[Infowarrior] - China fights back against MS DRM

[Richard Forno]

China's consumers are flexing their muscles in Microsoft fight

By Kathrin Hille and Mure Dickie in Beijing

Published: November 17 2008 02:00 | Last updated: November 17 2008 02:00

http://www.ft.com/cms/s/0/f9d08bca-b446-11dd-8e35-0000779fd18c.html?nclick_check=1

When Microsoft rolled out its latest anti-piracy initiative this year,  
it was not aimed at any particular country. Windows Genuine Advantage,  
a tool that identifies users of counterfeit software and pushes them  
to buy the real thing, was launched worldwide in several geographical  
blocs.

But Microsoft ran into trouble when the roll-out hit China last month.  
While users in other markets kept silent when hit by one of WGA's more  
extreme features, a mechanism that blackens the desktop background on  
computers found to be using counterfeit Windows, their Chinese peers  
broke into a storm of anger, forcing Microsoft officials in the  
country into damage control mode.

China's piracy rates, at 82 per cent according to the Business  
Software Alliance, are not the world's worst. But the country's sheer  
size means piracy generates vastly bigger losses there - $6.7bn for  
all software companies last year - than in any other market, according  
to the industry group.

In a dramatic illustration of the scope of the problem, several  
million Chinese are using a Windows license key held by the University  
of Pennsylvania, which is freely available on the web.

But fighting these problems is proving a sensitive affair in an  
increasingly nationalistic country that is well aware of its weight in  
the global economy.

Last month, Dong Zhengwei, a Beijing-based lawyer, called on the  
police to pursue Microsoft for what he called a "hacker-style attack"  
on consumers.

Local bloggers have also taken up the issue in fervent postings. "If  
we ignore them for six months, they will come back begging us to take  
it for free," one blogger called 'liangyouliang' wrote at the weekend.  
"If they don't seek good relations with us and not give us a little  
something for our [exported] clothes, then the people of their country  
will go naked."

Well aware of the mood expressed by such postings, the government has  
also criticised Microsoft. "Violating consumers' rights just to  
protect your own rights is inappropriate," warns Liu Binjie,  
Commissioner of the National Copyright Administration. He adds that in  
future he wants the company to discuss anti-piracy measures with the  
government before they are launched.

Like other multinationals doing business in China, Microsoft cannot  
ignore that message.

People familiar with the company's dialogue with the government say  
that it needs to apply more diligence to its intellectual property  
rights strategy in China. They say that the next planned big anti- 
piracy step, the shutting down of illegitimately-used software license  
keys such as that held by the University of Pennsylvania, will not go  
ahead until the current crisis in China is resolved.

Separately, Microsoft is taking another look at its anti-piracy tool,  
and does not exclude the possibility that it could look different in  
the future. "Microsoft engineers are working on ways to improve the  
user experience," says Garth Fort, Microsoft's marketing head for  
Greater China.

Although China-specific changes that would take away the black desktop  
feature are deemed unlikely, there could be global adjustments to WGA  
triggered by the Chinese protests.

The reason is simple: China is becoming an extremely important market.  
Microsoft's revenue in Brazil, Russia, India and China grew more than  
50 per cent in the fiscal year to June 30, more than double the world  
average. Company officials point to the fact that more than one-fifth  
of the world's computer science students are now in Chinese  
universities. If the software group falls foul of Chinese public  
opinion, what is at risk is not just its standing with today's Chinese  
consumers but its image with tomorrow's softw