Battling The Computer Pirates
The New York Times
January 5, 1983
When the personal computer boom began two years ago, the leading software manufacturers, mindful of how piracy had drained profits from the record and videotape industries, declared war on entrepreneurs who illegally copied computer programs.
The war is not over, but by most accounts the program pirates have won the first battle. Although legitimate manufacturers are pursuing legal remedies more vigorously, they have largely given up time consuming and expensive efforts to encrypt their most popular software with codes designed to prevent the electronic copying of programs.
Without these codes, most medium-priced home computers can make an exact duplicate of a complex word processing, accounting or game program in seconds. But even some highly sophisticated codes, the manufacturers learned, are not enough to stop a determined pirate, or a computer hobbyist who revels in the challenge of code breaking.
''The lesson is that as fast as you can think up a new code, someone else can break it,'' said Edward H. Currie, president of Lifeboat Associates, a New York software firm.
No Firm Estimates of Loss
Finding a way to defeat the pirates is a top priority for the software manufacturers, who are competing fiercely for a share of the emerging, multibillion-dollar market in programs for personal computers. But an accurate assessment of how much business the industry is losing to pirates is hard to come by.
Mr. Currie estimates that the industry loses 30 percent of its revenue to pirates. But Seymour Rubinstein, the founder of the Micropro International Corporation, a leading software manufacturer in San Rafael, Calif., with about $26 million in sales this year, said recently that his company loses $20 million to $40 million annually because of illegal reproduction.
''The word 'piracy' makes it sound romantic,'' Mr. Rubinstein said. ''It's theft.'' Both Micropro and the Tandy Corporation, the Texas-based company that markets Radio Shack computers, are among the manufacturers that attempted, and quickly dropped, copy-protection codes.
Codes Easily Broken
For example, Radio Shack's popular word processing program, called Scripsit, was first marketed with a program that prevented users from making more than two electronic copies. But the code was easily broken by computer experts, and by widely available programs that personal computer users can use to break the copy-protection codes.
Tandy also found that copy protection codes annoy legitimate users, many of whom make several backup copies of software they purchase in case the original becomes damaged or worn out. One senior Tandy executive speculated that the problems associated with using the copy-protected software drove some customers into the arms of competitors.
So it surprised few in the industry when Tandy last year released a new version of the program that carries no codes to impede the duplication of the software onto blank diskettes, the plastic, record-like disks that hold programs and data files. ''Our feeling now is that if it poses a problem for the legitimate user, it's not worth the added protection for us,'' said Jon A. Shirley, the vice president of computer merchandising at Tandy.
'User Groups' Trade Programs
Tandy is not alone. Both the International Business Machines Corporation, which entered the personal computer market more than a year ago, and Apple Computer say they rarely copy-protect software, and then only at the insistence of the company or individual who developed the program.
While Applewriter, Apple's own word processing software, does include copy protection codes, ''there are bootleg copies all over,'' concedes Ida Cole, Apple's manager of applications software. ''We know that the protection is just a Band-Aid.''
The companies say they are battling two kinds of pirates: The computer buff who makes a copy for a friend, and the merchant who runs a mail-order business from his basement and sells thousands of illegal copies at prices substantially below retail.
The manufacturers privately acknowledge that they can do little to stop users who trade copies of programs informally, although they have tried to bring pressure on some computer ''user groups'' that have sprung up across the country. Several of the groups, the manufacturers have charged, allow trading on a large scale. They are also cracking down on school districts that purchase one copy of an educational program and make reproductions for each member school.
Successful Prosecution Rare
But with the failure of the code protection system, the manufacturers are beefing up their threats of legal action against merchant pirates. New programs are packaged with prominent copyright notices and warnings of vigorous legal action.
So far, however, examples of successful prosecution are rare. But in a recent case, Micropro and Digital Research Inc. filed suit against Dataforce International Inc. for selling copies of Wordstar, a popular Micropro word processing program. Under a decree agreed to by the Federal District Court in San Francisco, Dataforce and its chairman, Daniel M. O'Rourke, agreed to pay $250,000 and legal expenses to the companies.
''We selected O'Rourke purposely,'' said Ronald Laurie, a lawyer for the two companies that brought the suit. ''We wanted to let people know they will be pursued.'' He noted, however, that neither Micropro nor Digital Research had yet received its award.
Neither Mr. O'Rourke nor Dataforce had current telephone listings, and attempts to reach him or a company spokesman were unsuccessful.
Industry representatives say that even with the failure of encryption efforts they still have a few weapons available to combat piracy. Some manufacturers are placing serial numbers on their software and refusing to offer help to any user who cannot identify where he purchased the program. Others are hoping to stay one step ahead of the pirates by regularly releasing improved versions of their programs.
Other companies, meanwhile, are trying to attack the problem by developing better hardware. One such method would emboss a computer program with the machine's serial number the first time that the program is used. The computer user could make unlimited copies, but they would only work on the machine that bears the same serial number.
''Each one of these schemes has incredible problems,'' warned Mr. Currie, who says that the software industry, like the recording industry, is learning that a certain level of piracy is just a cost of doing business.
''If the microcomputer industry has discovered anything in the past two years,'' he said, ''it is that anything you do that makes the user's life more difficult, you do at your own risk.''
Copyright 1983 The New York Times Company