The rate of software piracy worldwide held at 35 per cent in 2006, but rose slightly in Canada and elsewhere, offsetting gains by software makers, a new study suggests.

For every $2 of legitimately obtained software, one dollar's worth was acquired illegally, according to the fourth annual global software piracy study released this week by the industry trade group the Business Software Alliance and international research firm IDC.

While the piracy rate fell in 62 per cent of 102 countries studied between 2005 through 2006, it rose in 13 countries, the study found.

But although the rate of global piracy remained stable during that period, the market grew, resulting in a $5 billion US increase in losses, a 15 per cent rise to $39 billion US over 2005, the analysis found.

Increase forecast

But piracy rates are set to rise as more people get computers and broadband internet access, the study found. There were 140 million new internet users in 2006, according to IDC, and 50 million households got high-speed internet connections — half of them in high-piracy countries.

20 countries with lowest piracy rates in 2006 (%)
United States New Zealand Japan Denmark Austria Switzerland Sweden Finland U.K. Belgium Germany Netherlands Australia Norway Israel Canada UAE South Africa Ireland Singapore	21 22 25 25 26 26 26 27 27 27 28 29 29 29 32 34 35 35 36 39

By 2010, more than 250 million new internet users from Brazil, Russia, India and China, and 20 per cent of all households worldwide — more than 360 million — will have broadband internet access, IDC forecasts.

Combined with the rising popularity of peer-to-peer (P2P) filesharing networks, the figures don't bode well for the software industry, the study suggests.

Half of the countries examined for the 2006 report have piracy rates of 62 per cent or higher, and in nearly one-third of the nations, the rate is upwards of 75 per cent.

The study looked at packaged software that runs on personal computers, such as operating systems like Microsoft Corp.'s Windows or Apple's Mac OS, systems software like database and security programs, and business and consumer applications such as computer games, personal finance and reference software.

Software that runs on servers, mainframe computers or sold as a service were not included in the calculations, which employed proprietary data from vendors, users and distributors.

Narrow rise in piracy in Canada

In Canada, the piracy rate rose in 2006 to 34 per cent, up one percentage point over 2005 for total economic losses of $890 million ($784 million US), according to the Canadian Alliance Against Software Theft, which released the report in conjunction with the BSA.

Canada held its position near the bottom of the rankings for the 20 countries in the world with the lowest software piracy rates, coming in at No. 16 in 2006, according to the study.

Only the United Arab Emirates and South Africa at 35 per cent piracy rates, Ireland (36 per cent) and Singapore (39 per cent) fared worse among countries that pirated software the least. The three countries with the lowest piracy rates were the United States (21 per cent), New Zealand (22 per cent) and Japan (25 per cent).

"The fact that Canada's software piracy rate has remained more or less unchanged over the past few years indicates that a lot more work needs to be done before we can achieve rates found in countries that we usually compare ourselves to, such as the U.K. and Australia," Michael Murphy, president of CAAST, said.

Australia, with a rate of 29 per cent in 2006, came in at No. 13 on the list of the 20 countries with the lowest incidence of software piracy, while the U.K ranked No. 9 at 27 per cent.

By region, North America has the lowest rate of piracy worldwide, maintaining a stable rate of 22 per cent in 2006 as compared to 2005.

Worst offenders

The countries with the worst rates of piracy in 2006 were Armenia at 95 per cent, Moldova at 94 per cent and Azerbaijan at 94 per cent. They were followed closely by Zimbabwe (91 per cent) Vietnam (88 per cent) and Venezuela and Pakistan, which tied at 86 per cent piracy rates.

20 countries with highest piracy rates in 2006 (%)
Armenia Moldova Azerbaijan Zimbabwe Vietnam Venezuela Pakistan Indonesia Ukraine Cameroon Algeria Montenegro El Salvador Zambia Bolivia Ivory Coast China Nigeria Paraguay Guatemala	95 94 94 91 88 86 86 85 84 84 84 82 82 82 82 82 82 82 82 81

While China and Russia made significant gains in reducing their piracy rates, their clout in a growing market for computer use kept the global average constant.

China's piracy rate fell four percentage points to 82 per cent, preventing $864 million US in losses. The drop represents a 10-point decline since 2003. China was No. 17 on the study's list of worst offenders.

Russia's rate fell to 80 per cent in 2006, down three points from the previous year, for an overall decline of seven percentage points since 2003. Russia was not among the 20 worst nations for software piracy.

In both countries, the improvements were largely attributed to government efforts to improve their own software use practices, enforcement, education and better industry practices.

Russia's gains were also helped by a booming, oil-driven economy, resulting in more available discretionary personal income, the study said.

Central and Eastern Europe fared the worst in the study, with a piracy rate of 68 per cent in 2006 — a one-point improvement over 2005 — and was followed closely by Latin America at 66 per cent for a two-point reduction in piracy.

The Asia-Pacific region logged an overall 55 per cent piracy rate, down one per cent as compared to 2005.

Problem widespread, costly: security software company

North America's position as the region of the world with the least piracy overall is nothing to brag about, according to industry professionals who spoke with CBC News Online.

"We don't want to tolerate any counterfeit software," Scott Minden, a director in the legal department of anti-virus and security software maker Symantec Corp. said. "This is a global problem."

The counterfeiting problem the Cupertino, Calif.-based  company faced was so severe that it created its own special task force of lawyers, former police and other law enforcement investigators.

"When we first started looking into this in summer 2002, we were losing half a billion [dollars] a year worldwide [to piracy]," Cris Paden, a spokesman for Symantec's Brand Protection Task Force added, explaining that the sum includes estimates of lost revenue, legal, investigative and other associated costs.

"We've got it down to about $40-to-$80 million … In a lot of cases we may or may not recoup our losses."

Symantec alleges counterfeiting in lawsuits

Symantec fired its latest salvo in its war on Wednesday when it announced it was suing eight companies, including a Canadian firm, for a total of $55 million US for alleged software counterfeiting. 

Defendants in Symantec lawsuits
Acortech (California) mPlus (California) Logical Plus (New York) SoftwareOutlets.com (Florida) Rowcal Distribution (California) Global Impact, Inc. (Florida) Directron.com (Texas) eDirect Software (Canada)

But Minden said that when it sues, the cases typically don't make it to trial.

"We tend to resolve these in advance of trial but we're prepared to go to trial," Minden said.

The software company alleges in filings in U.S. District Court in California that the businesses are guilty of trademark infringement, copyright infringement, fraud, unfair competition, trafficking in counterfeit labels and documentation, and false advertising.

Symantec is also seeking a permanent injunction in each of the lawsuits to block the companies named from selling "unauthorized Symantec products" and to surrender all alleged counterfeits of Symantec goods.

"It takes a while to build up enough evidence to stand up in court," Paden said. "For this set of investigations, we took 2½ years."

Canadian company named in legal action

In a news release about the lawsuit, Symantec named eight companies, including a Canadian defendant, identified as "eDirect Software."

A March 27 U.S. Federal District Court filing by Symantec lists several individuals and Alberta companies as defendants: EDirectSoftware, Jesse Willms, Michael Callaway, 1016363 Alberta LTD., 1021018 Alberta LTD., DOES 1-10 and Linda Willms.

When CBC News Online called an Edmonton-area phone number for a company named Edirect Software, the receptionist transferred the call to a man she identified as a manager. The man who answered identified himself as "Jesse."

"I don't want to comment on that," Jesse said when asked about the Symantec lawsuit and allegations.

The line was then disconnected, and several more calls to the same number were immediately disconnected.

Microsoft lawsuit settled for $1 million US

Microsoft Corp., in an April 3 statement about alleged international software smuggling of its discounted software marked for education uses, said it had settled a dispute with an online retailer named EDirectSoftware.com.

"EDirectSoftware.com, one of the largest offenders, has already agreed to settle Microsoft's lawsuit out of court for more than $1 million in cash and property," the Microsoft statement said.

Microsoft released a separate statement that named the defendants and specified the settlement terms.

"Microsoft Corporation recently settled a lawsuit against eDirectSoftware, a Canadian partnership, and Jesse Willms, Linda Willms, Dave Willms, Canadian corporation 1016363 Alberta Ltd., and Canadian corporation 1021018 Alberta Ltd. operating in Billings, Montana, and Sherwood Park, Alberta, Canada," the statement said. Sherwood Park is an Edmonton suburb.

"The defendants paid Microsoft over $1.0 million in cash and property and agreed to a court-ordered injunction prohibiting future sales of infringing Microsoft products. Additionally, the Court ordered the impoundment of more than 50,000 copies of infringing software that will be destroyed as part of the settlement."

An internet domain record search for "EDirectSoftware.com" lists Jesse Willms and Linda Willms as contacts for the domain. The record also shows a street address in Billings, Mont., and an Edmonton-area fax number.

A toll-free number also listed in the record connects callers to a voicemail message that asks them to direct inquiries to the same e-mail address published in the domain record.

The address is the same one given by the voicemail system at the company where "Jesse" spoke to CBC News Online.