Memo to Google, Facebook and Twitter executives: Learn how to protect your intellectual property and patented software but avoid becoming a corporate bully.
That’s the lesson Bill Gates might have learned early on. Instead, for all of his personal and corporate philanthropic activities, his giant software company, Microsoft Corp., cannot shake off the image of being a blundering global monopolist. Microsoft’s missteps are lessons that emerging technology giants should heed as they trade on their intellectual property and establish global footprints.
Theft of intellectual property and software piracy – on a global basis – is a liability for all businesses. The issues will likely become thornier and more complex for the next generation of software giants – the Googles, the Twitters, the Facebooks. How they choose to protect their IP may well involve questions of human rights, political dissent and personal privacy, questions beyond the purview of regular business practice.
The cost of software piracy is significant. In 2008 it was estimated to be $51 billion by the Business Software Alliance, an international trade group that represents software makers. In China alone, the value of pirated software is estimated at nearly $8 billion. And piracy is accelerating in the other BRIC countries as well.
Microsoft is right to defend its intellectual property rights and staunch financial losses but the company has failed to recognize the consequences of its actions. In trying to catch IP pirates, Microsoft has become a partner with strong-armed police in the BRIC countries who are using these cases as an opportunity to intimidate and punish dissidents within their borders. The latest Microsoft fiasco may well become known as the Russian imbroglio.
In the most recent case, reported by the New York Times, the police raided the offices of a Siberian environmental group, Baikal Environmental Wave, which has been protesting Prime Minister Putin’s decision to re-open a paper factory that had long polluted Lake Baikal, the world’s oldest and deepest lake and the second most voluminous, after the Caspian Sea.
The police entered the Baikal Wave offices, seized 12 computers claiming software piracy even though the group’s leaders said that all of its Microsoft software was licensed. When the group asked Microsoft to confirm that the software was legal, the company refused. Instead, Microsoft’s lawyer purportedly gave the police a value of the software said to have been stolen.
The Baikal Wave case is the most publicized but well before Baikal, Microsoft had sided with the Russian police in dozens of cases where dissident groups were raided and their computers and records seized because of alleged software piracy.
In India, Microsoft’s attempt to enforce its intellectual property rights is both intimidating and primitive. The giant software company’s actions have become disruptive and costly to small and medium-sized businesses that rely on technology.
It seems that the company hires “investigators”, many with no knowledge of computers or technology. These investigators, often posing as market researchers, place telephone calls to businesses asking how many computers they have. They then match that up with the licenses sold to that business. If there is a discrepancy the police raid the business, seal its records and have it shut down.
The process gets even more punitive. Instead of trying the case in a local court – after all most of the offending companies are relatively small – Microsoft has used a provision in the patent law to try the case in New Delhi, sometimes hundreds of miles, even thousands, from where the offending business is situated.
The defendant company, not wanting to keep the business shut forever and not able to pay the legal costs, usually succumbs and agrees to settle.
In China, Microsoft’s efforts at protecting its intellectual property have resulted in significant financial gains for the Redmond software giant. In April, a Shanghai court ruled that Microsoft must be paid a then record $318,000 in fines by Dazhong Insurance for using pirated Microsoft software. In July, Microsoft settled its software piracy dispute with CITIC-Kington, who agreed to pay $477,000 for using nine variants of 958 items of Microsoft software.
