Chinese flex muscles in Microsoft piracy fight

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By Kathrin Hille and Mure Dickie in Beijing

Published: November 16 2008 18:37 | Last updated: November 16 2008 18:37

When Microsoft rolled out its latest anti-piracy initiative this year, it was not aimed at any particular country. Windows Genuine Advantage, a tool that identifies users of counterfeit software and pushes them to buy the real thing, was launched worldwide in several geographical blocs.

But Microsoft ran into trouble when the roll-out hit China last month. While users in other markets kept silent when hit by one of WGA’s more extreme features, a mechanism that blackens the desktop background on computers found to be using counterfeit Windows, their Chinese peers broke into a storm of anger, forcing Microsoft officials in the country into damage control mode.


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Lex: Microsoft will return - Nov-10Microsoft rules out Yahoo takeover - Nov-07Web guidelines aim at repressive governments - Oct-29Microsoft in online Office demonstration - Oct-28Google strikes deal over online library - Oct-28Microsoft opens a new Windows in the ‘cloud’ - Oct-27China’s piracy rates, at 82 per cent according to the Business Software Alliance, are not the world’s worst. But the country’s sheer size means piracy generates vastly bigger losses there – $6.7bn for all software companies last year – than in any other market, according to the industry group.

In a dramatic illustration of the scope of the problem, several million Chinese are using a Windows license key held by the University of Pennsylvania, which is freely available on the web.

But fighting these problems is proving a sensitive affair in an increasingly nationalistic country that is well aware of its weight in the global economy.

Last month, Dong Zhengwei, a Beijing-based lawyer, called on the police to pursue Microsoft for what he called a “hacker-style attack” on consumers.

Local bloggers have also taken up the issue in fervent postings. “If we ignore them for six months, they will come back begging us to take it for free,” one blogger called ‘liangyouliang’ wrote at the weekend. “If they don’t seek good relations with us and not give us a little something for our [exported] clothes, then the people of their country will go naked.”

Well aware of the mood expressed by such postings, the government has also criticised Microsoft. “Violating consumers’ rights just to protect your own rights is inappropriate,” warns Liu Binjie, Commissioner of the National Copyright Administration. He adds that in future he wants the company to discuss anti-piracy measures with the government before they are launched.

Like other multinationals doing business in China, Microsoft cannot ignore that message.

People familiar with the company’s dialogue with the government say that it needs to apply more diligence to its intellectual property rights strategy in China. They say that the next planned big anti-piracy step, the shutting down of illegitimately-used software license keys such as that held by the University of Pennsylvania, will not go ahead until the current crisis in China is resolved.

Separately, Microsoft is taking another look at its anti-piracy tool, and does not exclude the possibility that it could look different in the future. “Microsoft engineers are working on ways to improve the user experience,” says Garth Fort, Microsoft’s marketing head for Greater China.

Although China-specific changes that would take away the black desktop feature are deemed unlikely, there could be global adjustments to WGA triggered by the Chinese protests.

The reason is simple: China is becoming an extremely important market. Microsoft’s revenue in Brazil, Russia, India and China grew more than 50 per cent in the fiscal year to June 30, more than double the world average. Company officials point to the fact that more than one-fifth of the world’s computer science students are now in Chinese universities. If the software group falls foul of Chinese public opinion, what is at risk is not just its standing with today’s Chinese consumers but its image with tomorrow’s software engineers.
Copyright The Financial Times Limited 2008

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