Computer Crime Problems Research Center

Roman Gorbenko

Computer piracy in Ukraine has become “cultured”

The phenomenon of a computer piracy in Ukraine has passed to the next phase. The new industry of swindlers is like western one after model but is still heavier on scales.

The world rings with the fame of Ukraine as a country, which has the highest level of the computer piracy. The very popular magazine “Wired” even sent a journalist there and then thousands of its readers from all over the world saw the following lines:

“Welcome to Ukraine where the computer piracy became an element of national pride… my walk begins at the market “Petrovka” stretched under the open sky of northern Kiev… trays are sparkling with CD, CD-ROM, DVD and video cassettes at the price from 40 cents up to $3 each … a disk of the group “Metallica” draws my attention, it contains 9 albums, 123 music compositions in the “heavy metal” style due to the MP3 format. It costs 3 US dollars. In America only the deductions to musicians, a publisher and sound recording company would make up $27… When I noticed a Microsoft Office XP copy just being $2.20 (while in the USA such a software costs $580), I asked: “Where it was made?” and the seller overflowed with the feeling of patriotism answered: “Here, in Kiev”.

However leading manufacturers of software knew about the computer piracy in Ukraine without any publications, it was sufficient for them only to look at the results of their sales in Ukraine: approximately one sold licensed copy per thirty piracy ones – such was an unfavorable result. Various advertising actions, price reduction and emergency of the Ukrainian original versions have not changed the situation. For this reason Microsoft and some other software producers decided to attack computer pirates in all directions at once.

The first stage is political. US government has undertaken to assert the rights of its large taxables such as Microsoft, Adobe, Corel and so on. On December 21, 2001 it threatened to introduce the forbidden customs for raw materials (textiles, metal rolling) exported form Ukraine to the USA. As the export of these raw materials had made rather significant part of the country budget, the president of Ukraine, People’s Deputies and the government urgently started taking drastic measures on fighting against piracy.

So, among others, the decree of president L.Kuchma from January 30, 2002 “About urgent measures on strengthening the protection of intellectual property rights during manufacture, export, import and distribution of disks for laser reading systems” was accepted. Another important document accepted by the Parliament was the Law” About features of state regulation of the managing subject activity dealing with manufacture, export, import of disks for laser reading systems”. The general meaning of these statutory acts was reduced to that the state departments (Ministry of Internal Affairs, Inland Revenue, Customs and Ukraine Security Services) were ordered to make active the fight against pirates.

The so-called antipiracy campaign began. First of all five enterprises, which were engaged in manufacturing laser disks1, have been stopped. Besides the commercial enterprise offices were fully inspected and many criminal cases on using the unlicensed software were brought to an action. A typical example is the criminal case against Kiev TD Roda which computers were equipped with the piracy copies of OS Windows.

It were Ukraine computer clubs and Internet cafes of all kinds which caught to the full the meaning of the words said by Ostap Bender*: “it is better to be run by a horse than by a campaign”. It is clear that this business does not yield superprofits, basically all the earned money were spent on constantly modifying technical equipment and other kinds of activity. As a result there was not enough money to purchase the licensed programs. So when the Board of Fighting against Economic Crimes officials and corresponding experts came to check, they found out that almost all used software ranged from Windows to computer games were the piracy copies. Then the computer hardware was confiscated, premises were sealed up and the long months of trials were followed.

Below we are siting a fragment from the Pan-Ukrainian Association of Computer Clubs address, which shows the state of computer clubs in Ukraine.

“In the situation when law enforcement bodies are constantly intensifying their activity on checking computer clubs by withdrawing computer hardware almost every day, the impossibility of purchasing software results in closing computer clubs. The similar situation happened with the software of an educational, cognitive and entertaining character. When it was principally impossible to execute the law requirements, a paradoxical situation occurred. All this results in ceasing the development of the business on providing computer services to the population. Clubs, which are being closed, will be not able to legalize software any more and meet copyrights. The situation around computer clubs causes expenses to the state business and copyright owners and it is unprofitable to all. How can this vicious circle be broken? Let us not overlook that every day hundred thousand people, who cannot still procure computers and obtain an own access to the Internet, use services of the computer clubs the number of which makes more than 2 thousand in all Ukraine. Everywhere such a situation could be found when people went to the computer club and instead of playing/printing a report/checking their e-mail they came across the closed door with a sheet of paper informing that the premises were sealed up. If the popularity of such establishments in Ukraine is taken into account we can imagine the quantity of people who were very dissatisfied with such politics.

Microsoft company itself understood that the situation would go to impasse: Internet clubs and cafes would not be able to find money in haste to buy licensed software versions. It would be impossible to close all the clubs. For this reason as we had informed recently, Microsoft authorities ventured to make a very unusual decision.

In general it was that from April 8 till August 31, 2002 the company committed itself not to take (and really it did not) any legal measures relative to the computer clubs and Internet cafes, which use unlicensed Microsoft software. This stretch of time allowed changing over the box and OEM software versions, which are less unhealthy for the budget of such establishments.

Expansion of sales
Such multi-stage actions taken by the state and business should give the proper results. When at Kiev press conference the Microsoft representatives noted that the software sales in Ukraine had been increased by 327% in comparison with the last year results, nobody was surprised. It should be mentioned as well that the sales of OS Windows 2000 and Windows XP had been extended by 605%.

Alexey Badaev, the head of Moscow Microsoft representative office department of developing company business in CIS-countries, did not make secret of that such figures had been obtained by launching the antipiracy campaign as well.

On the whole by the bulk of the Microsoft software sales Ukraine takes today the second place among CIS countries preceded only by Russia.

Microsoft statistics prove that the situation has greatly changed for the better. It only remains to clear up whether it was corporate market or home PC one where such alterations has occurred.

In this case we had to study the situation directly at the markets of two largest cities in Ukraine – Kiev and Kharkov. We found out that it was still easy to buy piratical disks. Meanwhile if earlier the piratical disks were decorated with colorful book-lets and even packed in boxes (it was obvious that those products were manufactured in bulk and at the factory), now they are replaced by the ordinary CD-ROMs which have neither polygraphy, nor package but only a reverse side with an image made by the jet printers.

These changes are easy to explain. The industrial equipment for producing compact disks is very expensive and bulky. It requires specific factory supplies and maintenance, and consequently the law enforcement bodies can find the physical location of such a plant without any problems. But a handicraft “workshop” is much more difficult to detect.

Now the cheap equipment duplicates the disks. All the necessary hardware can be freely purchased almost at any computer dealer: CD-RW drives ($100), printers, which print on the compact disk surfaces ($100), clear CD-ROMs ($0.18 each). Then it remains only to rent an apartment, install there some computers, printers and a device that wraps the disks in polyethylene. Few persons will easily cope with the whole process of manufacture.

At a rate of 24x a usual “blank” can be recorded for 3-4 minutes and other production operations can also take three more minutes. Theoretically it turns out that 12 disks can be recorded and packed for an hour. If we multiply this figure by 3 (according to the number of RW-drives in a computer), it will make up 36 disks recorded by a computer for one hour. It means that only three computers can process about 250-300 disks during an eight-hour shift with breaks to be included. While producing disks for twenty-four hours a day during three shifts, a rather impressive figure can be obtained. Law enforcement bodies can hardly find such piratical workshops.

Cultured piracy
The situation developed today in Ukraine is much similar to the piracy industry expanded in Europe and America but differs in size. In fact a computer piracy also exists both in Europe and America, and some programs and music are distributed on CD-ROMs bypassing any licenses and author deductions. The way obtaining software and music recorded on such disks is the same to Europe, the USA and Ukraine as well – hacker ftp-archives. For a specific fee local pirates can get a login and password to the ftp-server where cracked versions of any possible programs, new music collections and the latest films as well are constantly displayed. All the information is downloaded, copied on CDs and delivered to the end users.

The investigation results show that the increase of a legal demand of the corporative market provides the Microsoft declared gain in sales. It is explained by that companies has started buying licensed copies despite of using an opportunity to purchase the piratical software. When piratical versions are detected a significant penalty will be inflicted on the spot or the legal actions will be taken against a director (according to the Ukraine Criminal Code the maximal term of imprisonment makes till two years in such a case).

Anyhow the antipiracy action results are obvious. The licensed software is widely used in the corporative computers and it has drawn Ukraine closer to other countries. In due course when well-being of the people is improved, the licensed software will appear in the home computers as well.

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