Letter to the USTR against fake data from BSA

I’ve found this in my mail archives, but decided to publish it for its relation to an article which I wrote a few days ago. The moral of this stories is that fake data must be traced down and fake data producers must be smoked from their holes.
Note that at this point I didn’t know my government, headed by the ex-king of Bulgaria, has actually agreed to pay not only the $ 13.6 (without 20 % VAT), but actually the total amount of money we paid secretly to Microsoft has been at this time $ 44 Million!!!

May 17, 2005

The Honorable Robert Portman
U.S. Trade Representative
Washington, D.C.
Via email: contactustr@ustr.eop.gov

LETTER IN DEFENCE OF THE BULGARIAN GOVERNMENT WITH RESPECT TO THE USTR SPECIAL 301 REPORT, PUBLISHED ON APRIL 29TH, 2005

Dear Ambassador Portman,

I am writing to you regarding your recently published Special 301 Report. It is based in part on the IIPA “2005 Special 301 report.” I refer to the discussion of Bulgaria on pages 69-85 in the IIPA report and your report discussing Bulgaria on page 37 of the Special 301 Report.

I write specifically to alert you to the false information, coming from sources like IIPA, BSA and other such sources, on which you had based your conclusions, which, as a consequence, are also erroneous. Specifically, you conclude that the Bulgarian government “has not taken effective steps to stop the increase in piracy and counterfeiting activity.” Yet, this accusation is based on wrong data, and therefore incorrect. Please allow me to provide information in defense of my government’s efforts in the area of software “piracy” in the hope that you would either issue a correction or, at least, make policy decisions based on full and fair information..

Following are certain mistakes, errors and misleading data in the IIPA report with regard to so-called “software piracy.”

As you will note in remark 2 on page 70 of the IIPA report, the organization claims that “the “global” figures did not include certain computer applications, such as operating systems…” However, if you take a look at the same data, provided by the BSA, in the reports from 1994 until 2002 (note, that BSA changed its “methodology” at this point), you will notice that on the contrary ­ their reports were based precisely on operating systems and business software, such as MS Office. This becomes clear upon review of the following facts:

Bulgaria was taken off of the USTR Special 301 Watch List in 1999, after a massive buy-out of software from the Bulgarian government. The fact that this data is accurate is further proven by the fact that the Microsoft distributor in Bulgaria at this time, Act Soft, had publicly declared their sales, as follows:

Year – Sales

1998 – $ 1.8 M
1999 – $ 16.6 M
2000 – $ 3.7 M
2001 – $ 4.7 M1

In 1999 the Bulgarian government had licensed all the computers it used in the state administration. This is quite clear on page 10 of the Global BSA Report 1994-2002. We must note the difference in the numbers, quoted by BSA in this report, though. According to Microsoft distributor, Act Soft, they have sold software of $ 16.6 M, which should be reflected in the decrease in the amount lost due to “piracy;” yet BSA reports a decrease of only $ 6.5 M for 1999.

In 2000 the government bought an additional 10,000 copies of Windows 2000 and Office 2000.

From 1999 until today every public bid, made by the government for computer equipment has been accompanied with the requirement that all computers that it purchases must have installed the OEM version of MS Windows (and often MS Office).

Another very large transaction was made by the Bulgarian government in 2002 as it rented 30,000 copies of MS Windows XP and MS Office XP for $ 13.6 Million (or $ 455 per copy).

In 2003 the Bulgarian Ministry of Education and Science, signed an agreement with Microsoft to rent 35,000 copies of MS Windows and MS Office at the price of $ 13.60 per copy).

None of these numbers are reflected in the BSA and the IIPA reports for 2002, 2003 or 2004. As you may see from the table, published on page 2 in the IIPA report, the decrease in business software for 2002 is only $ 2.1 M. That is simply not possible, as demonstrated by the data above.2

With respect to end-users, according to official government information (quoting the Minister of State Administration), the number of Internet users and computer users in Bulgaria has not increased dramatically in the year 2003. Yet, both BSA and IIPA report a change from $ 6.2 M to $ 16 M.

In addition, a number of Bulgarian companies that assemble computers in the country and sell them accordingly have done so with pre-installed Linux and Open Office. In a public bid, organized by the Ministry of Transport and Communications and the United Nations Development Program (UNDP) in order to create tele-centers, the Bulgarian company Lirex offered the combination of Linux and Star Office for as low as $ 25 per computer. Thus, it is impossible for the piracy-related losses to have been as high as the figures sited by BSA and IIPA. The number of end-users had not changed dramatically, as last data from the National Statistics shows Bulgaria is steadily on last place in Europe for using computers.

Further, on page 71, the IIPA report states that “only 40% of the 3,000 ­ 4,000 cafes are licensed” and “criminal syndicates appear to be in control of a number of Internet cafes where either pirated or unlicensed entertainment software is being used.” There is no source for this “data,” and it should not be accepted by the USTR for a number of reasons:
There is no requirement for “licenses of the Internet cafes.” Under the current Bulgarian legislation, Internet access is free of any licenses, or even registration. In fact, one might note that other U.S. Government policy, such as the Department of State Human Rights reports, would frown upon such legislation as potentially restricting freedom of speech.
The number “3,000 ­ 4,000” is not accurate. The report, itself, acknowledges a 30% uncertainty, which is remarkable for a report used as the basis of placing Bulgaria on the Special 301 list.
There is no proof whatsoever in the IIPA report that the Internet cafes are controlled by “criminal syndicates.”

On page 73, the IIPA report states that “All the CD production facilities in Bulgaria have the capability to produce high quality (silver disc) CD-ROMs loaded either with compilations of pirate copies of business software applications and entertainment software…” While this may be true, the report does not say that these factories actually produce such CD-ROMs. There is no evidence that such CD-ROMs are actually produced in Bulgaria.

On pages 78 and following, BSA attempts to make the case that there is great deal of software “piracy” in Bulgaria, which BSA blames on lack of punishment by the Prosecution Office and the Courts. Perhaps a better explanation to the lack of sentenced “criminals” is the fact that the software piracy actually occurs at much lower numbers than those quoted by the BSA and the IIPA, and relied upon by the USTR for the Special 301 Report. For example, page 78 states, “The business software industry’s enforcement activities have been focused on… end-user piracy.” While cases of end-user piracy may exist, that usually is the focus of the copyright holders, not of the law-enforcement agencies, which deal with larger distributor, companies and criminals. Using the Ministry of Interior Special Forces to combat end-user piracy would appear to be a measure far beyond normal scope.

Moreover, in a number of laws, as it is pointed also on page 78, esp. the Tax Procedure Code, the tax authorities are now entitled to review the software licenses of any company they investigate. What BSA has “forgotten” to mention is that the tax authorities have the right to also review the “reasons for obtaining the software,” which is a clear argument for increased corruption among the tax administration. For example, reasoning why one company has obtained Windows XP rather than the cheaper version of the OS, such as Windows 98, is a very good opportunity for corruption.

What BSA also neglects to mention is a 2002 change in the Copyright Law, which had been accepted by the Parliament without discussion “because Microsoft and the Council of Ministers have agreed on the text of the change” (quote from session of the Parliamentary Committee on Culture, while reviewing the draft of the law3). This demonstrates that Microsoft and potentially other U.S. companies have a significant influence on Bulgaria’s law making, and therefore Bulgarian law makers are not likely to make decisions that protect piracy interests.

Based on the above information, the following conclusions should be drawn:
The rate of software “piracy” in Bulgaria is lower than the data provided by the BSA and the IIPA, and used in the preparation of the USTR Special 301 report.
The private organizations like BSA, BIMP, and others quoted in the relevant IIPA and BSA reports have an interest in having Bulgaria included in the Special 301 report. We hear that they are getting support from their related organizations to fight with so-called piracy, and if Bulgaria is in the Report, they are getting more funding. If Bulgaria is not, then there’s less funding.
The Bulgarian government and the Bulgarian Parliament should not be blamed for not accepting relevant laws or enforcement of the existing laws. As pointed above, the Copyright Law includes provisions drafted by Microsoft together with the Bulgarian Council of Ministers.
I hope that this letter will bring to your attention the fact that the USTR may have based its conclusions by misleading reports of private interests groups. Bulgaria should not be on the USTR Special 301 report, and again, I hope that you would consider amending that decision, or at the very least, basing policy decisions on the full set of facts presented to you.

Should you have more questions, I will be happy to respond. You can find me at veni@veni.com, or at my office phones.

Sincerely,

Veni Markovski
President and Chairman of the Board
Internet Society ­ Bulgaria
office: +359-2-401-8009

CC:
H.E. Nina Chilova,
Minister of Culture and Tourism,
N.Chilova@mct.government.bg, G.Damyanov@culture.government.bg

H.E. Elena Poptodorova
Ambassador of the Republic of Bulgaria to the USA
“Elena Poptodorova”

H.E. James Pardew
Ambassador of the USA to Republic of Bulgaria
irc@usembassy.bg

_______
1- source: IDG Computerworld Bulgaria Annual Report

2 We must note that the agreement between the Bulgarian government and Microsoft has been largely criticized in the Bulgarian and international media (for example at the International Herald Tribune and the New York Times). It is also important to note that the computers, for which this software was rented, have already had legal software, obtained in 1999 and in 2000 by the Bulgarian government, and every new computer bought by the government would come also with pre-installed operating system and office software.

3 The author of this letter was present during the discussion, and there is a stenographer report of the session.