Pirated software and hardware costs billions and puts users at risk.
Classic movie pirates typically were adventurous, clever and courageous fellows with a certain moral ambiguity but a strong sense of honor that would always shine through by the third reel. Today’s technology pirates share few of the characteristics of the Hollywood swashbucklers, apart from a taste for ill-gotten treasure.
Software and hardware piracy costs manufacturers billions of dollars a year in lost sales, to say nothing of the additional costs to consumers in the form of viruses, worms and spyware or defective drives, processors and batteries that wreck their systems. The Business Software Alliance (BSA) estimates software piracy costs at more than $50 billion annually, while the Alliance for Gray Market and Counterfeit Abatement (AGMA) has pegged knockoff hardware costs at more than $100 billion a year.
Many counterfeiters operate overseas, and Daniel Baldwin, U.S. Customs and Border Protection (CBP) assistant commissioner for international trade, recently stressed the importance of international partnership in reducing the growing threat from counterfeit and pirated high-tech products. “The United States still sees intellectual property as a major priority. And we recognize that this global challenge cannot be solved without global cooperation and collaboration,” Baldwin said during a speech at the 2009 International Law Enforcement IP Crime Conference in Dublin. “The problem is huge, but there are lots of things we can accomplish together.”
Beyond Borders
Baldwin cited two recent examples of how international cooperation interrupted the counterfeit supply chain. In Operation Cisco Raider, the CBP collaborated with the Royal Canadian Mounted Police and other U.S. government agencies in more than 400 seizures of counterfeit Cisco network hardware and labels with an estimated retail value of more than $76 million. This joint effort effectively dismantled the North American supply chains for these counterfeit products from China. In Operation Infrastructure, the CBP worked closely with the European Union to seize 360,000 semiconductors and network hardware components bearing 40 different trademarks during a three-week period.
Baldwin further noted that in fiscal year 2008, the Department of Homeland Security made a record 14,992 intellectual property seizures with a domestic value of more than $272 million. This was a 10 percent increase in seizures and a 38 percent increase in value over fiscal year 2007.
“We recognize the huge value of our collaboration with the Canadians and the EU on these operations, and we are committed to expanding this type of cooperation,” said Baldwin. “The lessons of these successes were very clear. As we move forward, we can help each other recognize and share information on global risks.”
The P2P Connection
Software piracy has become a trickier issue due to the relative ease with which transactions can be made online. Individuals are turning to peer-to-peer (P2P) networks and auction sites in staggering numbers to acquire or transfer illegal software, according to the 2009 Internet Piracy Report from the BSA.
BSA uses special technology to monitor P2P networks and auction sites, issuing “takedown requests” when it finds suspicious software being offered. In the first half of 2009, BSA stepped up its efforts in this area and issued almost 2.4 million takedown notices related to P2P and BitTorrent file sharing, an increase of more than 200 percent over the same period in 2008. During the same time frame, BSA used its in-house Internet “crawler” to request the removal of almost 103,000 torrent files from nine of the largest Bit- Torrent hosting sites worldwide. These torrent files were being used by nearly 2.9 million individuals to download software with a retail value of more than $974 million.
“Peer-to-Peer networks are ideal for distribution of a wide variety of materials that can be legally shared with large groups and are a tool used by more businesses to enhance productivity. Unfortunately, P2P technology is also a favorite channel for software pirates who see it as the perfect channel through which to distribute illegal and potentially dangerous software,” said Jenny Blank, Senior Director of Legal Affairs for the BSA. “One of the great disappointments of this technology, for all of its benefits, is that it is now too often seen as the domain only for pirates and malcontents who place no value on the work of software developers and designers.”
No Bargain
Beyond the direct economic impact of technology piracy, the BSA report also draws correlations between Internet piracy and the spread of malware. To bypass installation and licensing protections in today’s software, counterfeiters must physically alter the software’s code. Essential elements of the program are often deleted, while unnecessary extras can be inserted. Deleted code will cause the software to behave erratically — displaying error messages or failing to work with other software and devices — and the extra code inserted by counterfeiters may include malware or spyware that can be used to infect a PC with viruses, change settings or even track how someone uses the computer, such as tracking Web sites visited or keystrokes entered. This malicious software can be used to steal personal information such as usernames, passwords and credit card numbers.
“Software piracy is a threat on multiple fronts,” Blank said. “Pirated software can be a breeding ground for malware and can also open users up to crimes such as identity theft. Those who decide to acquire illegal software harm the economy and companies of all sizes. Moreover, those who engage in piracy open themselves up to civil and criminal prosecution.”
While technology piracy has an obvious detrimental impact on manufacturers, end-users run a high degree of risk as well. Beyond malware and viruses, fake software and hardware can lead to computers that freeze, crash or won’t start — while also potentially corrupting critical data. Of course, since the product is counterfeit, there is no hope for tech support, updates or upgrades. All in all, it’s enough to shiver anyone’s timbers.
