IPR and Software Piracy in India

Software piracy refers to the illegal installation, distribution, sale and use of infringing software. Still Software piracy continues to be a growing problem in India and other developing countries. Though the industry has recorded a decrease in software piracy in the last 10 years, the rate is still alarming in India. According to the latest IDC estimate, the money lost in 2001 from pirated software is estimated to be close to US $245 million, which is almost half of the legal packaged software market.(3) This revenue loss was mainly due to piracy by unauthorized copying and selling and unauthorized bundling with hardware.

In India, the major driving forces for the use of pirated software are the lack of a legal framework, “taken-for-granted” approach, huge availability of pirated software, high software pricing, high usage of assembled PCs and enormous financial benefits. On the other hand, though piracy is still at a very high level, factors such as increased activities from vendors, industry associations and government, and increased user awareness are inhibiting piracy. Most independent software vendors (ISVs) fight individually as well as through industry alliances such as the BSA and NASSCOM, to combat piracy. These software programs are stolen either through hard-disk loading or counterfeiting. The results of the fifth annual benchmark survey on global software piracy showed that piracy losses in India at a piracy rate of 59 per cent. (2)

The continuing piracy problem meant higher prices for consumers, less publisher revenue to invest in new products and a potential barrier to success for software start-ups in India. Software piracy has robbed of thousands of jobs, billions in wages, tax revenues and critical investments in new technologies for the country. If found liable under the Copyright Act, offenders risk criminal penalties of up to three years in prison and fines up to US $5000 for the offence of copyright infringement.

They would also continue to educate the public and the business sector of the effects and dangers of piracy through seminars and press releases and also its effect on  both  the local economy and for the long-term prosperity of India's dynamic software industry.  NASSCOM and BSA have launched a 'reward program' which would give US $1200 to anyone for providing information leading to successful legal action against companies using unlicensed software. In India, during 1999, software piracy amounted to about 60 percent. This is still low compared to about 91 percent in China and 89 percent in Russia during that time. This initiative to thwart piracy has helped reduce software piracy in India from a high of about 89 percent in 1993 to 60 percent during 1999. (6)

IPR in India

Major changes to Indian Copyright Law were introduced in June 1994. This has made the Indian copyright law, one of the toughest in the world. The amendments to the Copyright Act in June 1994 included the definition of Computer Program. The Copyright (Amendment) Act 1994, clearly explains the rights of copyright holder, position on rentals of software, the rights of the user to make backup copies and the heavy punishment and fines on infringement of copyright of software.(1)

Today, officers of these government agencies, NASSCOM officials, police and various other law enforcement officers of Government of India are committed to enforce copyright laws and eradicate the menace of software piracy. Raids jointly facilitated by NASSCOM and Business Software Alliance with active cooperation from law enforcing authorities over last one year at some of the major metro cities have already had salutary effect.

 To protect the intellectual property rights (IPR) of software companies, apart from cracking down on piracy, the government has also made several policies to actively discourage piracy. Authorized sellers of imported software are allowed to reproduce software in India and sell it without import duty. Local software manufacturers are exempt from excise taxes.(6) Other incentives include :

• Depreciation on IT products allowed at 60% pa, taking into cognizance the high rate of obsolescence of such products.

• Exemption of withholding tax on interest on ECBs is proposed to be extended to the IT sector as well. This will reduce cost of borrowings for IT companies through the ECB route.

• 100% customs duty exemption on all software used in the IT sector.

• Extension of 80HHE Tax benefit to the supporting developers. This will enable supporting developers to enjoy tax concessions, similar to the supporting manufacturer’s concept in manufacturing sector.

 

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