Survey: Canada’s piracy on the rise, costs balloon

Software piracy rates jumped slightly in Canada in 2002, as the country continues to lead the United States in theft of commercial software, according to an annual survey on global software piracy.

The study, commissioned by the Canadian Alliance Against Software Theft (CAAST) and its sister organization, the Business Software Alliance (BSA), found that although the Canadian piracy rate has decreased seven percentage points over the last eight years, it still trails the global decrease of 10 points over the same period.

Toronto-based CAAST is a non-profit organization that works with the BSA to provide educational information for corporations, consumers and resellers about software piracy and its implications.

The rate in Canada, which currently sits at 39 per cent, was 38 per cent in 2001. Both down from an all-time high of 46 per cent in 1994, said Toronto-based Jacqueline Famelak, president of CAAST.

“Although piracy rates seem to be going down in general [worldwide], they are still quite high in Canada,” she added.

Microsoft Canada says the numbers, though remarkably high, are believable.

“I would agree with those numbers,” said Diana Piquette, anti-piracy manager with Microsoft Canada in Mississauga.

Nor do the numbers completely surprise Laura DiDio, senior analyst with Yankee Group in Boston. Though she said she was surprised how high the Canadian numbers were, she recently dealt with a European company which had only 1,000 Microsoft Office licences for 80,000 employees, most of whom were users.

DiDio said 90 per cent of the organizations Yankee Group deals with have some compliance issues, while 45 to 50 per cent have “significant compliance” issues.

However, DiDio does not let the vendors completely off the hook.

“They will often look the other way,” for small infractions, she said. Traditionally, if a company has 95 per cent compliance, it is viewed by vendors as acceptable. But in these tough economic times, when companies may be pressured into cheating a little more than usual, the vendors are often complicit.

“Ten to 15 per cent is often accepted…(if) they want to keep you as a customer.”

More Education

By educating corporations in Canada, CAAST would like to decrease piracy in this country.

“What we try to tell people is that it’s illegal, it’s theft and it’s a criminal act to copy software,” Famelak said. “Not only that but you are going to ruin your reputation as a business and be susceptible to viruses and you are not going to get the proper support you need.”

Another way to reduce piracy, especially those companies which do it unintentionally, is to have better asset management, DiDio said. Most companies have “sloppy procurement practices” and have no centralized asset management she said.

The Royal Bank does have a centralized system. Its common operating platform allows IT managers to upgrade software remotely to all 60,000-plus employees’ computers. The company also has a code of conduct which, among other things, bans the loading of personal software onto corporate computers.

The fact that the Canadian piracy rate is significantly higher than the U.S. (23 per cent), is also something for Canadians to be aware of, Famelak added.

“In Canada, compared to the U.S., the penalties in the U.S. for software piracy are very stiff.”

A penalty of up to US$150,000 per software title copied, is an example of the deterrents against software theft with Canada’s neighbours to the south. In Canada, Famelak said, penalties are around $20,000.

Piquette said she “absolutely believes” that American laws are a major reason why piracy rates are so much lower there.

Famelak would like to see the rate in Canada eventually fall in line with that of the U.S. If the Canadian rate was 16 percentage points lower, rivalling that of the United States, it could amount to millions of dollars in retail sales.

When it’s all put into perspective, however, Famelak said a one per cent increase isn’t something to ring the alarm bells over.

“The increase or decrease by year over year hasn’t been more than two per cent,” she said. “If I see a jump of more than five per cent, then we’re going to have to rethink the way we are doing business here and really start cracking down.”

So while a one per cent difference either way on the rate scale doesn’t make a huge difference, it does affect the retail sales industry.

That one per cent increase in 2002 was also the cause of a significant loss in retail sales, the study said. Losses of sales in 2001 were at $289 million in Canada because of software piracy. In 2002 those numbers skyrocketed to $419 million.

CAAST said the Canadian economy has lost over $3 billion in retail sales of business software applications because of software piracy since 1994.

But even Microsoft admits the losses are not that black and white. The cost of piracy is built into the price.

“I wouldn’t say it is not built in,” Piquette said. “It would have to be considered another (business) cost.”

International Planning and Research conducted the study for CAAST and BSA. Later in the year the research company will be releasing statistics on piracy for each province.

CAAST can be found on the Web at