Piracy update: Hard facts to swallow. (Tech Talk).

In November 2000, BUSINESS MEXICO featured an article on Mexico's software piracy problem ("Piracy plague"). This month we take up the theme again, to see what, if anything, has changed.

Unfortunately the statistics don't seem very promising. A recent study done by the International Planning and Research Corp. for BSA (Business Software Alliance), a group made up of software giants, revealed that the losses suffered by the software industry in Mexico due to piracy have increased from US$133.96 million in 1999 to US$180.16 million in 2000.

The annual report indicated that Mexico and Brazil, Latin America's two largest economies, registered piracy levels of 56% and 58% respectively in 2000. This marks the first time since the study began six years ago that the level of piracy hasn't dropped, year-on-year.

Mexico's Center for the Investigation and Promotion of the Software Industry (CIPI) estimates that 60% of all Mexican companies use pirated computer programs, generating a monthly loss of US$50 million for the international software industry. And an overwhelming 95% of all programs used in Mexican homes are thought to be pirated.

The BSA, whose members include Adobe Systems Incorporated, Autodesk, Inc., Macromedia Inc., Bentley Systems, Microsoft Corporation and Symantec Corporation, insists that piracy on such a wide scale is not only harmful for the companies that develop these products, but also represents steep fiscal losses for the government, as well as inhibiting the generation of thousands of direct and indirect jobs.

And while the battle looks uphill, resources do exist in Mexico that are slowly chipping away at the deeply engrained practice of program copying.

Road to resolution

With as much as it apparently has to lose, the BSA sees working with governments as crucial to achieving its long-term goal of piracy irradication. The BSA and its members have brought cases against a number of companies and distributors for presumed piracy--resulting in some 224 seizures coordinated by the Mexican Institute of Industrial Property (IMPI) and the Attorney General's office (PGR).

The government has done its part to define and tighten the laws surrounding pirating. The reforms made to the Federal Penal Code in 1999 established piracy as a criminal offense--without chance for bail--which can include sentences of between three to 10 years.

But many say that such laws are far too general, can be applied too randomly, and aren't designed to get at the crux of the problem. For example, the maximum penalty of 10 years in jail can be applied to a person found guilty of financing the piracy, as it can to the shop owner who may have pirated products among their stock without knowing it, as it can to someone illegally using a brand name, as it can to someone divulging an industrial secret.

While some think that cracking down on private companies and government institutions is as good a place as any to start, the underlying issue is far more complicated.

"More than anything else, it's a problem of consciousness as to how important it is not to encourage the production and sale of pirated products. And it's also economic, and it can't be ignored how difficult it is for people of scarce resources to acquire legitimate products," Jorge Amigo Castaneda, director of the IMPI, told local press.

Reality check

As BSA spokesperson David Shaw puts it, "piracy is like the drug problem, while there's demand, there will be supply and this multi-million dollar business will grow."

The supply and demand relationship is what we've so far been treading around so lightly. It's one thing to copy your friend's Microsoft word program. It's quite another thing when a small or medium-sized company buys a single program and copies it upwards of 500 or 1,000 times, passing it to each employee.

The motivating factors behind this practice must be examined to fully understand the situation. At the risk of calling it blind or insensitive, some insiders claim that BSA doesn't seem to have a realistic grasp of Mexico's state of affairs.

Economically speaking, the purchasing power of small and medium-sized Mexican companies is, for the most part, not to scale with that of U.S. companies of the same size. And while BSA may understand this theoretically, its ideas of practical application don't represent a feasible solution. Should software companies be challenged to make more reasonably priced programs? Should there be a sliding-scale payment plan for companies proportional to their economic means?

Perhaps giving a human face to the software police will do more good for solving the problem than implementing stricter laws.

Emily Hinch is BUSINESS MEXICO'S contributing editor.