Protection Against Software Piracy: A Study Of Technology Adoption For The Enforcement Of Intellectual Property Rights

Although software piracy is often described as a threat to innovation, only a minority of publishers has chosen to adopt hardware keys, the most secure technology protecting intellectual property in software. A survey of German software publishers reveals that they demand different levels of costly security, depending on product characteristics and markets served. Industry-specific business applications are more likely to be protected by hardware keys than other software. So is software whose usage involves network effects creating a channel for the distribution of illegal copies as well as positive externalities among users. Another factor is the export of software to countries where protection strategies relying on registration requirements and legal action are difficult to implement. These findings have policy implications. Since public protection incurs costs of its own, initiatives to strengthen intellectual property rights in software and their official enforcement should take empirical evidence about private willingness to pay for protection into account.