Microsoft has not Changed its IPR Strategy in China

Issue 26, By Harry Yang, China IP,[Copyright]


On September 18, 2008, David Finn, Microsoft’s Associate General Counsel, paid a visit to Microsoft’s headquarters in China. China IP had an interview with him to discuss Microsoft’s global anti-piracy strategies. David Finn is in charge of Microsoft’s worldwide anti-piracy and anti-counterfeit effort. With his lead, a team constituted of former law-enforcement agency officials, investigators, information analysis staff, assistant attorneys, judicial experts, and attorneys supervise the implementation of Microsoft’s strategies on a global scale, including monitoring criminal syndicates and piracy activities that affect Microsoft.

China IP: Do you often come to China?  What do you think of China?

Mr. Finn: I have been working at Microsoft for nearly 9 years. It is the fifth time I have come to China. I have attended several IPR conferences in China and noticed the enormous progress in IPR protection during these years. In IPR protection, China has made huge progress. The public has already realized that IPR’s protection is very important to innovation, the development of the economy, and the progress of China and every Chinese citizen.”

China IP: What is your key work?

Mr. Finn: I often go abroad on business all over the world. One of my responsibilities is to help people attach more importance to piracy. There are many problems with piracy. First, piracy related to crime syndicates is noticeable. Second, counterfeits may possibly bring risks to consumers. Take a crime syndicate for example: more than one year ago, the Ministry of Public Security of China and related law enforcement agencies cooperated for the first time with the Federal Bureau of Investigation of America (FBI) and struck at a counterfeit producing group in the South of China. This group produced relatively high-quality counterfeit products and sold them all over the world, including counterfeits of Microsoft’s software.

We should start by discussing the harm caused by these kinds of crime syndicate. They produce counterfeits of Microsoft’s software. Presently, there are 19 versions of Microsoft’s software counterfeits, including its flagship software such as Windows and Office. These counterfeits are in 11 language versions, including simplified Chinese, French, English, and so on. We have found that these counterfeits are sold in 36 countries. Using legal and medico-legal analyses, we found there were at least 175 printing batches of these software counterfeits. By conservative estimation, these criminal syndicates caused a loss of at least USD 2 billion to us. The scale of their duplication line is bigger than the total of Microsoft’s software production capacities in Europe, Middle East and Africa.

From this case, I want to show that the crime syndicates of piracy and counterfeits will do great harm to innovation and the economy, as well as cause enormous loss to those affected. In this case, the related Chinese agencies’ outstanding work struck powerfully at the crime syndicates that they had investigated for many years. I want to emphasize that, on the one hand, counterfeit and piracy are criminal, but some people cannot understand it thoroughly. On the other hand, counterfeit will bring risks to consumers. What kind of risks may be brought to consumers should also be focused on. There is a testing project in Microsoft, which works by collecting counterfeit products all over the world and conducting tests. More than 2 years ago, we gave 348 counterfeit software CDs, collected in 17 countries, to code translation experts and International Data Corporation (IDC) analysts. They found that out of the 348 CDs, 120 could not be booted or installed. In the other 228 CDs, 40% of them had obvious bugs, such as malicious software and codes, or various spy software. These bugs do not exist in Microsoft’s legal software codes. Obviously, one of our responsibilities is to tell customers and consumers that it is really risky to use counterfeit products. When a consumer bought a counterfeit product, he actually did a favor for the criminal syndicates, possibly without even realizing it.  Further more, the use of counterfeit software put at the user’s information, system, and internet use. Therefore, my team and I try our best to tell people about these risks.

China IP: Is there a global strategy for Microsoft’s anti-piracy efforts?

Mr. Finn: In our anti-piracy action, we have a global system and strategies, including 3 core parts, called 3E: education, engineering and enforcement. In education, we try our best to tell the customers, consumers, business partners, government, and media the risks caused by counterfeits and the advantages of legal software. We believe that it is quite important to improve people’s consciousness of IPR protection. In engineering, we spend enormous money and time to improve anti-piracy and anti-counterfeit skills, in order to avoid hacker attacks and counterfeits. In enforcement, we cooperate with many countries’ governmental law enforcement agencies and related agencies, such as customs, to help them conduct IPR law enforcement in a proper, concrete, and appropriate way. The above case shows the 3E strategies exactly. In the 3E strategies, education plays a key role and the other two are subsidiary.

For engineering, without the Windows Genuine Advantage Notifications (WGA) invented by Microsoft’s outstanding programmers, we could not have uncovered the counterfeit case discussed earlier. Using WGA, consumers can check whether Microsoft’s software they installed is legal or not. As a result, more than one thousand consumers sent software counterfeits to us and helped us to investigate cases on a worldwide scale. For education, this case helped us to tell consumers what kind of role they played in the process of investigating criminal syndicates. We convinced them of the importance of legal software and made them realize that the so-called legal software they bought was not really legal. They felt angry and willing to support us.

Because of the cooperation with our consumers, who sent the counterfeits’ sales invoices, contacting emails, and receipts to us, we can cooperate with China and other counties’ law enforcement agencies and customs to investigate these cases. Successful law enforcement creates a huge deterrent for the criminals.

China IP: Is there a turning point in Microsoft’s anti-piracy strategy in China?

Mr. Finn: I don’t think there is a turning point in Microsoft’s IPR protection strategy in China. We have practiced this strategy for many years, all around education, engineering, and enforcement. Enforcement is an indispensable part. In some cases, we cooperated with some law enforcement agencies. In the recent two important cases, Tomato Garden and the combined anti-piracy action between China and America, we appreciated the Chinese government very much. Although, China need to improve in many aspects in IPR protection, China has already made huge progress and we are encouraged.

China IP: In your opinion, what is the biggest difficulty for improving IPR protection in China?

Mr. Finn: It is different for different countries in the consciousness, commitment, and reinforcement of IPR protection. Piracy rates can show this to some extent. From the piracy rate, we can see the level of a country’s support and consciousness in IPR protection. In some mature markets, the piracy rate stays between 21%-23%, whereas in some newly rising markets it reaches over 90%. Therefore, differences no doubt exist. Furthermore, we can see that in different developing stages of different counties, the understanding and reinforcement of IPR protection is different.

But I’m still optimistic about the global IPR protection situation. Because in 1991, the piracy rate in Western Europe was 78%, which decreased to 35% today. In my own experiences, I noticed that the piracy rates in many counties were once extremely high, however, after a period, the government, the software industry and the public successively realized the importance of IPR protection. It does not mean to protect the development of a country’s software industry, but help them realize the importance of IPR protection to the economy. With the realization of the importance of IPR protection and the government’s action, great progress will be made in IPR protection.

During the Opening Ceremony of the Beijing Olympic Games, when a performance showed the Four Great Inventions of China to the world, it also showed China’s commitment toward innovation and invention protection. Therefore, for China, there is a long way to go and they will face great challenges. But I’m full of hope towards China’s IPR protection. As IPR protection in China develops, we will see the advantages that IPR protection brings to China’s economic growth, market, industries, and consumers. Just like what I’ve seen in other countries, after a period, the piracy rate in China will decrease on a large scale.

China IP: What’s your opinion on IPR abuse?

Mr. Finn: I think we should balance anti-piracy IPR protection and IPR abuse.

In the software industry, we should do more work to improve IPR protection and we have a long way to go. In countries with a low rate of piracy, the piracy rate stays around 20%, while some countries stay between 60%-80%. Therefore, in software protection, I think the problems of over-protection which may cause IPR abuse do not exist now. I noticed some experiences, not only in America, but also in other countries, reduced the piracy rate effectively. To reduce the piracy rate in a short time and on a large scale depends on the law environment changes in related countries and the strict law enforcement of governments. As without reinforcement, law will not be powerful enough. Italy, Greece, and Saudi Arabia have been successful in these aspects. Besides, cooperation in education, engineering and industry will also reduce piracy rate promptly.

(Translated by Li Wei)

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