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The Courts Government Microsoft News Your Rights Online

$500M Piracy Ring Busted In China 154

Posted by kdawson
from the but-did-you-arrest-the-red-army dept.
Blahbooboo3 writes "Reported by several news organizations, pirated software worth more than $500 million has been seized by authorities in China as part of a joint operation run by Chinese police and the FBI. Microsoft estimates that the software piracy of an international counterfeiting syndicate, over the past six years, cost the company at least $2 billion in lost software revenue. Microsoft said that key information in the investigation came from its Windows Genuine Advantage program, an anti-piracy system that can check whether an OS is legit. It's generally accepted that Microsoft has done well out of software piracy: it helps products become widely used, and as the market matures, people start to pay for their software. And this has been a major factor in Windows beating Linux in China, as Bill Gates has admitted."
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$500M Piracy Ring Busted In China

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  • ...will show that this will make no difference what so ever! Fred will still copy his knocked off copy of Vista, XP or Office for his mate. It's like trying to scoop water out of the sink with your hands, while the tapes are on full. Some other group will see a gap in the market and will jump in, thankful that haven't been caught yet.
  • Illegal piracy ... and microsoft's dominance


    The RIAA/MPAA/BSA/ ... and (unfortunately only "hopefully") more variation and choice in software

    Turns out it just doesn't work without laws ... hmmm.
    • by McGiraf (196030)
      with drm and dmca and the new law they're lobying, linux is not gonna be helped by laws. The will try to make it illegal for sure.
  • I'm sure that the RIAA will find a way to connect all this with their campaign to prohibit file sharing on college campuses.

    The fact that it has nothing to do with bittorrent means nothing. It will be used as an opportunity to say something on the lines of "If its happening there, it must be happening here. Evil,evil,evil!"

  • 1/4 of the Piracy is irradiated. 3/4 to go and the software bureau can close office.
  • by Whiney Mac Fanboy (963289) * <> on Wednesday July 25, 2007 @08:05AM (#19981691) Homepage Journal
    Codename "Summer Solstice" - no, not a porn film, but the name of the FBI operation [] encompassing multiple copyright investigations - including the one in question.

    (link is to the FBI press release for this case).
    • by Anonymous Coward
      You should have said:

      Operation Summer Soltice. Of course, the FBI use the OSS acronymn, because the WGA is driving people to OSS.
    • by Shakrai (717556)

      Codename "Summer Solstice" - no, not a porn film, but the name of the FBI operation encompassing multiple copyright investigations - including the one in question.

      I'm so glad that the FBI has taken time off from ignoring warnings about terrorists training to fly jumbo jets to go after the real threat to the American way of life: Chinese software pirates......

  • by hateful monkey (1081671) on Wednesday July 25, 2007 @08:08AM (#19981717)
    Apparently Microsoft has decided that the market is now mature enough to start tightening up on the availability of pirate versions. They have the 90% market penetration, now they want to get the money out of that market. The first hit was free now it is time to pay. The Chinese government has been under a lot of pressure to show more concern about "intellectual property" so let the dog and pony begin.
    • mod parent up.
      I am skeptical of the claim that 2 billion was lost from this one pirate.
      How much does Microsoft make in all of China?
      As Mencius wrote, in a world without walls or fences, who needs windows or gates?
      • by cHALiTO (101461)
        Well, now we can verify. Next year, MS should make at least 2M above expected, right?
        • Sure. Could you tell me their expected profit with a low enough margin of error? Because that would be valuable info, and is something many others would like to know as well. Consensus estimates are not to be relied on, as an average of guesses is still a guess.

          There are so many factors at play that it isn't possible to infer if this raid has any effect on their bottom line.
      • How much does Microsoft make in all of China?

        Currently about $700 million USD or 1.5% of global sales.

        Today Gates openly concedes that tolerating piracy turned out to be Microsoft's best long-term strategy. That's why Windows is used on an estimated 90% of China's 120 million PCs. "It's easier for our software to compete with Linux when there's piracy than when there's not," Gates says. "Are you kidding? You can get the real thing, and you get the same price." Indeed, in China's back alleys, Linux often

    • Re: (Score:2, Informative)

      Yes. The vast majority of fledling Chinese businesses simply cannot afford the genuine artice, so pirated versions are the only option. Both Microsoft and the Chinese government are well aware of this. Microsoft tolerate it because they view it as a kind of loss leader. It's a bit like offering interest free credit on your new PC. Initially the corporation loses money, but in the long run the consumer pays more, and the corporation has a much larger market sown-up than it would have had if the consumers ha
      • by rtb61 (674572)
        The reality is still different, in the medium and long term, M$ will never be able to make any real money out of it's products in China, by far the majority simply will never be able to afford the products, and don't count products that are be sold in China and just re-exported to western countries, so it is all just about keeping Linux out permanently and not a 'loss leader' as will be in a permanent loss state, as soon as M$ stop, Linux takes over.

        What of course is odd is that a authoritarian anti-democ

        • by Yetihehe (971185)

          why the fawning adulation between authoritarian anti-democratic communist leaders and the board of M$ ?!?
          Because they just call themselves communist, but in reality they are oligarchy or totalitarian?
    • Actually, there's a difference between counterfeiting and piracy. Microsoft's efforts seem to be oriented towads stopping counterfeiting (where people buy what looks like legit software, and think it's legit), rather than piracy (where people intentionally crack software). The latter is virtually unstoppable, and they know that. But they CAN make it very difficult for counterfeiters to pass off their wares (no pun intended) as the real thing.
  • by fijal (877896)
    does $100 windows x 5k copies count?
    • by carou (88501)
      does $100 windows x 5k copies count?

      You're a factor of 1000 out.

      But, in principle, yes it's very likely they're calculating value based on the US purchase price of the official software (not including manufacturing costs, warehouse, distribution, retailer's cut etc.)
  • My God! (Score:1, Funny)

    by JamesRose (1062530)
    They must have copied that DVD of Vista like 3 times!
  • by tigeba (208671) on Wednesday July 25, 2007 @08:15AM (#19981775)
    There is always Linux Genuine Advantage [] to keep it safe from piracy.
  • by tigress (48157) <> on Wednesday July 25, 2007 @08:15AM (#19981785)
    I've always been amused by the figures that are put on software piracy.

    Unlike things like producing a line of denim clothing and putting the Levis brand on it, creating pirated software costs virtually nothing. It takes just as much effort to copy a DVD containing your latest vacation photos as copying a DVD containing a $10k software package.

    Just because they discovered a few thousand copies of expensive software doesn't mean that it either cost that much to produce, or has that much sale value (pirated software sells for far less). Neither does it mean that the loss in sales is nearly as much, as many of those who buy/download pirated software would never have bought the software in the first place.
    • by maroberts (15852)
      The reported financial values remind me of those $100million drug busts, when you find you can buy the same quantity for $100 from your local dealer....oops!
    • Neither does it mean that the loss in sales is nearly as much, as many of those who buy/download pirated software would never have bought the software in the first place.

      Then it is still a lost sale because the person obviously wanted the product but was too cheap or poor to buy it legally.

      One can argue that the overall value of lost sales is not correct as more than likely the figures used are based on U.S. dollars, but the fact that people do have these illegal copies does mean lost sales. Eithe

      • by Andy Dodd (701)
        "Either the person did want to use the product, in which case they should pay for it, or they didn't want to use it. You can't have it both ways."

        Not quite. Let's use Adobe Photoshop as an example
        They can:
        1) Want to use the product but not afford retail price.
        1a) They pirate it
        1b) They choose an alternative (Paint Shop Pro or GIMP) that isn't quite what they wanted but does an acceptable job and is cheaper ($100-150 and free, respectively).
        2) Want to use the product and can afford/justify its exorbitant
      • yes, they SHOULD pay for it, but given the choice of pay for it or don't use it, MOST would choose not to pay for it and do without.

        There are 3 kinds of people:
        1. those who want the software and will pay anyway
        2. those who want the software but only if they can get it free (/very cheap)
        3. those who don't want the software, free or not

        Now, if you have X many people who have the software and say 20% fall into the first category and 80% fall into the second category.

        Now, remove the software from the second category an

      • by kalirion (728907)
        Given my financial situation, I would not even think of buying a car for more than $20k. If I could press a button and have a $300k Ferrari magically appear in front of me, I'd do it. Does that mean a $300k loss for the manufacturer?
    • by nasor (690345) on Wednesday July 25, 2007 @08:59AM (#19982129)
      If the "value" of pirated software was anything like what the industry claimed, everyone with a CD burner would simply make a copy of AutoCAD (retails for around $17k) every month and retire early.
      • by cdrudge (68377)
        Which version of AutoCAD retails for $17k? AutoCAD 2008 appears to cost around $4000. There are other "editions" that cost more, but nothing in the $17k range.
      • I think you are wrong on two counts. One if everyone did it then everyone would have to find someone to buy it every month. Something is only worth as much as someone else is willing to pay for it. Two just because someone can do a thing doesn't mean he or she will. Just as some people feel that software piracy is not a crime some people feel that it is and will not do it just because it goes against their morals.
      • "Everything is worth what its purchaser will pay for it"

        Publilius Syrus ~100BC
    • by Kjella (173770)
      or has that much sale value (pirated software sells for far less).

      Pirated software (in particular CD-with-sharpie, not counterfeit that tries to fake the real thing) doesn't have much sales value because of competition. Let's take say the Adobe CS3 Master Collection, priced at 2500$. Let's say you're willing to pay 1000$ tops, so you're not buying it from Adobe. But if you buy a pirated copy for 1000$, you're a fool even though it's 1500$ off Adobe's value. Why? Because every pirate-wannabe with a little kn
  • by 140Mandak262Jamuna (970587) on Wednesday July 25, 2007 @08:18AM (#19981801) Journal
    The main reason is that once people use Windows, they get locked in. Incompatible file formats, refusal to interoperate with anything other than Windows. The only choice they have after that is to continue to pirate or pay an enormous switching cost to go to Linux or pay the tax and become even more locked into MSFT. Since piracy is so rampant in those parts of the world, they will switch to Linux last. Though China and India are poor and could ill afford to pay full price for Windows, and you would logically expect them to be switching to Linux first, they wont because it is so easy to pirate Windows. So MSFT will protest and go through all the motions of fighting piracy but in reality it knows it is the piracy of windows that is keeping Linux at bay.
    • Re: (Score:2, Insightful)

      by SerpentMage (13390)
      How about Windows is easier to use?

      Naaaa, couldn't be that!

      You can debate, argue, point all one wants. BUT the reality of the matter is that people seem to continue buying Windows, year after year. Some of that may be lock in, but I doubt 100% of that is lock in. Thus when everything is done and said, maybe there might be a few million people who actually prefer Windows...
      • Windows is not really easier to use. It is more familiar. Most workplaces make their users use windows due to corporate policy. Since they are already familiar with Windows and they want to exchange data between workplace and their home PC they buy Windows.

        If windows is easy to use, how do you explain that most people don't even use 10% of the capabilities of the machine? How many people have Media center pc with a DVD writer and go out and buy the DVD recorder from Circuit City because they could not fi

        • Windows is not really easier to use. It is more familiar.

          I thought easier to use and familiarity go hand and hand?

          How many people have Media center pc with a DVD writer and go out and buy the DVD recorder from Circuit City because they could not figure out how to burn a DVD?

          Because Circuit City had a damn good sales staff! []

          I'm not sure what you mean by incompatibility; you may want to go in depth. You can mount NTFS in Linux, lots of hardware works for Windows, I'm not sure where the incompatibility ex

          • Re: (Score:2, Insightful)

            by KoldKompress (1034414)
            [Brings out the old trusty 'Car' Metaphor]

            Imagine you have a car with terrible steering. It always veers to the right, and has terrible understeer.

            Now you get a brand new car, and it doesn't veer to the right. And it turns perfectly, without understeer or oversteer.
            You'd still have to get used to not having to correct the understeer.

            Just because you're familiar with it, doesn't mean the car with the understeer is the easiest to use.

            • by HungWeiLo (250320)
              The decision making becomes a little different when your annual income is $X and the brand new car cost $X (and the understeering car can be bought from a street vendor at the train station for $X/1000)
          • by _Sprocket_ (42527)

            I thought easier to use and familiarity go hand and hand?

            You've touched on a really good point. A lot of the "Linux is so hard to use" discussion I see simply boils down to people unfamiliar with Linux. They're Windows power users who are put off by a system that doesn't behave as they would expect it to (that is - like Windows) and who forget Windows' own warts.

            I used to be in the Windows power user camp. Linux appealed to me and I dove in head first. Now I'm so far out of practice with Windows that Linux is a snap and Windows is a PITA to deal with (much t

            • Having and still using three systems; OSX, Linux, and Windows I think Linux on the desktop is not going anywhere. Yes you can mod me down as flamebait, but I have waited for the longest time to get a usable Linux on the desktop. Linux for programming is fantastic. It does things how I expect it to be.

              Though Linux on the desktop for "easy" jobs like mail its ok as well. But here are the issues I just keep running into.

              1) Media is choppy. I keep having problems where I can't listen to multiple streams at once
              • by _Sprocket_ (42527)

                1) Media is choppy. I keep having problems where I can't listen to multiple streams at once. Let's say I am watching a DVD, put it on pause and then want to listen to a podcast. I get audio device errors galore.

                I agree on this. Now days, it's an iffy thing. Some of my systems behave flawlessly. Some systems are quirky. Some just don't play nice with multiple streams at all. And that all depends on the application, of course. I wish it was all smooth - it is on Windows. However, I also note that things have improved a lot over the years (albeit slower than one would like). Most of the time I don't run in to this particular annoyance.

                2) If I compile something heavy duty and then want to watch a DVD, no can do, even though I multi-core CPU. Windows? No problem I regularly run big simulations on one CPU, while watching a DVD at the same time.

                I get some mixed results on this as well. Depends on how much effort I p

              • 3) Get me a decent word processor, and spreadsheet. NO Open Office is not it. AbiWord is actually pretty good for basic tasks, but fails for anything beyond that.

                CrossOver Office works pretty well for me for Word and Excel. They're not perfect--I see the occasional weird little glitch, but they work well enough for my purposes.

                What I need and don't have with a Linux desktop is Photoshop. I try the Gimp every now and then but it just doesn't work for me (poor LAB and CYMK support are the big ones).

            • It's in the 2.6 kernel.

              The Gentoo builds were flagging the module as experimental until 2.6 came along.
    • by afidel (530433)
      The problem with Windows isn't file formats, that's generally the easy part of migrations. The problem is user training, proprietary addons to Office, custom programs (less of a problem with modern tools) and the capital costs of most alternatives. As far as Windows interoperating with other system, I have never had a problem linking a Windows system to any other computer system. I have integrated Windows into Sun NIS+ domains, hooked up Windows boxes to mainframes and mini's, mounted exported NFS mounts fr
    • by hackstraw (262471)
      The main reason is that once people use Windows, they get locked in. Incompatible file formats, refusal to interoperate with anything other than Windows.

      That statement is so wrong. AFAIK, NIS doesn't work on Windows. Without Cygwin, and even with it, most of the Linux software does not work in Windows. OS X apps don't work on Windows.

      What locks people in is that for most people Windows simply is "good enough". Just like for most people crappy cars (like the one I drive) -- because its good enough. McDo
    • The main reason is that once people use Windows, they get locked in.

      Once anything gets to be the local standard, people will get locked in. To do business with your neihgbour, you have to have same standards. If everybody else on your business area uses some format, you have to be compatible with them to keep your business alive. If Red Flag Linux(?) would get to be the standard, you wouldn't see that many windows stores around. In earlier days when there was Word Perfect and MS word compiting on wordproses
  • $500 million / 290000 ~= $1700!
    I wonder what software (besides 47000 disks of Windows Vista) they were making.
  • Microsoft needs to protect their investment having their territory muscled in on. It demands a proper response. Bill needs to go to Beijing jack a car and get to work. First he will need to find a way into the party on the big boat and hook up with the Hot Babe and take her to the club...
  • by Anonymous Coward on Wednesday July 25, 2007 @08:28AM (#19981857)

    And this has been a major factor in Windows beating Linux in China
    That plus the fact that "rinux" just sound silly.
  • How did they count the $500m - I bet it was by adding up the retail value of all the software. Probably worth much less than a million at the prices these guys sell at.
    • by 1u3hr (530656)
      How did they count the $500m - I bet it was by adding up the retail value of all the software. Probably worth much less than a million at the prices these guys sell at.

      TFA said 290,000 CDs. These normally retail for about US$0.50 in China, up to US$3 or $4 sometimes in Hong Kong. So "street value" between $150,000-$800,000 max. Street value is how drug busts are valued, why not software? For the same reason, of course: they choose the larger number to make it sound more dramatic. And Slashdot goes along

  • Arr! (Score:3, Funny)

    by Kirth (183) on Wednesday July 25, 2007 @08:57AM (#19982103) Homepage
    The title is of course misleading, because it concerns counterfeiting and not software piracy:

    Software Piracy ('soft-"wer 'pI-r&-sE): Robbery of software on the high seas; the taking of software from others on the open sea by open violence; without lawful authority, and with intent to steal.
  • Vista sales (Score:2, Funny)

    by superphreak (785821)
    So that's why Vista sales are down...

    What? You don't think so? Aw, c'mon...
  • Question for a lawyer: Does Microsoft's deliberate allowance of piracy create a case [] of estoppel []?

    Since Microsoft allows piracy, can the company lose its copyright?

    Microsoft definitely encourages piracy, in my opinion. For years, local computer stores carried to office suite alternatives: Legal Microsoft Office, and pirated Microsoft Office for $50. Word Perfect and Lotus could not compete.

    I'm not sure what local computer stores are doing now.
  • So they count "lost revenue"?
    I have lost revenue because people aren't buying my software.
    I want to sell it for 100 billion but since people aren't buying it must be pirates. Do I get a newspaper story for "losing" that much?

    P.S. If anyone has 10E11 then Email me to get the address of my site.
    P.P.S. Did you know that the interjection, I get to use that word!!, "arr" was actually started from some actor in the '60s (19 that is)?
    Or at lesast I heard that.
  • by russ1337 (938915) on Wednesday July 25, 2007 @10:04AM (#19982789)
    What I found interesting was this tid-bit:

    Mundie also began talks with Chinese security officials to convince them that Microsoft's software was not a secret tool of the U.S. government. As a result, in 2003 the company offered China and 59 other countries the right to look at the fundamental source code for its Windows operating system and to substitute certain portions with their own software - something Microsoft had never allowed in the past.
    That sounds like they let the Chinese Government take out the bit that does the spying for Microsoft and lets the Chinese insert the bit so it spy's for them.... Thus confirming the Chinese suspicions that it was a tool that could be used by the US Government (albeit with the use of a 'security letter ' or under general access they may have for foreign intelligence).

    *puts tinfoil hat back on*
    • Sounds like it's time for module-based surveilance tools. Good thing it'll be secret, or I'd bever be able to choose between Communist Home Professional or Fascist Ultimate.
  • Who's $500 million is it? It could either be $500 million in pirate revenue at pirate street prices or it could be the imagined value to the IP owner and it makes a big difference when you try to figure out how many copies of the items were seized.
  • How to stop piracy (Score:3, Interesting)

    by WindBourne (631190) on Wednesday July 25, 2007 @10:30AM (#19983045) Journal
    China has 2 reason why piracy is rampant. The first is that generations have been raised that all this property belongs to the state, and if the state does not claim it, then to the people. IOW, they have a different view about property rights that they are now being asked to change.
    The bigger issue is that the chinese gov. has tied their money to America's. In effect, they have made imports to America dirt cheap, but exports to China very expensive. This is designed to kill America.What GWB should be doing rather than trying to pushing more laws, is pushing for china to allow the money to float freely. Right now, if they money was untied, the price of our goods to china would drop to somewhere between 1/2 to 1/5 of the current amount. IOW, a chinese person would see our goods cost 1/2 to 1/5 of what they are currently being charged.
  • Statements like that always bother me. They use simple math, something like "if 1,000,000 copies were sold, worth $100 each if bought legitimately, then that's $100 million dollars in lost revenue!" No it's not. The real question is how many would have bought it at all if they had to pay the full price? With China's average incomes, I imagine this would have been a tiny fraction. So it's really 30% (or whatever percent would have actually bought it) of that $100 million.
  • MS BS (Score:2, Insightful)

    by groovebot (999254)
    Microsoft estimates that the software piracy of an international counterfeiting syndicate, over the past six years, cost the company at least $2 billion in lost software revenue.

    That's bullshit. The Chinese are pirating software because they can't afford the real thing. If they weren't pirating Windows, they simply wouldn't have it. Therefore, Microsoft has lost no money to software piracy, because there was never potential for them to get any. However, if Microsoft started selling legit copies of Windows

    • However, if Microsoft started selling legit copies of Windows in China for very cheap (I'm talking as cheap as the counterfeits), they'd probably start making more money on the Chinese market.

      This is very complicated issue. If I'd fly to China and bought hundred copies of legimate copies of Vista for very cheap, why couldn't I use them in western countries. After all, MS sold them and licensed them, so those must be legal.

      As for being able to sell as cheap as for counterfeits, legimite copies would need to
  • I visited Shen Zhen China (just inland from Hong Kong) about 2 months ago and while I was there Spiderman 3 came out 3 days earlier in China then in the US. On Wednesday there time which is +16 from Los Angeles.

    So I went to see it opening night. Ticket prices were about $10.40 each 80 RMB. Per Ticket, a very high price in China considering most people in that neighborhood only made 1000 RMB or less even.

    As I left the theater, there was a street vendor there holding out a very professional looking DVD packag
  • I know I'm probably going to get flamed from hell and back, but I just have to ask this question:

    Can they really report monetary loss if someone using the pirated version of would never have purchased it in the first place?

    I'm not condoning illegal activity, but under the following circumstances, can monetary loss still be claimed if someone downloads (for example) Microsoft Office 2000, but:

    1) doesn't incur any direct charges to Microsoft (ie cd media, bandwidth, etc)
    2) would never have purchased the soft
    • Of course they can't. Just like Microsoft can't pay public officials to get people fired, can't operate above the law and ignore court orders to split their company into pieces or to compensate for their monopolistic practices etc.

      It's called corruption.
  • Did anyone consider that $500M in software in China is actually worth $5M or less, since it's being sold on black market dollar-a-piece anyway ? Same applies to "lost revenue". Reminds me of RIAA tactics of estimating "losses".
  • With the cut in piracy, surely we'll soon be seeing the benefits of lower-priced software! After all, one of the reasons for software prices being high is piracy, isn't it?
  • As has been pointed out several times, we already know MS likes the rampant piracy over there. It gives them a foothold.

    This is just like Blizzard banning a few hundred 'token' gold farmers, so they can claim they're doing SOMETHING.

Simplicity does not precede complexity, but follows it.