Software Piracy in India and the Developed World

Software Piracy in India and the Developed World

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Software Piracy in India and the Developed World

Introduction: Software Piracy in India

Software is one of the easiest and a very lucrative medium to steal. The copies made are as good as the original software and can be made quickly in large quantities. This makes it very difficult to effectively enforce anti-piracy laws, as the officials cannot raid each and every home in search of illegal copies of copyrighted software. In India, with a population of over 1 billion, effective enforcement of anti-piracy laws is a ponderous task.

The government of India possesses neither the will nor the finances to dedicate a chunk of its budget to enforcing copyright infringement laws. Another problem is that to control expenditure of monitoring and convicting such a huge number of offenders is a complicated and time consuming process. Latest figures show that the Personal Computer market in India is rocketing skywards. In the quarter ending December 31st, 2003, 800,000 units were sold.

Out of these 55 percent of the computer sales were of regional brands and unbranded systems. It should be noted that not all of these brands conform to software copyright laws as in the United States and Europe, or even in India. By the end of March 2004, an estimated 3 million personal computers are expected to sell. 2 The regional brands are the most responsible for propagating software piracy. In order to sell the computers cheap, pirated versions of software are installed on all machines sold. It can easily be deduced how much loss software piracy will cause the industry in the recent future.

The use of illegal or copied versions of software costs the worldwide software industry more than 13 Billion Dollars a year in revenues, out of which 1.96 billion dollars are lost in the US alone, which has a software piracy rate of 23 percent. In some East-Asian, Latin American and European countries, 95 percent of the software used is pirated. So, India is better off but still has a long way to go in the fight against software piracy.

India is unarguably one of the software hubs of the world, yet software piracy is rampant in this country. The software piracy rate in India is nearly 65 percent. No illegal activity of this scale can survive unless and until it has the support or involvement of a large number of users. The more concrete manner in which software piracy can be precluded is to pro-actively involve the public in the anti-piracy initiative.

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This paper will identify the issues regarding software piracy and attempt to propose an ethical solution to the problem. This paper will also analyze the ethical issues involved with software piracy in India and compare it with the situation in the United States and some other developed countries.

Identifying the Types of Software Piracy

2.1 Physical Distribution: One of the aspects of software that make it so vulnerable to piracy is that one legally purchased software CD/DVD can be used to install the software on n number of computer systems. This concept ridicules the very existence of software anti-piracy laws. How can the government possibly apprehend people who go around installing legally purchased software on all their family and friend’s computers? Of what legal or ethical use is a law that cannot be enforced unless the government checks each and every computer for evidence of pirated software? This method cannot be implemented as it violates the privacy of the person, which is a fundamental right in any democratic country. How can the law enforcement authorities justify prying into people’s computer systems to search for pirated software without viewing other confidential information?

Lately, software manufacturers have begun the use of online licensing to generate dynamic registration keys for the software so that nobody can use the software without the manufacturer’s knowledge. But, there is still a long way to go until all software companies adopt this method. This is simply because not all countries have 24 hour broadband internet access as seen in North America and Europe. So, hastily implementing online registration and installation of the software will lead to widespread customer dissatisfaction and a drop in legitimate sales of the software wherever internet access is not so common.

2.2 Electronic distribution: Thanks to the widespread availability of Internet access, the pirated software can be quickly and effortlessly propagated to millions of users throughout the world. This prospect will definitely develop into a horrifying scenario for the software industry. It is extremely difficult to track the flow of illegal copies of software over the internet due to the proliferation of Peer to Peer (P2P) software such as Kazaa. There are currently no available means to track the files due to the lack of a central database that stores the illegal software files. All the computers connected over the internet by Kazaa can share files with each other without leaving any concrete proof of the file exchange ever taking place in any server or database. Therefore, finding the recipients and propagators of the pirated software is nearly impossible.

2.3 End-user copying/Counterfeiting: The most rampant form of software piracy is observed due to end-user copying. The culprit is the easy procedure to copy the software media to back-up CD-ROMs. The CD-RW drive has become a staple in any computer system nowadays. So, copying the huge 400-500 MB software to other CDs/DVDs is not a complicated task at all, not to mention that the entire software data can be copied effortlessly at the click of a mouse.

The law enforcement authorities can do absolutely nothing about this infringement of anti-piracy law because it would involve a big financial and manpower-intensive initiative to go after home users for software piracy. It would not be wrong to estimate that almost every home user has knowingly or unknowingly committed an act violating anti-piracy laws at some stage of His/Her life. Would this widespread legal action not lead to a sense of social unrest? The government will be hesitant to aggressively go after home users simply because it could prove to be a political time bomb. What would be the ethical implications?

Major Consequences of Software Piracy
No upgrades, technical support, manuals or documentation.
No quality assurance or reliability.
Exposure of computer or network to security breaches.

Copyright Laws in India

The amended Indian Copyright Act, 1994, section 14 states that it is it is against the law to distribute or reproduce copies of copyrighted software without prior permission or license from the software manufacturer. This makes it one of the toughest copyright laws in the world. Violation of this law can result in the offender being charged both under civil as well as criminal law. The maximum punishment for this offence is a prison term of up to seven years in prison and a fine of two million rupees.

Laws are made, but the story doesn’t end there. Enforcing Laws is a different matter altogether. Unfortunately, in developing countries, the task of law enforcement is not so easy. Government agencies such as the Department of Electronics and the Ministry of Human Resource Development along with NASSCOM and the Business Software Alliance are cooperating in combating software Piracy in India. An Anti-Piracy Hotline is operational since 1995 for the purpose.

The only exception to the Indian Copyright Act is section 57, which states that a person or organization can reproduce or create backup copies of legitimate software that is licensed to that person or organization. This is a loophole that is utilized to create multiple copies of copyrighted software products. The rampant piracy in India not only plagues the software industry, but also the music recording industry.

One cannot help feeling that the Indian copyright laws are hopelessly out of date with the current technological trends. In this era of internet connectivity, more comprehensive and updated laws are required. The reason for this, one might argue, is that broadband internet connectivity has not fully penetrated all Indian homes. But, that day is not too far away. I estimate that in about 5 years, broadband internet will be as popular in India as it is in the US today. Only then will serious thought be given to laws governing the role of the internet in software piracy.

Copyright Laws in Major Developed Countries

Copyright law and copyright originated in the UK from a concept of common law, the Statute of Anne 1709. It became statutory with the passing of the Copyright Act 1911. The current act is the Copyright, Designs and Patents Act 1988. The Computer programs regulations in 1992 extended the copyright of literary works to include computer programs. Copyright law gives the creators of literary, dramatic, musical, artistic works, sound recordings, broadcasts, films and typographical arrangement of published editions rights to control the ways in which their material may be used.

The rights cover broadcast and public performance, copying, adapting, issuing, renting and lending copies to the public. In many cases, the creator will also have the right to be identified as the author and to object to distortions and mutilations of his work. The law covers: Song lyrics, manuscripts, manuals, computer software, commercial documents, leaflets, newsletters & articles; Plays, dance; Recordings and score; Photography, painting, sculptures, architecture, technical drawings/diagrams, maps, logos; Magazines, periodicals, etc. The duration of the copyright is from 50-70 years, depending on the type of medium.

Recently, a new law, known as the Copyright and Related Rights Regulations 2003, was drafted by the U.K.'s Patent Office. It is modeled on the controversial EU Copyright Directive, broad legislation designed to protect content makers from the growing phenomenon of digital piracy that has ravaged media and software companies. This makes it very easy for companies to go after ordinary home users for downloading illegal files over peer to peer networks such as Kazaa.


The Copyright Act 1968/Copyright Amendment (Digital Agenda) Act 2000 has been legislated by the Federal Government. This means that it covers all of Australia provided that the work is original and the work has a connecting factor with Australian law, that is, it was first published in Australia or in a country to which the Copyright Act extends, or the author is a citizen or resident of Australia.

Australian Copyright Law protects the following: artistic works such as paintings, drawings, cartoons, sculpture, craft, photos, maps and plans; musical scores and jingles; dramatic works such as dances, plays and screenplays; literary works such as instructional manuals, reports, novels, poems, essays, computer programs, tables and compilations; films and videos; sound recordings; communications and Published editions.

In late 2000, Australia's Federal Parliament enacted a range of amendments to its Copyright Act of 1968. Much of the Digital Agenda Act is concerned with the implementation of the 1996 WIPO Copyright Treaty (to which Australia is a signatory), which focuses predominantly on the protection of copyright content in the digital networked environment. The Copyright Amendment to the Digital Agenda Act contains a number of similar provisions to the U.S. Digital Millennium Copyright Act, which was enacted to bring U.S. copyright laws in line with the WIPO Copyright treaties by providing legal protection and effective legal remedies against circumventing technological measures that are used by copyright owners to protect their works from piracy.


Copyright is a form of protection provided by the laws of the United States (title 17, U.S. Code) to the authors of “original works of authorship,” including literary, dramatic, musical, artistic, and certain other intellectual works. This protection is available to both published and unpublished works. Section 106 of the 1976 Copyright Act generally gives the owner of copyright the exclusive right to do and to authorize others to do the following: To reproduce the work in copies or phonorecords; To prepare derivative works based upon the work; To distribute copies or phonorecords of the work to the public by sale or other transfer of ownership, or by rental, lease, or lending; To perform the work publicly, in the case of literary, musical, dramatic, and choreographic works, pantomimes, and motion pictures and other audiovisual works; To display the copyrighted work publicly, in the case of literary, musical, dramatic, and choreographic works, pantomimes, and pictorial, graphic, or sculptural works, including the individual images of a motion picture or other audiovisual work and in the case of sound recordings, to perform the work publicly by means of a digital audio transmission.

The copyright owner may choose between actual damages, which can be as much as $150,000 for each program copied. In addition, the government can criminally prosecute the offender for copyright infringement. If convicted, the perpetrator can be fined up to $250,000, or sentenced to jail for up to five years, or both. On October 12, 1998, the U.S. Congress passed the Digital Millennium Copyright Act. The Act is designed to implement the treaties signed in December 1996 at the World Intellectual Property Organization (WIPO) Geneva conference, but also contains additional provisions addressing related matters.

Makes it a crime to circumvent anti-piracy measures built into most commercial software.
Outlaws the manufacture, sale, or distribution of code-cracking devices used to illegally copy software.

Does permit the cracking of copyright protection devices, however, to conduct encryption research, assess product interoperability, and test computer security systems.

Provides exemptions from anti-circumvention provisions for nonprofit libraries, archives, and educational institutions under certain circumstances.

In general, limits Internet service providers from copyright infringement liability for simply transmitting information over the Internet.

Service providers, however, are expected to remove material from users' web sites that appears to constitute copyright infringement.

Limits liability of nonprofit institutions of higher education -- when they serve as online service providers and under certain circumstances -- for copyright infringement by faculty members or graduate students.

Requires that "webcasters" pay licensing fees to record companies.

Requires that the Register of Copyrights, after consultation with relevant parties, submit to Congress recommendations regarding how to promote distance education through digital technologies while "maintaining an appropriate balance between the rights of copyright owners and the needs of users."

Major International Treaties

(i) The Berne Convention:

The Berne Convention for the Protection of Literary and Artistic Works, adopted at Berne in 1886, first established the recognition of copyrights between sovereign nations. Prior to the adoption of the Berne Convention, nations would often refuse to recognize the works of foreign nationals as copyrighted. The Berne Convention provided that each contracting state would recognize as copyrighted works authored by nationals of other contracting states.

Copyright under the Berne Convention is automatic: no registration is required, nor is the inclusion of a copyright notice. The Berne Convention provided for a minimum term of copyright protection of the life of the author plus fifty years, but parties were free to provide longer terms of copyright protection. Since 1967, the convention has been administered by WIPO. Since almost all nations are members of the World Trade Organization, the TRIPS Agreement requires non-members to accept almost all of the conditions of the Berne Convention.

(ii) WIPO

The WIPO Copyright Treaty, adopted by the World Intellectual Property Organization (WIPO) in 1996, provides additional protections for copyright deemed necessary in the modern information era. It ensures that computer programs are protected as literary works (Article 4) and that the arrangement and selection of material in databases is protected (Article 5). It provides authors of works with control over their rental and distribution (Articles 6-8) which they may not have under the Berne Convention alone. And it prohibits circumvention of technological measures for the protection of works (Article 11) and unauthorised modification of rights management information contained in works (Article 12).

The WIPO Copyright Treaty is implemented in United States law by the Digital Millennium Copyright Act (DMCA). By Decision of 16 March 2000, the European Council approved the treaty, on behalf of the European Community. EU Directives 91/250/EC (copyright protection for software) 96/9/EC (database protection) and 2001/29/EC (protection for anti-circumvention technologies and rights management technologies) largely cover the subject matter of the treaty.

The Indian User’s Perspective

The free, though illegal availability of software in India proves invaluable in most cases to small businesses that cannot afford the high price tag the licensed version of the software carries. In a manner of speaking, you could say that an alternate economy functions due to the availability of pirated software. The free availability of software is especially useful to those students and home users who cannot afford it.

The question to be asked is that will the software industry aggressively pursue such infractions by such a large, albeit poor majority of the population. I would certainly not take kindly to any company examining my computer usage, whether I am using legal software or not. Not only could this lead to bad publicity for the industry, but could also cause a sense of social unrest against the software industry. Unlike in the western countries, where users can actually afford the high-priced software, Indian users do not have the luxury of saving up to buy the exorbitantly priced software. So, in order to earn a decent living, the Indian user actually needs the software to perform daily work. What is the ethical solution to this conundrum? So far, a solution has not been found. But, it is also wrong to incarcerate those Indian users for just trying to eke out a living.

Most of the application software available today is way too expensive for the middle-class stratum of India. The average income level of the Indian population is much less as compared to the developed countries. In fact, 25 percent of India’s population lives in abject poverty. So, it is no surprise that the local populace is not interested in cooperating with various anti-piracy efforts. Why would the public want to stop the source of high quality software that it is essentially getting for free or at least at a fraction of the price of the legal version? Why would people spend time contemplating on the ethics of software piracy, when they are too busy earning their daily bread and butter?

“Grub first then ethics”
- Bertolt Brecht (1898-1956)18

From the Manufacturer’s Perspective

The major issue under consideration for the software companies is how to maintain a satisfied customer base while simultaneously being profitable. The manufacturer will obviously try to attain the maximum number of customers for its product. Essentially, this means that companies such as Microsoft, Oracle, Adobe, etc. will try to maintain the exclusivity of their products in the market. This gives it a monopoly of the market for that product. This is the main reason why software piracy turns out to be so detrimental to the interests of such software companies.

A software company has to strike a fine balance between the cost to the consumer and its profit margin. Unfortunately, this does not work out very well in favor of the user. Once a software company establishes a monopoly on software, it essentially eliminates any competition that can spur a will on part of the manufacturer to constantly strive to produce better, cheaper software. An ideal example is Microsoft. Ultimately, this proves harmful to the end user. Devoid of a competitive atmosphere, the price of the software remains high. The end user has no quality options other than this high-priced software.

It can be argued that producing high quality software requires huge amounts of financial investment as well as research on part of a software company. The software companies have no recourse but to sell their software at a high price to compensate for the high expenditure on research and development. Software piracy, in this case, will force the company to further increase the price of the software in the market in order to maintain the feasibility of its product. Thus, it harms the end user itself by forming a vicious cycle. Software piracy not only wrecks the software industry’s profit margins, it makes the software more expensive for the end user. However, in a bold initiative, Microsoft India recently slashed prices of Office 2003 to half to encourage people to buy the legal version of its software.

The software companies will be reluctant to make investments in such an untrustworthy atmosphere. They may eventually resort to a cut in jobs and spending to balance its losses. This will increase the unemployment rate and harm the Indian economy. A study by IDC states that a 10-point drop in software piracy worldwide by 2006 could result in creation of 1.1 million new jobs, generate 170 billion dollars in additional economic growth, and provide more that 15 Billion Dollars in tax revenue.

In India alone, a 10 percent drop in software piracy could lead to generation of 50,000 new hi-tech jobs, add 2.1 billion dollars to India’s economy and provide 92 million dollars in Tax revenue. The Indian economy’s powerhouse is the IT industry. It is estimated that this 10 percent reduction in software piracy would result in its economy growing at 167 percent by 2006 instead of the current 148 percent.

Practical Solutions to Software Piracy

8.1 Education: Education of the user involves creating public awareness through educational material, advertisements, seminars, direct mailers where the user is informed about the consequences of using pirated software and the advantages of legal software. Regular drives against corporate using pirated software and an initiative to train and educate officials on software asset management is also necessary. The legal consequences of using pirated software must be effectively communicated to the user. The education campaign is imperative to educate users on the advantages of using legal software, the problems associated with copied software, the legal penalties, etc.

8.2 Purchasing Control: To encourage use of legal software, many software companies in India, under a NASSCOM initiative, announced a scheme under which software required for the purpose of training by the private training institutes will be made available at the same rate at which it is available to other universities or colleges. This is one way of ensuring that software remains within the purchasing power of the average Indian Consumer.

8.3 Policy: Enforcement & Police Training NASSCOM in association with BSA has initiated a program of police training and for the judiciary in the country to bring awareness on software piracy amongst law enforcement agencies. NASSCOM has been conducting police training programs. The association also plans to see that computer training institutes in the country only use legal software. The Government as well as the Police and Judiciary is helping & supporting the NASSCOM-BSA anti-piracy drive in all possible ways- Amendments in the Copyright Act; Training of the Police, Conducting Raid and Training of the Judiciary. NASSCOM-BSA is working with the government, a scheme through which every manager in a government department or PSU (Public Sector Unit) will verify and sign a statement that according to him/her, no pirated software is being used in their department. When a government officer signs such a statement, it carries some political weight and can be used to persuade the government to participate pro-actively against software piracy.

8.4 Pro-active Software Asset Management: NASSCOM is also working with various major corporates to have corporate software policy, which will allow people to manage their software better. Special seminars on Software Asset Management have been organized wherein international consultants have made presentations to the corporate users on how to frame their software policy. NASSCOM-BSA also launched Software Asset Management Seminars in different parts of the country viz. Bangalore, Chennai, Delhi and Mumbai.

8.5 Self-Audits: Both corporate as well as home users should check if their software is original. They should also check whether the software being used on their PCs and servers complies with the terms of the End User License Agreement. Users have the choice of procuring the required licenses for the software they use from vendors or their authorized distributors in their country.

The Different Ethical Standpoints

9.1 The Deontological Point of View

Deontology is simply a theory concerning our duties to society, which states that we have duties and responsibilities to laws, both federal and universal. Deontology also says to do what is morally right despite the consequences that result from the decision. Thus, the principle of Deontology states that software piracy is definitely a crime. The Deontological point of view states that regardless of the reasons for perpetuating software piracy, it is wrong and should be considered an offence under law. No matter where or by whom the software piracy occurs, the anti-piracy laws mentioned should be strictly enforced.

The Deontological view is perfectly applicable in an ideal world. Unfortunately, in today’s world, one person’s ethics might be frowned upon in another part of the world. For example, Democracy states that each individual should be rewarded for his/her efforts in any endeavor. But, Communism considers all endeavors as state property and any gains thereafter should benefit all the people, and not the individual. In other countries, where dictatorship exists, the dictator is the supreme power and all state property belongs to the dictator, who can do what he pleases. It is a difficult task to balance ethics and politics.

Therefore, according to me, the principle of deontology can definitely be applied in India, but only after 50-70 years, when India has reached the state of being a developed and technologically advanced country. Sitting in the US, it is very easy to wonder why Indian people cannot conform to copyright laws. But, the US is the most developed country in the world, and there still exists a 23 percent software piracy rate here. So, on what basis can the software industry expect copyright laws to be strictly obeyed in a developing country like India? Thus, the deontological view provides a black-and-white view of the world and does not focus on the grey areas that should be the topic of intense discussion.

9.2 The Consequentialist/Utilitarian Approach

The principle of Consequentialism/Utilitarianism defines a moral framework in which actions are judged primarily by their results. Utilitarianism states that actions or policies that achieve good results, particularly the greatest good for the greatest number of people, are judged to be moral.

As stated before, we do not live in a perfect world. But that does not mean that we should not try to put in the best possible efforts work out a positive solution to the problem of software piracy. Accordingly with the principle of Utilitarianism, all the solutions proposed in section 5, such as purchasing control, pro-active asset management, policy, etc. are justifiable. All efforts should be made towards a philosophy that ultimately benefits the largest number of people. These actions will not only benefit the software manufacturers, but also the huge number of users that are dependent on software for their daily activities.

Instead of spending a lot of time and financial resources prosecuting violators of anti-piracy law, the better option for the software industry will be to pursue an action that is mutually beneficial to both the software industry as well as the people. In the long run, it will pay off better than strict laws and imprisonment. This is in line with the principle of utilitarianism. The solution is not easy and will take some time, but the rewards will be enormous for everyone.

9.3 The Virtue Approach

The virtue approach to ethics assumes that there are certain ideals toward which we should strive, which provide for the full development of our humanity. These ideals are discovered through thoughtful reflection on what kind of people we have the potential to become.

I believe that the virtue approach is something that has to be taught in society from a young age. The virtue approach cannot be imbibed into the minds of people overnight. If a child in India grows up and all his/her life, sees and uses pirated versions of software, that child will always have a skeptical attitude towards software anti-piracy laws. Ethics cannot be imposed as and when it serves the interest of anyone.

I also believe that the software industry owes society a sense of moral responsibility. So, the software industry should find a solution to software piracy that does not involve harsh punishments to the general public, especially the poor. Instead, depending on the situation of a particular country, the anti-piracy laws should focus more on education and information exchange between the consumer and the manufacturer.


The software Industry should respect the purchasing power of its users around the world before fixing the price of its software. If the price of medicines can be made cheaper in less developed countries, why cannot the same principle be applied to software? Conversely, the Indian people should somehow be made realize that software piracy harms them in the long run. It is definitely wrong to use software without a license from the manufacturer.

In all respects, the utilitarian approach seems to be the best option out of the three ethical approaches proposed. The utilitarian approach is more comprehensive in the sense that in developing countries, the bulk of the piracy law violators are actually home users or small businesses. This translates into a large number of people, especially in a country like India, which has an ever burgeoning middle class.

So, the software industry as well as the government has to look out for the interests for such a large section, i.e., a majority of the population. Accordingly with the principle of utilitarianism, benefiting the larger and needier section of society will ultimately benefit everyone in the long run. As of today, this seems as the most viable solution to the problem of software piracy.

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