SOFTWARE PIRACY SURGES\Copying technology, Internet's popularity keep enforcers scrambling.

Byline: Laurie Flynn The New York Times

When police raided the software mail order business that Thomas Nick Alefantes ran from his Los Angeles home, they uncovered a counterfeiting operation on a scale typically found only in overseas factories beyond the reach of American software copyright enforcement.

Using relatively low-cost copying equipment, Alefantes, who pleaded guilty to two felony charges and is to be sentenced this month, amassed millions of dollars worth of CD-ROM counterfeits of Microsoft business software and Autodesk computer aided design programs, among other pirated software.

For the U.S. software industry, Alefantes - or Captain Blood, as he calls himself, after the high-seas pirate played by Errol Flynn in the 1935 film - is a personification of the sharp increase it fears in software piracy. New, low-cost techniques are making it easier to produce and distribute unauthorized copies of valuable programs.

Even as they worry about the multimillion-dollar offshore counterfeiting factories that have bedeviled U.S. software companies in recent years, industry executives are bracing for a surge of onshore counterfeiters abetted by inexpensive CD-ROM copying devices, or by ever-easier access to the Internet, where bootleg software can flow like hooch down the Mississippi.

"If the prices of CD-ROM recordables continue to fall, it opens up a whole new front," said Robert Kruger, a former federal prosecutor who directs copyright enforcement for the Business Software Alliance, an industry group in Washington. "And Internet piracy is going to take us off in a hundred new directions if we're going to keep up with it."

A continuously updated "piracy meter" in the group's headquarters indicated last week that the estimated level of illegally copied software had reached nearly $144 million worldwide through the first four days of 1996.

In recent years, the illegal distribution of U.S. software internationally has been a major concern and a thorny diplomatic issue for the United States and its Pacific Rim partners. In Japan alone, estimated losses from piracy to U.S. and other software companies exceeded $1.3 billion in 1994, the last year for which figures are available.

In China, according to another U.S. trade group, the Software Publishers Association, only 1 of every 50 copies of software is legal.

Throughout Asia, software counterfeiters use high-speed CD-ROM duplicating equipment that can cost $1 million to stamp out copies of software programs, sometimes cramming dozens of different products onto one disk.

Last year in Hong Kong, for example, Microsoft's general counsel, David Curtis, said he was able to buy a CD-ROM containing nearly 70 software titles, including a dozen Microsoft programs. Curtis said he paid $50 for a collection with total market value well over $30,000.

Yet the Software Publishers Association said that in the United States, the level of software piracy had been falling - even though, with the size of the U.S. market, total losses were among the highest. In 1994 compared with 1993, the value of illegal software produced in this country fell nearly 50 percent, to $1.05 billion, the association said.

It attributed the decline in domestic software crime to an education campaign aimed at corporations and to stiffer penalties.

But thanks to the explosive growth of the consumer CD-ROM industry and the great popularity of the Internet, software piracy seems ready to rise again in the United States.

"We always thought our biggest losses were in corporations, where they were distributing more copies of software than they had purchased," said Sandra Boulton, director of the anti-piracy department at Autodesk, whose $4,000 Autocad design software is popular with architects and engineers, and has been a preferred target of software counterfeiters.

"But now we're seeing new technologies like the Internet and CD-ROM duplicators play a role," Boulton said.

The CD-ROM drives typically sold with home computers are "read only," meaning that they can be used to play CD-ROM disks containing multimedia games or large reference works, but the computer user cannot alter or copy the disks. But low-speed recordable drives for use with home computers will soon be priced as low as $500.

The CD-ROM recordable machines have legitimate uses, like storing graphics and large quantities of data that would not fit easily onto floppy disks. But the availability of low-cost duplicators opens a new market to software counterfeiters, making it even cheaper for operators following in Captain Blood's boot prints to do plenty of damage.

For software programs that are not so large that they require a CD-ROM's vast storage space, the Internet presents a potentially bigger threat in dollar terms. (Because it lacks any central authority, the Internet is particularly difficult for law enforcement agencies to monitor for piracy. Some software publishers have taken to calling it the "home shoplifting network.")

While pirates had long ago discovered the advantages of distributing software over private electronic bulletin boards, officials today estimate there are already hundreds of Internet news groups, mostly under the heading alt.binaries.warez.

On these, software pirates upload programs that any of the world's estimated 30 million Internet users can download onto their own computers.

CAPTION(S):

PHOTO

Photo The tally above Robert Kruger of the Business Software Alliance represents the first four days of 1996. The New York Times