Saturday, July 01, 2006

Is Software Piracy Bad?

Software development is a creative effort in which developers engage, hoping to obtain certain benefits. Some developers create software for altruistic reasons, as is the case with many open source projects (see Open Source Initiative). Some development is done for purely recreational reasons; some good, some benign, and some malicious. But the software that is most used throughout the world is done for profit.

With any type of intellectual property, the issues of ownership and proper usage surface. Our society has long been comfortable with copyrights, which are intended to define legal ownership of intellectual properties. However, not all societies share the common American understanding of copyright. In some societies, the idea of holding ownership of an intellectual property rather than allowing it to freely benefit the lives of citizens seems immoral.

Even within the U.S. there is wide disagreement about the morality of some of our copyright laws. For example, is it moral for the legal right to use the image of Mickey Mouse to be owned by descendants of the creator, basically in perpetuity, even though the creator passed away long ago? Is it moral for Microsoft to hold a copyright on products that became obsolete a decade ago? Different people feel differently about these types of issues.

International copyright infringement used to be a relatively minor issue. With the advent of the xerography, which simplified and reduced the cost of copying of printed materials, new situations developed. This was magnified many times as we moved into the computing era, where recorded material of any type is easily digitized and transferred.

Ostensibly, those that own copyrights to materials get upset with those that obtain or misuse copies, since this practice dilutes their control, and especially because it reduces their profit. They see this practice as tantamount to theft, and they have successfully coined the term ‘software piracy’ to describe it. An international organization called the Business Software Alliance aims to address software piracy.

Many consumers cannot see the harm in copying a piece of software, a song, or a DVD movie. It is certainly cheaper than buying it retail. Why should Microsoft sell a copy of its Office suite for hundreds of dollars? You almost need it to operate in today’s world. That sounds an awful lot like a monopoly. Isn’t this immoral? (By the way, you can get a free open source office suite that works very similar to Microsoft’s from

Every for-profit software producer loses vast amounts of potential profit to markets in China, Russia, developing Eastern European countries, etc. In fact, over 90% of all software in use in China was obtained on the black market. (The Chinese government is by far the largest consumer of black market software.) Does this mean that Chinese consumers are smarter shoppers than Americans in general? Are there other matters to consider?

AP’s Joe McDonald has an excellent article here that discusses some of the broader implications of software ‘piracy’ in China. The software market works a lot like the prescription drug market, where we are often partially paying for the next development. The market can and should quibble about how much should be paid toward this effort, because it is kind of like buying futures. But consumers need to understand that completely undercutting the effort cuts funding for future development. It essentially stifles creativity.

That’s OK if you figure that the drugs we currently have on the market will be good enough for society for the next century or millennium, or if you figure that we don’t need any innovation in software in the future. The fact of the matter is that the people that produce these commodities need to be able to put groceries on the table while they work on the next innovation.

Even the Chinese government is beginning to come to grips with the fact that software piracy is hurting the country. Chinese programmers end up working for foreign companies that can pay them, since Chinese software companies can’t make a profit due to piracy. China does not innovate; it simply uses others’ ideas. That can seem like a smart strategy, but they are discovering that it bites them in the long run. It destroys the ability of the market to work its magic that creates higher level jobs, synergistically spreading new wealth and idea creation throughout the society, which raises the overall economy rather than just a tiny sector.

But don’t look for anything to happen in China or Russia soon. Consumers right now see only the quick gain of getting something cheaper. The concept of improving their economy and society over the long run is something they aren’t grasping at the moment. This will require a solid effort to educate consumers. Are these countries up to the task?

1 comment:

Jason Green said...

Fantastic post - keep up the good work. I had never thought about the fact that you are really "paying forward", but it makes total sense.