It’s always interesting to get a glimpse into the thinking behind intellectual property litigation decisions. When are the circumstances sufficient to justify filing an infringement case? The list of factors is long, but the importance of lost profits was emphasized by the recent remarks of Robert Holleyman, head of the Business Software Alliance. The Wall Street Journal ran a short piece about the likelihood of increased litigation in 2012. What’s going on that would justify a ramp-up in lawsuits?
“The problem here is getting bigger and there are more instances of piracy” occurring, as growth in China’s personal-computer market outweighs the country’s gradually falling piracy rate, Mr. Holleyman said.
BSA estimated that 78% of the PC software installed in China last year was pirated, down from 82% in 2006. Despite that, growth in the Chinese PC market means piracy is occurring more often overall. “The dollar loss, the lost opportunity, is really exploding,” Mr. Holleyman said.
Get it? The incidence of piracy in the sector has been falling, although it’s still very high when compared to other industries. However, the decision whether to litigate is not just about the prevalence of piracy in the market but rather the lost profits suffered by these firms. That dollar value has been going up, significantly altering the cost-benefit analysis applied to possible copyright litigation.
The WSJ article does not address the issue of damages, but I suspect that this is of little importance. Damages in copyright cases are notoriously low in China. I suspect that when measured against lost profits, any amounts that could be collected from infringers pales in comparison to an increase in market share.