Businesses must crack down on piracy

The arrest of 25 members of a software counterfeiting syndicate in China last week is the latest reminder of the scale and reach of the software black market.

The group’s output was prodigious. It included 13 fake versions of Microsoft’s most popular programmes, found in 27 countries on five continents.

As long as there are suppliers, there will be a demand for bootlegs. A massive 27 per cent of software installed on UK computer systems is illegal – costing the industry $1.67bn (£800m) last year alone, says Business Software Alliance (BSA) research.

Although shutting down the operation in China will put a dent in the supply of counterfeits, the majority of the group’s products are still in circulation and will be on the market for months to come.

When it comes to beating the fakers, part of the problem is the sophistication of what is produced. The Chinese gang were selling high-quality material complete with branded packaging, and often only experts can spot the difference.

‘With the operation in China, it would be very difficult to tell some of the material was fake,’ said Susie Winter, director general of Alliance Against Intellectual Property Theft.

‘It was a professional operation making very good copies,’ she said.

A knock-down price is no longer an easy indicator of fraudulent goods. The Chinese syndicate’s software is of such good quality that much of it is sold at the full recommended retail price, making it easier to pass off as the real thing.

However, there are a number of measures companies can take to avoid piracy.

The first step is knowing what you are buying. The BSA web site has a ‘how to tell?’ section with information about checking barcodes and holograms, the two most difficult elements to fake.

Any products that do arouse suspicion should be referred to the software supplier directly, says Ram Dhaliwal, chairman of the BSA UK member committee.

‘All vendors would say to contact them if you have any doubt about what you are buying – it helps them to gauge the extent of the problem,’ said Dhaliwal.

Simply because of their size, larger organisations face a greater challenge ensuring all software is genuine.

The BSA recommends that bigger firms appoint a software asset manager, with a remit to maintain a database of all programs used within the company and to run a complete audit at least once every year.

Employee education is also important. All staff need to be made aware that any software purchased or downloaded onto the organisation’s network could potentially be fraudulent, and told of the implications.

Given the sophistication of the fakes, it may seem like a lot of effort to ensure your software is the genuine article.

But although 41 per cent of UK small businesses believe there is ‘no risk’ from using unlicensed products, a quarter of all pirated software contains code changes, viruses or Trojan horses which could infect an entire network.

The legal penalties are also severe, and a firm is fully liable for any and all software that employees download.

If it can be demonstrated that a person has knowledge the software is fake, and that they are the ‘controlling mind’ in the business, they face up to 10 years in prison.

Executives have to start seeing software as an asset, says John Lovelock, of the Federation Against Software Theft.

‘We are working with a financial services firm which has £3m worth of software licences – if they are not audited and recorded, the business is being significantly undervalued,’ he said.

The government is also taking intellectual property (IP) theft more seriously in an effort to protect the UK’s budding creative industries.

Prime minister Gordon Brown has created a ministerial post covering i ntellectual property and quality.

And following last year’s Treasury-commissioned Gower review of UK IP regulations, the law has been changed to allow trading standards officers to raid businesses suspected of using unlicensed software without a warrant.

In November’s pre-Budget speech, then-chancellor Brown announced a £5m fund for trading standards officers to take

action against copyright infringement, the first time funding has been allocated for IP crime.