China cracks down on corporate software piracy

PUBLISHED : Thursday, 10 May, 2001, 12:00am
UPDATED : Thursday, 10 May, 2001, 12:00am

Mainland companies will be fined for using pirated software as Beijing realises knock-offs are hurting local software businesses, which officials see as a catalyst for continued economic growth.

According to an April notice from the National Copyright Administration, mainland firms found using pirated software will be forced to switch to legal products. They must also pay a fine ranging from twice to five times the value of the software. A computer company that installs pirated software must also pay back illegal gains.

The notice suggests that mainland companies budget for licensed software before they shop for computers - most companies do not set aside software funds. Pirated software now in use should be replaced as soon as possible, the notice added.

A spokesman from the copyright administration said this notice was his department's first outline of a specific punishment for users of pirated software. He said his department was drafting measures to extend the rule to government offices. He anticipated that rules issued by July would make the use of pirated software a legal offence, leading to more severe punishment.

The unnamed official said the new policy would increase company expenses because licensed software often cost several hundred times more than pirated versions, which may cost as little as 10 yuan (about HK$9.20). He suggested companies bargain with software developers for bulk discounts.

The official said the notice was aiming to help China's software industry because piracy threatened its very survival and hurt the development of new technologies.

China's software developers are in full agreement. Gao Qun, the deputy head of the China Software Alliance, a non-government organisation set up by major software companies, said piracy in China would not ruin foreign developers because China was a relatively small market. But it was lethal to local developers, because China was almost their only market, he said.

According to Mr Gao, more than 1,000 mainland software developers went out of business every year due to sluggish sales caused mainly by piracy. The government recently lowered the value-added tax rate on the software industry from the usual 17 per cent to 3 per cent to boost its development. But Mr Gao said software developers considered the anti-piracy campaign a more effective way to help them.

'How can they enjoy the low sales tax when wide use of pirated software dries up their revenue source?' Mr Gao said. 'We would rather pay high tax if the government can stop piracy.'

He said software developers had lobbied the government to add harsher punishments to its soon-to-be revised copyright law.

Mr Gao attributed the failure of the government's anti-piracy campaign over the past decade to the wrong idea that piracy hurt foreign software companies only. He said it was extremely encouraging to see some top leaders change their views.

Premier Zhu recently refuted the idea that piracy enabled China to develop by reducing office overheads, saying instead that the mainland could not develop new technology or new products without intellectual property rights protection.

But some industry insiders remain sceptical about the new anti-piracy campaign. Xu Chunlai, an official from the Copyright Protection Federation in Guangdong province, said he doubted the policy would be effective, because the province's copyright protection department had four employees to handle an incalculable number of companies that used pirated software.