02 July 2007
BEIRUT: Computers loaded with advanced software programs are almost like survival kits to any company, irrespective of its size and manpower. Specialized software has made the business of banks, insurance firms, engineering establishments, newspapers and graphic designers much easier to conduct.
But installing and loading a software program such as Auto Cad (a program used by engineers and architects) or a spreadsheet does not come free of charge, especially for corporations.
Giant software companies like Microsoft, Oracle and Computer Associates, which operate in most countries of the world, came under some hard criticism in Europe and other countries for charging high fees for licensing, a service provided by the company after the purchase of the product or software.
Some companies were particularly irked by the decision of Microsoft to implement a new licensing strategy in May 2006. Under the new licensing agreements, Microsoft will encourage customers to enter "software assurance" contracts that will effectively commit them to buying operating system and application upgrades for an annual fee. Additionally, Microsoft will also lease software through annual subscription contracts, rather than selling software outright.
This effectively raised the average cost of licensing from 33 percent of of a given software's price to 107 percent, according to some critics in Europe and the United States.
In Lebanon, the public outcry over this move was somehow shy. Some small- and medium-sized firms have complained that Microsoft's licensing strategy should be revised, but they have done so quietly.
Those contacted by The Daily Star preferred to remain anonymous, with several refusing even to explain the logic behind their off-the-record comments.
The owner of one Lebanese company affected by Microsoft's move claimed that the new fee system was detrimental to competitiveness.
He said the average licensing fee for a company operating 10 computers amounted to about $400, on a yearly basis. He also complained that the licensing process is not handled by Microsoft's Beirut office but is instead run out of Ireland.
Repeating another commonly voiced claim, the owner also accused Microsoft of failing to provide special discounts for non-governmental organizations (NGOs).
"Also, the resellers here get [a commission] of just 5 percent from the sales price, so the exorbitant costs of software are a Microsoft policy and not due to the greed of dealers," the owner said.
He told The Daily Star that he had sent a strongly worded letter to Microsoft to protest against the new licensing scheme.
"Companies are in a tight spot," an official at a smaller firm said. "If we use pirated programs the authorities chase us and slap us with big fines, and if we go to a company to install original programs then they charge us high fees for the software and licensing."
He explained that most companies don't have too many choices.
"Pirated programs are not useful for us because some of the applications need authorization and permits from the developer and to get this permit we have to dig into our pockets and pay the price," the official said.
He added that Microsoft does on occasion offer special prices on software, but he said the prices in general still remained high relative to the state of Lebanon's economy.
Internet cafes, which are widespread in Lebanon, usually use Microsoft platforms but apparently few of them are running original programs, especially those outside Beirut.
The owner of an internet cafe in a suburb north of Beirut said that most of his clients either chat on MSN or Yahoo! or play Internet games.
So "why do I have to install original programs?" he asked. "I only charge LL2, 000 per hour for each user. It's not worth it."
Several companies that are running pirated software cited Microsoft's new licensing scheme as excuse not to acquire and install originals.
On April 2007, the Bush administration placed 12 countries, including Lebanon, on a "priority watch list" which will subject them to extra scrutiny and could eventually lead to economic sanctions if the US government decides to bring the issue before the World Trade Organization.
The Bush administration said that the countries on the list had failed to protect American producers of music, movies and other copyrighted material from widespread piracy.
In addition to Lebanon, Russia, China, Argentina, Chile, Egypt, India, Israel, Thailand, Turkey, Ukraine and Venezuela were included on the list.
These countries are expected to come under increasing pressure from the United States and may find it more difficult to gain access for their products to the crucial American market.
The government of Lebanon, which is trying to join the World Trade Organization, says it realizes that its poor copyright record will reduce its chances to join the group.
With a piracy rate of 73 percent in 2006, according to the Business Software Alliance (BSA), Lebanon remained one of the top intellectual property violators in the Middle East.
In the same period, losses caused by the illegal practice rose by $4 million to $39 million the BSA said in a study. "This is attributed to the unstable situation and the events that disrupted the country's efforts in putting a dent in piracy with the formation of the Computer Crime & Intellectual Piracy Reinforcement Bureau. Pirates have benefited from the chaos to increase their operations," the BSA said in its last report.
Microsoft officials in Beirut were quick to defend the terms of their company's new licensing system.
"There are different ways to acquire a license from Microsoft. A company can acquire the license under OEM [Original Equipment Manufacturer] and other different programs such as open value and enterprise agreements," Aly Harakeh, the head of Microsoft's copyright department for the Levant region, told The Daily Star in an interview. He stressed that OEM licenses were not discountable because their price was fixed by Microsoft worldwide.
Harakeh added that each company has its own requirements and Microsoft takes these requirements into consideration. Microsoft's office in Beirut estimated that hundreds of companies from the private sector, public institutions and NGOs in Lebanon are dealing with the software company.
Harakeh acknowledged that there have always been complains about licensing strategy in some countries. "Our licensing programs have evolved over the years. We listen to complains from customers and introduce changes," he said.
He added that some companies wanted the licensing fees to be paid by installment. But "in some programs you have to pay upfront," Harakeh said.
He added that in the past if a company wanted an open license, it had to be operating at least five computers in its offices.
"Now you can buy five licenses instead of five computers and this depends on the program a company needs for each PC," Harakeh said.
About 80 percent of companies and banks use Microsoft applications, according to industry insiders.
"We have a big share in the market and why not? People like our product," Harakeh said.
He added that operators are using Microsoft products to generate revenues.
Microsoft believes that 70 percent of Lebanon's large- and medium-size companies and banks are using licensed programs.
One of Microsoft's marketing representatives said that his office is not allowed to cut prices but can provide the end-user with additional services.
"All banks, IT companies, Internet providers and large distribution companies use Microsoft programs," Leila Serhal said.
But the company does offer special packages and deals to students and NGOs, she said.
Other industry insiders did not see anything irregular about Microsoft practices.
The head of the Professional Computer Association (PCA), Gaby Deek, said it was not up to his group to assess the licensing scheme as this is a commercial issue that has to do with supply and demand.
He also rejected the argument that the high prices of Microsoft and other software companies justified the use of pirated programs.
"We do not encourage piracy under any circumstances," he said. "If people or companies are not happy with Microsoft licensing they have other legal alternatives like open source, but piracy is not an option."
He also spoke out against any suggestion of intervention by the government on this issue.
"This is a free market. Nobody - I repeat nobody - should interfere in commercial issues like this, especially the government, which should play a role only in favoring competition and helping the market to develop multiple options for consumers," Deek said.
He added that the PCA had been a key player in establishing the copyright law and will always support all initiatives to comply with it, including awareness campaigns and seminars. "Copyright applies to other software vendors as well, especially local developers and software publishers who should have a high priority in terms of protection as much as international companies," Deek said.
Claude Bohsali, the general manager of Middle East Data Systems, said companies like Microsoft and Apple have policies that apply around the world and they are not going to change for Lebanon.
"No one can ask a software company to tailor a special price package for Lebanon. This simply does not work," Bohsali said.
He added that Lebanon can't be an exception to the rule and that many countries are facing many of the same economic difficulties.
"Microsoft can probably make an extra effort on the price but we can't expect to change their world-wide policies," Bohsali said.
He said that any company with 200 employees working on 200 PCs can probably afford the licensing scheme of Microsoft or any other software firm.
"We should remember that the software companies have invested millions of dollars to develop the programs and charging $4,000 a year for hundreds of computer uses in an office is logical," Bohsali said.
As an example, Bohsali said that his group has around 350 staff working on 350 PCs. "We are a Microsoft partner but nevertheless we pay a certain fee for licensing to the company each year," he noted.
Adriana Doumit, the project manager for micro-credit at the Association for the Development of Rural Areas, said that many NGOs in Lebanon use Microsoft programs.
"Our group is obliged to use original computers such as IBM, Intel chips and Microsoft software because the IT company which is sponsoring us insist on using American products," she explained.
She added that Microsoft programs are expensive, but "we got a good deal from the company," describing discounts of more than 65 percent.
She told The Daily Star this was not uncommon.
"Microsoft makes special offers to students and NGOs," Doumit said. "This is a great help for us."
Lebanon's long but lax history of copyright protection
Very few people are aware that Lebanon was one of the first countries in the Middle East to pass a law on intellectual property.
On January 17, 1924, Resolution No. 2,385 was issued by the government during the French Mandate. The law was then amended on January 1, 1946. The law was entitled "Regulations and Systems of Commercial, Industrial, Literary, Artistic and Musical Property in Lebanon"
One of the articles of the law stated that in the case of "every industrial invention which creates a benefit for its owner, he alone shall have the right to utilize and invest it, and such right shall be acknowledged by a certificate subject to the conditions specified herein below."
To protect inventors, the old law said a certificate may be granted for each invention relating to a new industrial product, or for each discovery of a new method which results in some product or a known industrial outcome, and for each new application of a known industrial method.
But this law was never systematically enforced and Lebanon has become one of the top intellectual property violators in the Middle East, scaring away investment and slowing the country's efforts to join the World Trade Organization.
Under pressure from the United States and Europe, Lebanon took steps in the late 1990s to demonstrate its determination to clamp down on copyright violations.
A new and modern Copyright Law was enacted on April 3, 1999, and entered into force on June 6 of that year. The copyright protection, originally available to literary and artistic works, has since been extended to computer software, video films and all kind of audiovisual works. The law now provides stiffer penalties for offenders and better compensation to the persons whose rights have been infringed. The manner in which the copyright is breached has also been extended.
Article 47 of the Patent Law states: "Whoever - by virtue of his status, position or art - knows confidential industrial or commercial information, and discloses it without valid reason, or uses it for his or somebody else's benefit, shall be penalized by the punishment provided for under Article 42 above [LL5 million and imprisonment from three months to three years, or one of these two penalties).
Despite the legislation, most copyright violators have continued to escape penalty, a clear indication that successive governments have attached little importance to the issue.
Copyright advocates argue that intellectual property rights are like any other property rights - they allow the creator, or owner of a patent, trademark, or a copyright to benefit from his or her own work or investment. These rights are even outlined in Article 27 of the Universal Declaration of Human Rights, which sets forth the right to benefit from the protection of moral and material interests resulting from authorship of any scientific, literary, or artistic production - as defined by the World Intellectual Property Organization.
