As chief information officer at the Hong Kong Jockey Club, Steve Beason is the steward behind a large technology infrastructure that helps run the giant gaming institution. The club, one of Hong Kong's largest corporate users of information technology, is a model in its industry in the use of IT to support its business goals. This entails a close scrutiny of IT partners and suppliers, which is accomplished through regular audits. Due diligence checks ensure that IT systems are up to specifications and enable the club to maintain a high standard for qualifying suppliers in Hong Kong or the mainland. 'A few months ago, we made this unannounced audit across the border on a mainland firm that wanted to do some software applications work for the club,' Mr Beason said. 'We soon found out that there was not a single piece of legitimate software used at its premises. It was all pirated.' To rectify the situation, Mr Beason and his team undertook a long, arduous search for legitimate software at stores close to the company. Some shopkeepers even tried to pass off counterfeit software as genuine, carefully packaging it to appear legitimate on store shelves. 'That is simply the situation over there,' Mr Beason said. 'It was difficult, but we eventually found some legitimate software for that company to use.' It is almost three years now since China became a full-fledged member of the World Trade Organisation, but the country's record in intellectual property protection - especially for software - remains poor even as calls for sweeping reforms from international trade groups grow louder. Jeffrey Hardee, vice-president and regional director for Asia at the anti-piracy group Business Software Alliance (BSA), said loopholes in intellectual property (IP) rights regulations and inadequate law enforcement were the main reasons for the high piracy rate in the mainland. 'Illegal software users include domestic companies as well as foreign and Hong Kong enterprises operating in the mainland,' he said. He said the National Copyright Administration (NCA), the body in charge of IP rights protection, was having a challenging time ensuring rules were enforced nationwide because of inadequate manpower, training and resources. A global survey conducted by research firm International Data Corp (IDC) and the BSA found that the mainland tied with Vietnam as the world's worst software IP rights offenders, with piracy rates in both markets at 92 per cent last year. Bootlegged items included operating systems, consumer and business software and local market applications. IDC said it was unfortunate that high-piracy markets such as China, India and Russia were also recognised as high IT growth markets. Software piracy rates in India reached 73 per cent, while Russia posted 87 per cent. Industry experts have acknowledged changes in the IP rights situation in the mainland, but it is taking more time for international perception to adjust. The American Chamber of Commerce and the European Union Chamber of Commerce in the mainland recently called upon the authorities to put more teeth into local IP rights laws. They recommended severe penal sanctions and an improved process for prosecuting offenders. Dion Wiggins, vice-president and research director at Gartner, said a recent counterfeiting complaint filed by Microsoft against three local software firms represented the most significant test to date of the mainland's commitment to IP protection. 'The media have quoted senior Chinese officials as promising to support Microsoft's filing, but have also reported that the manufacturers may have connections to China's military and could belong to a much larger group selling counterfeit software overseas, which could cause some complications,' Mr Wiggins said. Microsoft's legal action against Beijing Zhong Xin Lian, Tianjin Tian Bao Gang Die and Tianjin Minzu Wenhua Guang Die also represented a shift in strategy for the software giant, from prosecuting users of illegal products to attacking the producers. 'If the NCA takes serious action on Microsoft's complaints, many other multinational and Chinese companies will likely file such complaints with renewed confidence,' Mr Wiggins said. 'The Chinese government will certainly use this case as an example of the progress it has made in IP protection.' Despite being lambasted for its poor IP rights protection, the mainland is increasingly being credited for substantial progress in fighting copyright abuses. Mr Hardee lauded recent mainland government commitments. 'The government has issued a document requesting governments at the provincial and local levels to legalise their software by the end of this year and next year, respectively,' Mr Hardee said. 'As another concrete measure, Vice-Premier Wu Yi kicked off a one-year special IP rights protection campaign in late August. The NCA also launched its software IP rights protection programme in the second half of this year.' The Supreme People's Court is amending its 1998 judicial interpretations on illegal publications to lower the criminal threshold on IP rights offences. In addition, the NCA and the Ministry of Information Industry are drafting an administrative regulation on the liability of internet service providers in cases of online piracy. The new judicial interpretation and internet regulation are expected to be issued by the end of this year. Mr Wiggins claimed that a number of large mainland IT companies were 'rapidly cleaning up their acts and pressuring the Chinese government to enforce IP laws so that honest vendors had a level playing field in the domestic market'.