous motives. The degree of software piracy

varies in different countries and in different regions. Though there are legal protection for

software in some countries, some are do not or rarely enforced for software protection. In

recent decades, many studies and researches have been conducted on reasons behind software

piracy. Eining and Christensen (1991 cited in Limayem, Khalifa & Chin, 2004: p125) utilize

the Theory of Reasoned Action (TRA) to build a model of piracy behavior which addressed

the individuals intension towards software piracy. Then later Ajzen (1991 cited in Limayem,

Khalifa & Chin, 2004: p124) developed the Theory of Planned Behavior (TPB) which

addressed the psychological aspects towards software piracy.

By referring few relative studies, below factors are identified as major reasons of software

piracy.

High price of software

Countries with lower and emerging economies are often victims of software piracy

due to the unaffordable cost of software. BSA (2013) emphasis the correlation of

piracy rate and economy of a country is evidently a critical factor.

Legal enforcement

Copy right laws and policies are established in order to avoid infringements of rights

and to minimize software piracy. In European and North American region people are

aware of laws and policies on copyright infringement. With the legal enforcement in

their countries, they are obligated to respect copyrights and they have achieved lower

software piracy rate as a result of legal enforcement.

Social and cultural factors

Juniwasarakij (2013) indicates that social and cultural factors play a vital role in

decision making on software piracy. In regions, countries are divided according to

their social structure. Especially on collectivism and individualism. Often countries

with collectivism structure tends to share resources among their community.

Therefore piracy rate is known to be in higher levels in collectivistic countries than

individualistic.

Public awareness

Lack of awareness in software license, agreements and legal aspects related are

known to be one of the major threat in software industry.

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Availability of pirated software on internet

Availability of pirated software copies on internet is one major factor which tends

people to involve in software piracy. Easy access, portability and riskless method of

having a software worth hundreds or thousands of dollars, increases the piracy rate

severely.

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STATISTICAL ANALYSIS

Software piracy has created negativity in economic and social factors. Especially in global

economy, it has been the cause of cripple in software industry. To measure and prevent

software piracy, Business Software Alliance (BSA) conducts studies globally. Key findings

of their recent global software study can be given as below.

Global piracy rate for PC software at 43%

Commercial value of $62.7 billion in 2013 for the market of pirated software ($4.7

billion more than year 2010)

Emerging economies have taken 56% of new PC shipments in 2011 and account for

more than half of all PCs in use

Emerging economies holds the highest software piracy rate

(BSA, 2012)

REGIONAL HIGHLIGHTS

World economy has changed its direction drastically towards emerging markets. Over the

past decade, global economy managed to survive in crisis which created falls in every

industry. Although the crisis affected to the software industry, piracy rate has been increased

continuously. According to Khadka (2015) global software piracy rate in 2007 was 38% and

in 2013 was 43%.

The increment of global software piracy rate is caused by variation in software piracy by

regions.

Source: (BSA, 2013)

Figure 1 - Average Rates of Unlicensed Software Use

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Figure 1 illustrates how unlicensed software programs are in use regionally. According to

average rate given, it can be identified that Western Europe and North America holds the

lowest rates from all 6 regions. Asia-pacific region is in the prime location which holds 62%

in rate. According to Forbes (2014) Asia-pacific region is the native ground for worlds best

emerging economies. Especially countries as China and India (in Figure 2) placed well ahead

in the list.

Figure 2 - Emerging Markets 2014

Source: (Forbes, 2014)

Hence the demand for resources is comparably higher in such countries. Figure 3 illustrates

how PCs shipments made to fulfill requests of emerging economies.

Source: (BSA, 2012)

Figure 3 - Global PC Shipments

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PC shipments for emerging economies have been increasing rapidly. In 2010, the difference

was marginal between matured and emerging economies. But the gap continuously increased

and emerging economies have extended their lead by acquiring 56% of rate in 2011. And

even demand for software has increased along with development and tends to accomplish by

using illegal software copies. Figure 4 clearly indicates emerging countries such as China,

India, Thailand, and Indonesia etc. are in the regions with high unlicensed software use rates.

Figure 4 - Commercial Value of Pirated Software

Source: (BSA, 2013)

The total commercial value of unlicensed software used in Asia-Pacific regions in 2013 is

US$21 billion (Yu, 2014). In Asia, Bangladesh lead in the list having highest piracy rate of

87%, followed by Pakistan at 85%, Indonesia at 84%, Sri Lanka at 83%, and Vietnam at 81%

(BSA, 2013). It can be identified a drop in piracy rates in Asian region by considering the

data from 2007 (Figure 5).

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Figure 5 - Commercial value of unlicensed software by country

Source: (BSA, 2013)

However the commercial values has been increasing rapidly. Especially in Vietnam, Sri

Lanka, Pakistan, Bangladesh and Thailand the commercial values have multiplied in 2013

when compared it with 2007.

COUNTRY HIGHLIGHTS SRI LANKA

Over the past decade, Sri Lanka emerged as one of the best economies in the world and

fastest in Asian region. According to Trade Economics (2015) growth averaged 6.4 percent

between 2005 and 2014, with Gross Domestic Product (GDP) per capita rising from

US$1242.40 in 2005 to US$3,625 in 2014.

IT industry in the country has been growing at a steady rate along with its economy in past

few decades. According to SLASSCOM (2014) the size of Sri Lankas IT industry in 2007

was US$ 213 million and has gained significant growth up to US$ 386 million in 2011. Such

growth has widened the necessity of hardware and software around the country. With the

growing demand, computer hardware market dominated in IT spending. In 2007 70% of Sri

Lankas IT spending were on hardware. ICTA (2011 cited in ICRA, 2011: p11) expected that

nearly 2,559,000 PCs are in use while having PC stock growth rate of 25.2% in 2010. And

also they have predicted more than double in stock of PCs in 2015 (Figure 6).

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Figure 6 - Hardware Penetration

Source: (ICTA, 2011 cited in ICRA, 2011)

Though the predicted improvement of hardware market clarifies the growth in IT industry,

software market lags in severely. While Sri Lankas spending on software was US$ 47

million in 2011, commercial value of unlicensed software was US$ 86 million. Hence it is

believed that software requirements for PCs are majorly fulfilled by pirated software (ICRA,

2011).

According to BSA (2013) Sri Lanka is in 5th place with rate of 83% in the list of countries

with highest unlicensed software installation rate in Asia. With the development of the IT

industry, necessity has created the environment for software piracy. Though the requirements

increases day by day, country has been able to reduce the unlicensed software installation rate

by 7% within 2007 - 2013. But the commercial value has been doubled in 2013 when

compared it with 2007.

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LEGAL ANALYSIS

LEGAL FRAMEWORK - INTERNATIONAL

Software privacy prevention has been prioritized internationally since 1980s. Therefore

countries with matured IT industry addressed laws and policies to protect the intellectual

right by preventing piracy. United States as the narrator, established acts in searching legal

solution for piracy prevention. Below given are three significant acts which presented in

United States in recent years.

Digital Millennium Copyright Act (DMCA) was the first to be presented in 1998 which

criminalized illegal production and dissemination of technology, devices, or services. And

also it accompanied provisions to limit online copyright infringement. Apart from laws and

policies, the act has allowed to perform organizations to investigate and conduct actions on

such copy right violations.

(DMCA, 1998)

Preventing Real Online Threats to Economic Creativity and Theft of Intellectual

Property Act (PIPA) and Stop Online Piracy Act (SOPA) are two of the modern day

infringement addressing act presented in 2011. They facilitate the government and copyright

holders to take legal actions regarding infringements done by websites which are dedicated to

the sale of infringing or forged goods.

(Yeh, B.T. & Miller, J., 2011)

LEGAL FRAMEWORK - LOCAL

Business Software Association ranks Sri Lanka with worst nations for software piracy over

the past years. With economical and legal conditions available in the country, software piracy

has been a common practice all over the country. In order to strengthen the legal enforcement

and to overcome challenges caused, several laws (acts) have been established over the past

decade. Given below are the three acts introduced respectively.

Intellectual Property Act of 2003

Computer Crimes Act of 2007

Companies Act of 2007

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Intellectual Property Act of 2003 (IPA)

Intellectual Property Act accompanies features for the protection of software, trade secrets

and integrated circuits. To prevent infringement of intellectual property right, it has enabled

a framework which is validated by World Intellectual Property Organization (WIPO).

Copy right and related rights, Industrial Designs, Patents, Marks & Trade Marks, Collective

marks, Certification Marks, Trade Names and Layout Designs of Integrated Circuits are the

headings which stated under intellectual property by the act. Legal provision has been given

by operation of law to each above property from the act and addressed in different sections.

(IPA, 2003)

Computer Crimes Act of 2007 (CCA)

Computer Crimes Act primarily addresses crimes related to computer, hacking offences and

contents. In support of preventing software piracy, the act has addressed content related

cyber-crimes and included laws and regulations.

The Act comprises provisions which state that any person who is intentionally or without

lawful authority carries out a function, produces, sells, procures for use, imports and exports,

distributes or otherwise makes any computer or computer system or computer program shall

be guilty of an offence. And it has given the authorization to conduct thorough investigation

to prevent such practices in Sri Lanka.

(CCA, 2007)

Companies Act of 2007

Companies Act addresses the legislative factor of the commercial law in Sri Lanka. Though

importance of the act was to ease the process of formation of a company, it provides legal

body to get protection in today business world.

Legislation of the commercial law has enabled the companies to deals with issues of both

private law and public law. Especially act provides legal enforcement on company rights,

relations, and conduct of individuals and businesses which are engaged in commerce,

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merchandising, trade, and sales. Hence Companies Act also strengthen the legal frame work

of software piracy prevention.

(Nation.lk, 2007)

CASES REPORTED LOCAL

Case 1 - Microsoft Corporation and Media Center 2011

According to a complaint made by Microsoft Sri Lanka, Computer dealer/media center in

Unity Plaza, Colombo 4 found with unlicensed Microsoft software (Windows XP

Professional and Office Enterprise 2007) in DVDs which are used in pre-installing as bundle

with purchased PCs. Then a case was filed against the dealer at Supreme Court in 2010 by

Microsoft.

Computer dealer agrees to make a settlement after the court decision and signed affirming

that they will no longer distribute or sell any computers with pirated/unlicensed Microsoft

software in future.

(Microsoft Corporation, 2011)

Case 2 Tec Touch International 2008

According to a complaint filed by local music producers, Tec Touch International was raided

by police and found thousands of counterfeit copies of local music, movies, teledramas and

business software which are belongs to members of BSA.

After the prosecution, the court granted the accused bail of Rs. 25,000 for each case filed

against the owners and in addition, two surety bonds of Rs. 100,000 for each case had to be

signed by the accused with one of the sureties.

(ANCL, 2008)

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SOLUTIONS

TECHNICAL

Generate license at the server

o Without providing the software program and a key in bundle, registration and

validation of the software needs to be done at the server via internet. Autodesk

inc, software enterprise in 3D modeling uses network license for registration

of their product after purchase.

Partial installation via internet

o CD of the purchased software program only should contain partial file.

Software installation can be completed by allowing to download via internet.

Google has introduced this method even with their Chrome browser.

IP Tag

o Monitoring software programs location (at server) by installed PCs IP

address and making sure the serial number of the software doesnt appear on

multiple locations.

SecuROM

o It is a solution/file developed by SONY to prevent copying software/media

CD by home media duplication devices, professional duplicators, and even

resists reverse engineering of software.

QR Code and Mobile Gateway

o Providing serial number of a software in QR code and allowing user

authentication by using a mobile gateway. Whatsapp PC software allows to

validate user by its mobile number by using this technology.

LEGAL

Legal bind on Cloud data space providers

o Cloud technology is common data store solution in present era. It is used as

data storage for websites and blogs. Legal enforcement on such space

providers to monitor and address storing pirated software copies will prevent

use of internet as repository.

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Regulations on Banning Torrent Websites

o Torrent websites holds the main entry point for pirated software to the

country. Therefore legal actions required to perform regulations and sanctions

on torrent websites and clients through countrys internet service providers.

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REFERENCING AND BIBLIOGRAPHY

Aladdin. (2008). Software Piracy: Causes, Effects, and Prevention. [Online] Available From:

ftp://ftp.cis-

app.com/pub/marketing/HASP/HASP_SRM/WhitePapers/WP_HASP_Software_Piracy.pdf

[Accessed: 17 April 2015]

ANCL, (2008). Another company charged with piracy. [Online] Available From:

http://www.sundayobserver.lk/2008/07/27/fin20.asp [Accessed: 28 April 2015]

BSA. (2009) Software Piracy on the Internet: A Threat to Your Security. [Online]. Available

From: http://portal.bsa.org/internetreport2009/2009internetpiracyreport.pdf. [Accessed: 16

April 2015]

BSA. (2012). Shadow Market 2011 BSA Global Software Piracy Study. [Online] Available

From: http://globalstudy.bsa.org/2011/downloads/study_pdf/2011_BSA_Piracy_Study-

Standard.pdf [Accessed: 18 April 2015]

BSA. (2013). The Compliance Gap - BSA Global Software Survey. [Online]. Available

From: http://globalstudy.bsa.org/2013/downloads/studies/2013GlobalSurvey_Study_en.pdf

[Accessed: 17 April 2015]

Computer Crime Act of 2007. Chapter 24. Available From:

http://www.slcert.gov.lk/Downloads/Acts/Computer_Crimes_Act_No_24_of_2007%28E%2

9.pdf [Accessed: 29 April 2015]

Forbes. (2014) Turkey and South Africa's Interest Rate Hikes Still Might Save Emerging

Markets from the Federal Reserve. [Online] Available From:

http://www.forbes.com/sites/cedricmuhammad/2014/01/29/turkey-and-south-africas-interest-

rate-hikes-might-save-emerging-markets-from-the-federal-reserve/ [Accessed: 21 April 2015]

Gopal, R.D. (2004). A Behavioral Model of Digital Music Piracy. Journal of Organizational

Computing and Electronic Commerce. p. 1-34

ICRA, (2011) IT and ITES Industry in Sri Lanka. [Online]. Available From:

http://www.icralanka.com/images/pdf/Sri%20Lanka%20IT-

%20ITES%20Sept%2015%20Final.pdf [Accessed: 21 April 2015]

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Intellectual Property Act of 2003, Chapter 36. Available From:

http://www.wipo.int/wipolex/en/text.jsp?file_id=184465 [Accessed: 29 April 2015]

Juntiwasarakij, S. (2013). Towards Socio-Economic Perspective of Software Piracy: The

Case of Thailand. Proceeding of WCECS. 2. p. 23-27.

Khadka, I. (2015). Software piracy: A study of causes, effects and preventive measures.

[Online] Available From:

http://www.theseus.fi/bitstream/handle/10024/87274/Khadka_Ishwor.pdf?sequence=1

[Accessed: 17 April 2015]

Limayem, M., Khalifa, M. & Chin, W.W. (2004). Factors motivating software piracy: a

longitudinal study. p. 124-131.

Luppicini, R & Adell, R. (2009) Handbook of Research on Technoethics. Information

Science Publishing.

Microsoft Corporation. (2011) Parties agree to settle in Microsoft Corporation vs. Media

Centre case in the Supreme Court. [Online] Available From:

http://www.microsoft.com/srilanka/PressRoomNew96.aspx [Accessed: 28 April 2015]

Nation.lk. (2007) Salient features of Companies Act No. 7 of 2007. [Online] Available From:

http://www.nation.lk/2007/04/29/busi6.htm [Accessed: 29 April 2015]

Sharari, A.S. (2006). Intellectual Property Rights Legislation and Computer Software Piracy

in Jordan. Journal of Social Sciences. 2(1). p. 7-13.

Sharma, V., Hussain, S.Z. & Rizvi, S.A.M. (2010). Distributed Co-ordinator Model for

Optimal Utilization of Software and Piracy Prevention. International Journal of Computer

Science and Security. p.550-558.

SLASSCOM. (2014) Sri Lankan IT/BPM Industry - 2014 Review. [Online]. Available From:

http://www.slasscom.lk/sites/default/files/Sri%20Lankan%20IT-

BPM%20Industry%20Review%202014.pdf [Accessed: 21 April 2015]

The digital millennium copyright act of 1998, Chapter 12. Available From:

http://www.copyright.gov/legislation/hr2281.pdf [Accessed: 29 April 2015]

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Trade Economics. (2015) Sri Lanka GDP Growth Rate. [Online] Available From:

http://www.tradingeconomics.com/sri-lanka/gdp-growth [Accessed: 22 April 2015]

Yeh, B.T. & Miller, J. (2011) A Legal Analysis of S. 968, the PROTECT IP Act. [Online]

Available From: http://fas.org/sgp/crs/misc/R41911.pdf [Accessed: 30 April 2015]

Yu, E. (2014) APAC software piracy rate climbs to 62 percent. [Online] Available From:

http://www.zdnet.com/article/apac-software-piracy-rate-climbs-to-62-percent/ [Accessed: 20

April 2015]