Digital Piracy, Intellectual Property Rights, and their Implications for Businesses

The Problem of Digital Piracy

In recent years, the corporate world has been wary of theft of intellectual property and digital piracy that is impacting their bottom lines and eroding their profits.

To understand, how digital piracy impacts businesses, consider the case of Microsoft that comes out with a new version of its proprietary operating system or its bestselling Office suite of products. Now, if this software are pirated and sold in the black market, Microsoft loses money because those who are using the pirated software do not pay any money to the company. In this way, businesses like Microsoft stand to lose large amounts of money that otherwise would have flowed into their coffers.

Indeed, the problem of digital piracy is so rampant across the world and in Asia in particular that it has been estimated that nearly 30-40 percent of all software is pirated. This indicates the magnitude of the problem for corporates that are now teaming up with industry bodies and partnering with governmental agencies to combat piracy.

Further, in countries like China, more than half of all music, videos, computer games, and software is pirated which means that businesses like Microsoft that rely on revenues from sales of its software lose heavily because of digital piracy.

The Problem of Theft of Intellectual Property

The second problem that is related to the above is theft of intellectual property. Though this is not as blatant as digital piracy that is carried out by shady pirates operating outside the realm of formal economies, the theft of intellectual property represents an insidious form of sophisticated piracy. To consider how this works, Pharma majors like Pfizer, Merck, and Johnson and Johnson invest humungous amounts of money on research and development of new drugs. However, many countries do not have adequate controls on copycat products of these drugs, which lead to outright theft of intellectual property as imitators produce their versions of these drugs leading to loss of revenues for these Pharma Majors. Of course, this situation is slightly different in countries like India where the government itself encourages process patents instead of product patents which means that competitors can make the same product that their rivals launched with a different process and therefore, no company has exclusive monopoly over the products themselves. This is an entirely different topic and it would suffice to state here that this article is discussing the theft of intellectual property that happens outside the reach of the law and not cases like India and other developing countries that have an official policy governing intellectual property.

Some Recent Steps taken by Multinationals

Therefore, what should western multinationals do when they are confronted with digital piracy and theft of intellectual property? For starters, many multinationals are lobbying with emerging market or developing country governments to tighten the loopholes in the laws and more importantly, to strengthen the existing law enforcement mechanisms so that their intellectual knowledge and intellectual property is protected.

Further, many multinationals are resorting to ingenious and sophisticated methods of protecting their intellectual capital wherein they encode the software to make it impossible to copy and pirate. They also ensure that their drugs are covered under strict Processual patents, which means that it becomes difficult for competitors to make the same drug in a different process because of these safeguards. Apart from this, many multinationals have sued developing country companies and won lawsuits against them in the international bodies as well as in the US courts, which they hope would act as a deterrent to those who indulge in such behavior. Though these are some steps and measures that are still in their infancy, the multinationals hope that they would represent a move in the direction of enforceability of intellectual property and protection of their intellectual knowledge and intellectual capital.


❮   Previous  Article Next  Article   ❯


Authorship/Referencing - About the Author(s)

MSG team comprises experienced faculty and professionals who develop the content for the portal. We collectively refer to our team as - “MSG Experts”. To Know more, click on About Us. The use of this material is free for learning and education purpose. Please reference authorship of content used, including link(s) to ManagementStudyGuide.com and the content page url.