Taking On the "Superpower of Piracy"
U.S. software companies crack down on Russian counterfeiting
Business Week, December 19, 1994 issue

	Software pirates beware!  There's a sting operation under way in 
Moscow to nail you.  The operation is being orchestrated by a branch of 
the Business Software Alliance (BSA), a U.S.-based trade group with the 
cooperation of three Russian software companies.  The plan is to gather 
evidence against produces and users of counterfeit goods, and then make 
them a test case under Russia's new copyright laws.
	Tired of rip-offs, such software companies as Microsoft Corp. and 
Lotus Development Corp. are taking a hard line now that the Russian 
computer market is set to boom.  The industry estimates Russian 
counterfeiting cost it $75 million last year.  So widespread is piracy 
that many Russians apparently don't realize it is illegal to copy 
computer programs without paying a licensing fee.  "We hope that by 
bringing cases against commercial pirates, end users will get the 
message," says Virginia L. Clough, the BSA's representative in Moscow.
	As recently as three years ago, there was no software markeet in 
Russia.  Few people owned personal computers.  And Western software 
companies were hesitant to enter a market that provided no copyright 
protection laws.

Distribution Derby

	But since the collapse of the Soviet Union, burying imported 
computers have become something of a national pastime.  The computer 
market in Russia is now growing an estimated 30% to 50% annually, with 
sales hitting 80,000 computers per month.
	Legitimate software sales are skyrocketing, too.  Take the 
BiblioGlobus store near the old KGB headquarters, where shoppers crowd up 
to a brightly lit counter.  Behind the harried clerks, shelf after shelf 
is lined with colorful boxes of Lotus 1-2-3, Microsoft Word, and Borland 
Paradox--all marketed by a small Russian company called CompuLink.
	This spectacular growth has convinced software produces they had 
better move quickly to guard the market by putting the squeeze on the 
pirates.  Since 1992, there has been a law on the books that protects the 
copyrights of computer programs and databases, with violators subject to 
fines of about $400.  "Now we have to make people aware of it," says Jane 
Kitson, president of Lotus Development Russia.  According to the BSA, 98% 
of the programs used in Russian computers in 1993 were pirated.
	Already, more Russian distributors are growing legal.  Industry 
executives estimate Russians are now purchasing more than $1 million of 
licensed software per month.  Microsoft sales grew by 1000% between July, 
1993, and June, 1994, says Robert Clough, managing director of the 
company's Moscow office.  Says Clough: "Russia is still a superpower of 
piracy, but it's getting much better."
	But the big software producers are fighting piracy in Russia with 
carrots as well as sticks.  They are trying to woo Russian computer nerds 
with discounted prices.  A Microsoft Word package that would list for 
$350 in the U.S. goes for about $200 in Russia.  "We are taking less 
money so that the dealers can grow," says Microsoft's Clough.

Warning Letters

	Western software makers are not the only producers concerned 
about piracy.  Two Russian software companies, 1C and 
Paragraph-Interface, have joined BSA.  1C is the biggest domestic 
software distributor, with 750 dealers in the Commonwealth of Independent 
States.  AT the insistence of the two Russian companies, the BSA is 
sending Russian banks and businesses informational letters warning them 
that it is illegal to copy software.  Most companies now purchase one 
legal copy in order to get technical support, but then copy to hundreds 
of other company computers.  "Now we need to show there will be sanctions 
imposed on those that don't pay," says Alla G. Polegenkaya, general 
director of Paragraph-Interface.
	President Boris N. Yeltsin has set a good example by directing 
the Presidential Council and the State Duma to use only licensed 
programs.  And a few Russian companies are deciding to pay up.  For 
example, the giant gas conglomerate Gazprom recently spent over $500,000 
on software.  But most cash-strapped Russian Companies still aren't 
willing to spend money for something they can duplicate for free by 
pressing a button.  Legitimate osftware produces are hoping a 
well-publicized sting will change their minds.



Typed by BGI/RTS
Packaged by Jimmy Jamez/DoD-SCuM