The "Software Piracy" Controversy

Software piracy is a term that is frequently used to describe the copying or use of computer software in violation of its license (commonly referred to as an end user licensing agreement or EULA). Interestingly, not only the concept, but also the term itself, is highly controversial.1

The copying and selling of software in violation of its EULA is extremely common in many parts of the world, particularly in the so-called developing economies, such as China, Southeast Asia, Eastern Europe and Latin America. In fact, in such regions typically the vast majority of computers contain unofficial copies of commercial software. Moreover, this practice is far from unusual even in the higher income, industrialized countries.

Inability to Stop

Software developers have tried various techniques to eliminate so-called software piracy because of the loss in their revenue that can result from it. These techniques have included publicity about the harm that it supposedly causes, electronic copy protection, surprise audits of businesses, requiring users to contact the vendor to obtain an installation code, legal action, and the selling of less expensive versions with reduced functionality.

However, such measures have generally met with little success, as determined users soon discover ways to avoid or defeat them. Moreover, some of them have actually alienated users by making software more difficult to install or use, notably the tedious task of typing in long registration codes and the annoyance of having to call the vendor after installation or reinstallation to obtain an authorization code.

The main success of these techniques has been in the higher income, industrialized countries, particularly within large businesses and other organizations. This is largely because of the stronger enforcement of copyright laws in such countries and the fear of surprise audits and heavy fines by the Business Software Alliance (BSA)2, as permitted by the EULAs. The BSA is a not-uncontroversial, international organization that was set up by the largest software vendors to enforce compliance with their EULAs.

Dispute About Effects

Some industry executives assert that unauthorized copying and use is by far the biggest problem facing the software industry. The BSA claims that it results in a loss of revenue of tens billions of dollars per year (more than US$30 billion for 2004) and that it also destroys jobs, impairs computer security and hinders innovation.

However, this view is strongly disputed by others, both within and outside of the software industry, who contend that such copying and use is only a relatively minor problem. They explain that the way the supposed losses are computed is faulty and results in a wild exaggeration. According to some sources, the loss could be overstated by a factor of ten.3

In particular, they point out that many, or most, individuals and organizations currently using the so-called pirated software would not do so if they had to pay the prices set by the vendors. This is particularly true in the lower income countries, where the official price of an operating system or application program can easily exceed the average monthly family income. Rather, they claim, the biggest problems for much commercial software are the lack of competition and the consequent poor quality (most notoriously, sloppy coding and the consequent vulnerability to viruses, worms and other malware) and high prices.

The true cost of poorly designed and carelessly written commercial software is difficult to measure, but there is little doubt that it is massive. Some estimates place the total annual worldwide damage from malware alone at more than US$150 billion. For example, the mi2g Intelligence Unit estimated that it ranged between $166 and $202 billion for 2004.4 This does not include other problems that can result from poor quality software, such as system crashes (and the consequent disruption to businesses), incompatibility of files, data loss, etc. There is little doubt that such problems are for the most part avoidable with good program design and careful development, as can clearly be seen from their relative rarity on operating systems that have been designed from the ground up with security and stability as high priorities, such as Linux, Mac OS X and FreeBSD.

Moreover, those complaining about the supposed economic harm caused by so-called software piracy have failed to provide any solid evidence for their claims that it reduces the growth in jobs and slows down innovation. In fact, it can be argued that just the opposite is the case: that is, because software is used by individuals and businesses that would not otherwise use it, the result is an increase in the efficiency of economies, and thus the creation of more jobs and income.

Reasons and Justifications For

The copying and using of software in violation of its EULAs occurs for several reasons5:

(1) One is the fact that it is extremely easy to do because of the nature of digital media. That is, CDROMs or other disks containing entire operating systems or application programs can be copied for mere pennies using readily available and inexpensive equipment, and a company or group of friends can easily install software on any number of computers from a single disk.

(2) Another is that many users find it prohibitively expensive to purchase proprietary (i.e., commercial) software at the prices set by its vendors. This is particularly true for users in the developing countries, for which the prices are typically comparable to those in the high income countries (in which the developers are invariably located) but in which incomes are far lower.

For example, China, the world's most populous nation, had an average annual per capita income equivalent to US$1,290 for 2004, and the corresponding figures were $620 for India, the second most populous nation, $3,090 for Brazil and $390 for Nigeria.6 Even US$200 for a proprietary operating system (e.g., the least expensive version of Microsoft Windows Vista) would be completely unaffordable for the majority of the population in such countries, not to mention $400 for an office suite (e.g., Microsoft Office) or $600 for a graphics program (e.g., Adobe Photoshop).

(3) A third reason is that many people feel compelled to use expensive proprietary software, even if they are aware of the free alternatives, because it is required by schools for their studies, by companies for their jobs (or for submitting resumes), or by government agencies for submitting or accessing documents.

(4) In addition, there is also a strongly held ethical or moral justification on the part of many who engage in so-called software piracy as well as many of their sympathizers. This justification is based in part on the view, which is widespread in the developing regions, that it is unfair to charge prices in low income countries that are comparable to those in the higher income countries, and which are thus virtually unaffordable for most citizens and many businesses in such countries. It is also based on the awareness that such high prices bear little relation to the actual costs of development and production and, rather, result merely from the fact that there is little or no competition due to the obstruction of market forces.

This position also holds that large software companies that complain about so-called software piracy are not justified in making complaints from an ethical or moral point of view because they have utilized unethical, and sometimes illegal, tactics7 to create a situation which leaves no choice for vast numbers of people but to engage in unauthorized copying and use.

Although many countries have laws that make it illegal to violate software licenses, such laws are not enforced uniformly. Critics of such laws (and advocates of lax enforcement) could point out that their non-enforcement is also justified from the point of view that antitrust (i.e., anti-monopoly) laws, which exist in most industrialized countries, have not been vigorously enforced with regard to software in the countries in which the software developers are based, particularly in the U.S. Had antitrust laws (e.g., The Sherman Antitrust Act in the case of the U.S.) been consistently enforced for a number of years, there would have been much more competition in the software field and thus software prices would be substantially lower (i.e., closer to the true cost of development and production); consequently, unauthorized copying and use would be much less common in terms of the number of installations or copies and vastly lower in terms of valuation.

Secret Allies?

Moreover, there is a widely held suspicion that developers of commercial software themselves are secretly in favor of some extent of copying and use of their software in violation of the EULAs despite their incessant publicity about the supposed harm that it causes. One reason for this is that such practices are extremely valuable for familiarizing people with the software who otherwise would not be able to afford it. When the incomes of such users rise, or when they start or join a company, this familiarity is likely to encourage some fraction of them to purchase the same software at full price from the authorized vendor.8

Perhaps an even more important reason that developers of commercial software might secretly be, at least in part, happy with the unauthorized copying of their products is that it is a major weapon in their fight to slow down the advance of free software, which represents a far greater threat to their business model than does unauthorized copying and use. Free software consists of programs that are free both in a monetary sense and with regard to use. That is, it can be acquired by anyone at no cost, and everyone is permitted to use it for any desired purpose, including studying, copying, installing on as many computers as desired, giving away and even selling. The most famous examples are Linux and the Firefox web browser, but thousands of other free software programs are also available, many of which have a performance comparable to or exceeding that of their proprietary counterparts.9

Advocates of this secret ally theory point out as evidence the fact that the large commercial software developers are very selective in their attempts to enforce the EULA restrictions. That is, their efforts are devoted mainly to organizations in high and medium income countries, whereas relatively little is done in low income countries and very little is done about individuals unless their actions are particularly blatant and attract a lot of attention. In fact, at least until recently, little attempt was made to prevent individuals using unauthorized copies from freely downloading security patches and other upgrades.

Inappropriate Terminology

Critics of the concept of software piracy also point out that the situation is further confused by what they claim to be the deliberate use of misleading and inappropriate terminology by the major commercial software developers. That is, use of the term piracy itself is also highly controversial in a software context.

This is because it implies that people or organizations who create or use copies of programs in violation of their EULAs are similar to pirates. Pirates are violent gangs that raid ships at sea in order to steal their cargoes and rob their crews; they also frequently injure or kill the crews and sink their ships.10 Critics of this terminology claim that it was chosen for its dramatic public relations value rather than because of any relationship to the traditional use of the word.

Many people who have heard about real pirates can easily sense that this term is a great exaggeration when applied to software. They might legitimately ask whether it would be any less meaningful to use another nonsensical term such as software murder or software rape. When the terminology is so exaggerated, it can only strengthen the suspicion that the entire situation is being exaggerated, probably mainly for revenue enhancement and political purposes.

Another problem with the term is that some people might actually delight in considering themselves to be pirates of some sort, as the term has taken on somewhat of a romantic image as a result of various books and movies about historical pirates and their adventures. This is just one more reason that the term unauthorized copying might be a much more appropriate alternative.

Possible Solutions

Some computer, economics and legal experts believe that if a solution to the so-called software piracy situation were truly desired, then an important first step would be a reexamination of the entire issue, including the concept of EULAs and the lack of antitrust enforcement, by unbiased parties or representatives of all interests and points of view rather than just by those representing the views of the large software developers. However, they are generally aware that this could be very difficult because of the strong forces that favor the status quo, particularly the great political influence of the largest software developers. They also emphasize that the issue could become increasingly irrelevant in the future.

Among the unilateral steps that could be taken were there serious interest on the part of at least some of the major parties involved in achieving a reduction in the so-called software piracy but in the absence of any consensus on the policy measures for achieving such solution are:

(1) Adjustment by vendors of proprietary software of their prices to levels that are consistent with the income levels in each country or region. In fact, this could actually result in increased revenue for them due to the greater volume of authorized sales.

(2) Enforcement by national governments of existing antitrust laws and the creation of new ones where necessary in order to increase competition and thereby lower prices so that it is easier for users to purchase software from authorized sources. Ideally, it would be most effective to do this in the countries in which such software is developed (i.e., mainly the U.S.). However, in the absence of the political will to do so in such countries, the coordinated enactment and enforcement of such laws in a number of user countries, even the lowest income ones, could still have quite an effect.

(3) A more honest approach by companies that are accusing users of so-called software piracy. This includes (a) stopping the exaggeration of the negative effects, (b) openly admitting and making at least token restitution for the vast amount of damage which has resulted from years of abusive monopoly practices and (c) avoiding the use of nonsensical terminology such as software piracy.

(4) Increased promotion of the use of free software. Because its license always requires that it be available at no monetary cost and encourages the study, modification, extension and redistribution of it, thus, by definition, there can be no such thing as piracy of free software. Indeed, the increased use of free software is likely to become the most effective solution in the long run as its use continues to proliferate as a consequence of successive improvements in its performance, of more people becoming aware of its benefits,11 and of governments and other organizations continuing to remove the various barriers to its widespread use.

1As is often the case with controversies, each side claims that there should be no controversy because its view is the only correct one.

2The BSA's home page is

3For example, see IDC says piracy loss figure is misleading, by Fred "zAmboni" Locklear, Ars Technica, July 19, 2004. Also see Dodgy software piracy data, The Economist, May 19, 2005 (registration required).

4Source: 2004: Year of the global malware epidemic - Top ten lessons, mi2g Research Methodology, November 21, 2004. For another study with a different methodology, see: Software Errors Cost U.S. Economy $59.5 Billion Annually, National Institute of Standards and Technology (NIST), June 28, 2002.

5The purpose of this article is not to promote or condone the breaking of laws with regard to the copying or use of software. Rather, it is to examine the reasons for controversial practices regarding software from the viewpoints of both sides and to propose practical and equitable solutions.


7Many of these tactics are the same or similar to those that are typically used by monopolies to maintain or extend their economic and political power. For a more detailed look at such non-market tactics, see Monopoly Predatory Tactics: A Brief Introduction, The Linux Information Project, January 2006.

8It is reported that in 1998 Bill Gates, co-founder and chairman of Microsoft, stated in a presentation to business students at an American university that widespread software piracy could be a useful for Microsoft. According to Microsoft in China: Clash of titans,, February 2000, and other sources, he said: "Although about three million computers get sold every year in China, people don't pay for the software. Someday they will, though. And as long as they're going to steal it, we want them to steal ours. They'll get sort of addicted, and then we'll somehow figure out how to collect sometime in the next decade." Significantly, this quote appears to be well known in China.

9For a list of the some of the most popular free software programs for use on Linux, see Major Linux Application Programs, The Linux Information Project, updated February 2006. For a list of some of the best free software for use on Microsoft Windows and other operating systems, see Best Free Software Applications for Microsoft Windows, The Linux Information Project, updated February 2006.

10Although many people think of piracy as being something that occurred centuries ago on sailing ships, the practice is still very much alive today, particularly in the waters around Southeast Asia and off the east coast of Africa. It is often at least as cruel now as it was in the past.

11For more information on the benefits of using free software, see 25 Reasons to Convert to Linux, The Linux Information Project, January 2006.

Created February 27, 2006. Updated February 25, 2007.
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