Global Piracy Rampant - But You Can Fight Back

By Peter Piazza
NewsFactor Business Report
May 7, 2008 7:26AM

According to a report from the U.S. government, the global state of piracy is dismal, with 46 countries on "watch lists" for their weak protections of intellectual property rights. One company, Arxan, is fighting software piracy with the use of Guards, small modules of object code inserted into programs that block tampering attempts.

Piracy is running rampant, according to a report from the U.S. government. Not the kind of pirates with eye patches and parrots on their shoulders, but rather the kind that downloads content illegally from the Internet, counterfeits products, and generally hijacks the profits of pharmaceuticals, electronics, software, and other goods. China and Russia were singled out in particular for their weak protections of intellectual property rights (IPR).

The report, known as Special 301, is conducted annually by the Office of the United States Trade Representative (USTR) to examine the global state of IPR in accordance with the Special 301 provisions of the Trade Act of 1974. This year, the USTR designated 46 countries in one of three "watch list" categories. China and Russia -- which were both given kudos for improved measures against pirates and counterfeiters -- made their way to the top of the list, followed by other trading partners, including Argentina, Israel, Pakistan and Thailand.

On the Lists

Belize and Lithuania both were removed from the Watch List thanks to "heightened engagement" with the United States. Other countries, including Egypt, Lebanon and Turkey, made their way off the dreaded Priority Watch List and on to the less serious Watch List, thanks to improvements made on IPR. (Spain and Greece are new Watch List members as well.) The USTR wields power against friend and foe; even Canada is on the Watch List, cited in part for its "weak border measures [that] continue to be a serious concern for IP owners."

The International Intellectual Property Alliance (IIPA), which represents a group of seven trade associations concerned with copyright, hailed the report (it had requested that Canada be put on the Watch List) and issued a matrix of estimated trade losses due to copyright piracy. It estimated that China's piracy cost businesses nearly $2.5 billion since 2006, with the Russian Federation trailing slightly at close to $2 billion.

Fighting Back Against Piracy

Michael Dager has firsthand knowledge of the trouble that piracy can bring to software vendors. Years ago, he was CEO of a software company that was victimized. "We sold about $900,000 worth of software to a large company in Asia," he told us. "A year later we were getting support calls from all over world from installations" that had never purchased the software and were using unauthorized copies. "They were using about $11 million worth of our software, so our little $45 million company lost $10 million in revenue."

Dager is now CEO of Arxan, which creates technological barriers against software pirates with the use of Guards, small modules of object code inserted into software programs that anticipate tampering and reverse-engineering attempts and block them by using what Dager calls a "moving maze architecture."

"Imagine you come into maze," Dager explained. "You can turn left or right, and then suddenly the maze changes. The labyrinth of Guards has been scrambled and shuffled in microseconds. That forces the hacker to leave the program and try to come back in through another exploitable gap. If he makes progress, he will again encounter the moving maze architecture."

Other Guards can capture information about the person trying to hack the code, Dager said. For example, an IP address and MAC address of the PC can be derived, zipped into a file, and then sent back to an organization for follow-up. If these Guards don't actually sink pirates, at least they'll harden software targets and make the pirates' job more difficult -- and possibly dangerous.