Thank you, Mr. Chair.
My name is Michael Hilliard and I am corporate counsel for Microsoft in Canada. I appreciate the opportunity to appear before this committee to share with you a few thoughts on the importance of protection and enforcement of intellectual property rights, in particular software.
The problem of software piracy in Canada is a significant one. According to the most recent BSA and IDC global software piracy study, the software piracy rate in Canada is 33%. Thirty-three percent of software in Canada is pirated. While this rate has declined in recent years, it is still considerably higher than the rate in the U.S., which is at 21%, New Zealand at 23%, Finland at 26%, and in many other developed countries.
The losses attributed to piracy in Canada are over $800 million. This is a problem that has many negative economic consequences. It undermines efforts of local software developers, it results in fewer jobs in the legitimate software market, and there's a loss of tax revenue. The IDC has suggested that if you could reduce the piracy rate in Canada to 26%, you would see 14,000 new jobs in the software industry and $2 billion in additional tax revenue.
In other words, it's not simply a problem for software manufacturers such as Microsoft. For every one dollar of software sold, there is at least another $1.25 in services to design, install, customize, and support software. Most of these additional services or revenue go to local firms.
Beyond the economics of piracy, there are also significant risks that pirated software creates for Canadians who use it. A recent IDC study examined websites that offer counterfeit product keys, pirated software, etc., and 25% of the websites attempted to install either malicious or potentially unwanted software. The negative impact of unwanted software like this can range from mild, such as adware, pop-ups, or home page hijacking, which are annoying; to the destructive impacts of Trojans being installed on your computer that use up the resources of the computer; and up to devastating, where bots or keyloggers take over the machine to relay spam, store illegal files, or give access to sensitive data.
For businesses, a recent survey of IT security professionals suggested that the cost to an organization to correct the problems of a virus, an unauthorized access to information, or the theft of information can be over $20,000 per incident.
At Microsoft, we take the problem of software piracy very seriously. We have focused our various activities investments into a single initiative that we call the Microsoft genuine software initiative. This has three key strategic areas. The first is education, by raising the awareness of the risks of counterfeit software and the importance of proper licensing through consumer-oriented communications. The second is engineering, in that we engineer our software with anti-counterfeiting techniques that can alert the consumer to the presence of counterfeit software, and that protect them from some of the harms that I've spoken about. And the third is enforcement, in that Microsoft actively supports government officials and law enforcement taking action against software piracy and those who would victimize unsuspecting Canadian consumers and businesses.
Furthermore, we are not simply relying upon the government to address this problem. Microsoft will take whatever legal steps are necessary to protect its honest partners and consumers.
To address the problem of software piracy, in addition to strongly supporting the recommendations of CACN, Microsoft believes the Government of Canada should do the following: first, immediately implement the provisions of the WIPO Copyright Treaty and the WIPO Performance and Phonograms Treaty; second, grant the Canada Border Services Agency the independent authority to seize or destroy counterfeit goods; three, make the manufacture, sale, and distribution of labels of authenticity an offence in the Criminal Code; and four, provide the RCMP and the Department of Justice with adequate resources to effectively address counterfeiting.
Intellectual property rights are playing an increasingly important role in the global economy. In order for Canadians to derive the benefits of, and compete in, such an economy, it is imperative that Canada's legal and enforcement regime be strengthened to encourage the development and protection of intellectual property.
On behalf of Microsoft, I wish to express my appreciation for the committee's interest in this issue and for the opportunity to appear before you.