How Chinese companies steal a critical business advantage

The epicenter of the crisis is in China, where four out of five PC software programs were stolen last year at a commercial value of nearly $8 billion. In the United States, four out of five PC programs are legally purchased. That discrepancy unfairly skews trade and competition.
 
Rampant enterprise software piracy in China is an especially galling issue for U.S. policymakers, because American companies lead the global software industry. More often than not, Chinese businesses are stealing the software tools they need from one U.S. industry to manufacture products and compete with other U.S. industries. This cannot be allowed to continue.
 
The Obama administration and Congress have worked hard to persuade China to curb its software piracy — including in ministerial talks this week between President Obama’s economic team and their counterparts in the Chinese government. These and other recent negotiations have elevated the issue of enterprise software piracy to the top of the bilateral economic agenda.
 
China has made a series of commitments to ensure that all the software its government agencies use is legally purchased, and it has announced pilot projects to promote the same practice among state-owned enterprises. Yet China’s piracy rate has barely budged in the last year, and U.S. software companies are not reporting any significant increase in sales. This is troubling, because Chinese officials have the power to compel rapid changes in the country’s economy if they choose.
 
It is often said that piracy is widespread in China because Chinese culture does not appreciate intellectual property rights. But new survey data dispels that assumption. Eighty-six percent of Chinese PC users agree with the idea of paying innovators for the products they develop to spur more technology advances. Likewise, overwhelming majorities believe IP rights benefit them by creating jobs and improving local economies.
 
The problem is a muddy landscape for intellectual property enforcement in China. A stunning 72 percent of business decision-makers in China say they would buy one license and then install a program on multiple computers in an office — and about the same percentage mistakenly believe it is legal to do. China needs to correct this problem by sending a strong message of deterrence to the marketplace. The way to do that is to take legal action against high-profile enterprises operating with unlicensed software.
 
The software industry is doing its part to raise awareness by investing heavily in public-education campaigns, software asset management courses for system administrators and IT professionals, and other means. What we need now are companion efforts by the Chinese government to bring greater focus to the issue by supporting public education, enacting and vigorously enforcing strong intellectual property laws, and leading by example.

The Obama administration has done this in the United States. It has implemented an ambitious program to enforce intellectual property rights broadly and to combat software theft in particular, both at home and in the international trade arena. It is to the administration’s credit that China has even acknowledged the need to curb enterprise software theft. Now it is up to China to show the resolve necessary to produce tangible results. The administration should keep up the pressure until that happens, because the stakes are huge for the software industry and the entire U.S. economy.
 
Robert Holleyman is president and CEO of the Business Software Alliance.