Quotes of the Day

On Oct. 29th, police in Bavaria arrested a British man who had fallen asleep in his car at a service station near Aschaffenburg. Officers found Peter Murray-Cowan, 39, dozing at the wheel of an Audi so stuffed with boxes of what appeared to be Microsoft Office 97 Professional software that the car was barely drivable. Sensing counterfeit, police took both driver and 4,000 copies of one of the world's most popular business programs — worth $2 million on the retail market, according to Microsoft — into custody. Murray-Cowan, a British businessman and would-be politician who ran for local office in Suffolk in 1999, was already wanted there for jumping bail on 12 charges of infringing the trademark on Microsoft Windows. Police are weighing fresh charges in Germany against a request for extradition to the U.K. (though Murray-Cowan has not been convicted of anything).

In an unrelated case, Italy's financial police, the Guardia di Finanza, announced last week it had conducted synchronized raids across nine Italian provinces, closing down an Internet piracy ring with an estimated turnover of over $60 million a year in CDs, DVDs, pornography and high-priced software titles. Investigators say it was one of the largest-ever software piracy busts in Europe. In one instance, police had to trick the pirate before he could delete any data from his hard disk. Police said they dumped pails of water under the door to flood his home. As the suspect ran out to see what was happening, they ran in.

Three European countries, 12 suspects nabbed in two busts and tens of millions of dollars in pirated software — just another couple of weeks in the fight against the counterfeiters, who appear to be headed for another banner year, cutting into legitimate sales by billions of dollars. In 2001, worldwide losses from software piracy were estimated at $10.9 billion, with 25% of that coming from Europe. Eastern Europe is particularly notorious: an estimated 67% of all software installed there is illegitimate. But even with its traditionally strong intellectual property laws, Western Europe is having trouble coping with software crime.

The busted Italian ring "is known to have links to organized networks in other countries," according to the Business Software Alliance (BSA), an umbrella group of companies which worked with police on the operation, known as smart. The BSA says it is also cooperating with authorities in the U.K., Netherlands, Germany and Spain on similar large-scale piracy rings.

Among the loot seized in operation smart: video games and videocassettes (everything from film classics to the latest Robert De Niro flicks); counterfeit industrial cad/cam software that normally retails for $5,000 to $20,000 per title; more than 400,000 MP3 music files (recordable CDs and burned DVDs containing 80 music albums each); counterfeit smart cards to access pay satellite TV; and pornography — some of it produced by the ring, some pirated — that included pictures of children engaging in sexual acts with adults.

The Italian ring, allegedly led by a man police will identify only as a phone company employee nicknamed Robhy, was selling $60 million-worth of this stuff each year over the Internet using three Italian websites. (Visitors to those sites now see a Guardia di Finanza logo and a message saying they have been shut down.) Software attracts a wide variety of pirates, from international gangs of criminals to local thieves and enterpreneurs. "There are all kinds of people involved," says the leader of the smart raid, Commandant Mario Piccinni, who heads a specialist corps of Milan's Guardia di Finanza. "There are professionals, a baker, a factory worker and an unemployed person." All 11 suspects were charged and released. "The investigation is ongoing," says Piccinni. "It serves our purposes that these people are being released."

It's not hard to see what attracts criminals to the software racket. A drug dealer pays about $47,000 for a kilo of cocaine, and can sell it on the street for about $94,000, a 100% profit. But for the same outlay of $47,000 — and a lot less risk — an enterprising crook can buy 1,500 pirated copies of Office 2000 Professional and resell them for a profit of 900%.

The rise of cybercrime has prompted police organizations across Europe to set up new high-tech crime divisions. The Hague-based force that coordinates police investigations into organized crime, Europol, is setting up a new center to track criminals over the Internet. The U.K. has its own high-tech crime unit, as do Italy, Spain and Sweden.

Police units, however, are only as effective as a country's laws. Italy's are stiff: up to four years in prison and a $15,000 fine for anyone caught selling, distributing, producing and importing illegal copyright-protected goods, plus a second system of even heftier fines. This year, Italian police have arrested 1,329 people for music-copyright violation alone, says Luca Vespignani, a music anti-piracy official who works for the International Federation of the Phonographic Industry.

But all too often, software providers say, pirates get off too easily. In March of 1998, Danish police conducted a raid against a piracy ring which had produced 125,000 cd-roms containing counterfeited software with a retail value of $237 million. Yet the pirates got off with suspended sentences and small fines. "They were back in business within a few months," says Beth Scott, vice president of BSA's European branch .

The bsa and other industry groups are calling on governments to institute tougher and consistent sanctions. To that end, the BSA eagerly anticipates the expected release, by year's end, of a counterfeiting and piracy directive that would harmonize civil enforcement procedures across Europe. The European Commission has recognized this need for years, but jurisdiction issues have stalled the directive, says Francisco Mingorance, director of European public policy for the BSA.

As always, there are principled opponents of such sweeping laws. Martin Keegan, deputy director of the U.K.-based Digital Rights Campaign, argues that laws aimed at hard-core criminals can end up hurting people making copies for their own use, and impinge on privacy.

Software providers argue that without stiff penalties, software piracy is bound to get worse. "It's great that governments and law enforcement are starting to crack down but we still have a long way to go," says a senior Microsoft anti-piracy attorney. "Hard-core criminals will not be deterred as long as the profits are high and the risks are low."

Piracy charges don't seem to have deterred Murray-Cowan. As long as laws in the E.U. differ and trafficking in software is seen as a great business venture, new high-tech crime units are likely to remain busy.

• JENNIFER L. SCHENKER
• Police are cracking down, but software pirates still come at a flood