Piracy of Business Software Expected to Cost Industry $800 Million Yearly

From United Press International

Much of it is done innocently by office workers and home computer buffs, but the growing problem of unauthorized copying of business softwares is expected to skim off $800 million from the industry's revenues in 1985.

Future Computing Inc. of Dallas, a unit of McGraw-Hill Information Systems Co., believes there is currently one pirated copy of business software in use for every copy authorized by the publisher.

In an analysis of 45,000 households that responded to a questionnaire mailed to some 70,000 households, FCI found the 50% piracy rate includes the unauthorized use of "backup" copies provided by the software publisher, as well as unauthorized duplicates made by the buyer.

"Future Computing regards the 50% rate as a conservative estimate of the level of software piracy in the personal computer marketplace," the agency said.

FCI estimated piracy cost the industry $1.3 billion in lost revenues between 1981 and 1984. Assuming approximately 25% of the unauthorized copies represent packages that would have been purchased, it said, the "revenue loss in 1985 will be $800 million more."

The problem is compounded by the raging controversy between software buyers and the software industry.

The buyers say once they have paid for the product, it is their property and they can use it any way they want. The industry says the purchase is only a licensing agreement and does not confer ownership of the software.

Analyst Joe Curry, who directed the FCI piracy survey, said he sees logic on both sides of the issue and noted it can be settled only through increasing public awareness that unauthorized copying is a violation of the licensing agreement.

"Most of it is done innocently in the office or the household," said Curry. "I don't think there is an established underground market that is making huge profits out of this. Most of those who make unauthorized copies are not aware they are violating an agreement."

Curry said a popular software program currently costs from $300 to $500. But it can be copied for as little as $5.

"Educating the public is important," he said. "Even some large firms are not aware that some of their employees may be doing this."

Curry said the industry's trade group in Washington, the Assn. of Data Processing Service Organizations, has issued an appeal to corporate management and educational institutions to establish policies to stop the unauthorized copying.

Some corporations like IBM have instituted stiff penalties against any employee caught copying another company's software, Curry said.

May Seek Congressional Help

Curry said Congress may be asked to pass legislation to expand the current U.S. copyright laws to include software technology.

"The ADAPSO also is working to come up with a standardized software protection scheme which can be universally adopted by the industry. There are a number of such techniques right now, but you need to have one that can be applied universally."

Curry said he realizes the problem is extremely complex because of the very nature of the business, but warned that doing nothing would only cause it to grow.

Curry said he expects the problem to peak this year and begin to diminish through 1989. "That is because the cost of software is declining and there will be less incentive to copy. Also, new computer users are going to be less sophisticated than the older ones who were mainly hobbyists and learned everything about the computer. Finally, we think there will be some type of protection scheme adopted that will be more effective," he said.

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