SOFTWARE publishers face massive losses as China鈥檚 CD pressing factories turn their attention to producing pirated computer programs on CD-ROM. Counterfeit discs have already appeared in the US, Europe, Australia and throughout Asia. 鈥淭he world is being swamped by pirates,鈥� says Valerie Colbourn, vice-president of the Business Software Alliance. The BSA 鈥� the international copyright watchdog set up by the software industry in 1988 鈥� is alarmed by how fast illegal copying of CD-ROMs is growing.
鈥淲e have been horrified by the scale of the problem,鈥� says Colbourn. 鈥淚t is very recent. Pirating of CD-ROMs only started six to eight months ago, but it is a very big threat to the industry.鈥�
Hong Kong鈥檚 Customs and Excise officials agree that the rapid increase in the number of pirated discs is a cause for concern. Ronnie Tsang, head of the C&E Intellectual Property Investigation Bureau, says that the CD-ROMs seized in 1993 were worth only HK$10 000 (拢900). But in 1994 his officers netted CD-ROMs worth HK$845 000. 鈥淲e must take into account that we carried out more raids last year,鈥� says Tsang. 鈥淪till, it is a huge increase.鈥�
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According to the recent BSA Worldwide Report, the legitimate software industry is already losing $1.4 million an hour through pirating of software in all its formats.
The BSA estimates that during 1995, 50 per cent of the software from leading producers will be available on CD-ROM rather than floppy discs. This makes CD-ROM counterfeiting an attractive operation for pirates. 鈥淧roduction costs are dropping substantially and the cost of making one CD is just a couple of dollars,鈥� says Colbourn. Small-scale production can be achieved with a recordable CD-ROM drive and a terminal. 鈥淣ot a great deal of expense 鈥� maybe just HK$15 000 to get started up,鈥� she says.
China is the major source of the pirated CD-ROMs flooding Hong Kong and the international markets. Computer software outlets in Hong Kong have made little effort to conceal their roaring trade in illegal CD-ROMs. Many shop windows openly boast a wide range of counterfeit CD-ROM software, including games, reference materials and applications.
A notorious black spot for pirated software is Hong Kong鈥檚 Pearl Arcade. Every day, new titles are snatched off the shelves by customers with an eye for a bargain. What you get for your money varies in quality, but according to Colbourn, pirated copies usually operate fairly reliably.
Because the pirated CD-ROMs are generally sold in high-quality packaging, people may buy illegal merchandise unwittingly. 鈥淐ustomers often think they are getting a genuine product,鈥� says Colbourn.
Some shops are also providing made-to-order compilations of programs on a single disc. 鈥淭he customer gives the shopkeeper a few hours to put together various programs from different companies,鈥� says Tsang. 鈥淭he customer decides exactly what programs to take home on one disc.鈥�
During a raid last month, customs officers found that Microsoft鈥檚 Encarta 鈥�95 CD-ROM encyclopedia was selling for HK$200. 鈥淟egitimate copies of this program were not even on sale in Hong Kong鈥檚 legal stores,鈥� says Colbourn.
Another reason for the pirates鈥� success is that the illegal discs are relatively easy to smuggle. One CD-ROM disc can store the same quantity of computer data as 400 floppy discs and can contain over 200 applications. 鈥淧irated software that would once have filled up a cargo container can now be fitted into a single bag,鈥� says Colbourn. 鈥淭he pirates are very crafty 鈥� they change their tactics constantly and use increasingly sophisticated means to avoid being detected.鈥�
The music industry has taken the CD pirates to court in China, and production of pirrated music CDs has declined significantly as a result. But the resilient fraudsters have bounced back and turned their attention to CD-ROM production, using the same factories and similar technology. 鈥淭he profit to be made with counterfeit CD-ROM discs is far higher than the profit from music CDs,鈥� says Colbourn.
China鈥檚 lax intellectual property laws have brought it into conflict with the US, which claims that it is losing out to pirates across a wide range of goods to the tune of 拢500 million. During a trip to China last July, deputy US trade representative Charlene Barshefsky demanded that Beijing close every one of its CD factories, claiming they were all guilty of piracy. The US says that China鈥檚 29 CD factories produce about 75 million discs a year 鈥� 25 times China鈥檚 domestic market.
Following the breakdown of negotiations last month, Mickey Kantor, the US trade representative, has told China that unless it falls into line by 4 February it will face punitive 100 per cent tariffs on its exports. China has responded by threatening tit-for-tat tariffs on American goods.
