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A warm fog rolls in from the mountain tops above Guatemala City, veiling everything — from the bright blue lights of an enormous Pepsi billboard to the new, white marble shopping mall. Driving around one of the Latin American capital’s richest neighborhoods on a late-autumn evening, Miguel Lopez Forastier peers through the mist at the glass front of Bavaria Motors SA, a luxury car dealership. “You see that company?” he asks, pausing for effect. “I sued them.” The bravado comes naturally to Forastier, an Argentinean-born third-year associate with Washington, D.C.-based Covington & Burling. And it doesn’t hurt. His major client, the software industry’s aggressive anti-piracy watchdog, on whose behalf Forastier sued Bavaria Motors, doesn’t reward its lawyers for modesty. Forastier has made the 1,900-mile trip from D.C. as part of the latest campaign in the Business Software Alliance’s 13-year-old fight to export U.S.-style enforcement of intellectual property. A young foot soldier for this privately funded enforcement group, Forastier has spent the last two years as the alliance’s lead outside counsel overseeing six Latin American countries: Bolivia, El Salvador, Guatemala, Honduras, Paraguay and Uruguay. This trip — his 11th in two years — should be typical: a few meals with his local counsel, a couple of meetings with an official from the U.S. Embassy, a trip or two to the courthouse to obtain a warrant, and, finally, the raid of a company suspected of using illegal software. On his first full day in Guatemala, Forastier heads for the downtown courthouse with his local counsel. Entering a judge’s overcrowded chambers, he is unfazed by the criminals chained to the backs of chairs or by the bare-midriffed prostitutes who sashay by. Instead, it’s the waiting around that gets to him. An armed marshal insists on finishing his coffee before he can be cajoled into walking up one floor to hand the judge the request for a warrant. Forastier jokes about Guatemalan bureaucracy: “You think they’re slow in the U.S.” At noon, Forastier swaggers into the office of Guatemala’s minister of economy, Marco Antonio Ventura, in hopes of garnering his support for an aggressive antipiracy media campaign Forastier wants to launch in the spring. The minister pledges his support — mouthing the words, “We are with you,” over the rim of his Andersen Consulting coffee mug. It is one day before the raid is scheduled to take place, and everything appears to be proceeding as expected. Then Forastier’s luck begins to change. The next morning, Forastier is hunched over a coffee and the morning papers in a hotel cafe. Emblazoned on the front page is bad news: Ventura has been tossed from office just hours after their meeting. Having been briefed by a U.S. Embassy official about Guatemala’s worsening economy, Forastier had known that Ventura’s power was in jeopardy, but he hadn’t known an ouster was imminent. Still, the raid remains on target for 11 o’clock that morning. At lunchtime, however, Forastier is still roaming the hotel lobby when he receives a call from the BSA’s local counsel, Mario Rene Archila Cruz, a partner in one of Guatemala’s handful of top firms. More bad news. The judge has refused to issue a warrant for the surprise search of three companies’ computers. The problem? A police inspector had copied down “C” (pronounced “say” in Spanish) in one of the companies’ addresses where he should have written “seis” (for “six”). The judge has kicked back the paperwork to the office of the special prosecutor for intellectual property crimes, which means that the raid will be delayed by a week, possibly more. Later in the day, sitting in the prosecutor’s carpeted, air-conditioned office, Forastier mumbles, “I could kill them.” Hands trembling, he swallows his anger, trying not to insult the prosecutor’s assistant, who was supposed to check the documents for such careless errors. Finally back outside, Forastier throws back his head and shouts, “Dios! Dios! Dios!” He boards a plane back to D.C. The bravado is gone. The business of copyright enforcement has never been more brisk — nor more fraught with difficulty. For more than a decade, the BSA has made deep inroads into the global piracy problem, which the alliance estimates costs the industry upward of $12 billion annually. Since its formation in 1989, the BSA has been rooting out pirates among the world’s multinational corporations and spending a small portion of its time tracking piracy back to its source — through the resellers to the producers of illegitimate copies. In the beginning the results were remarkable: In some markets, such as Italy, legitimate software sales doubled and tripled almost overnight, thanks to well-publicized crackdowns on high-profile businesses. But the BSA’s salad days may be coming to a close. As the alliance has tightened the noose on piracy, it has increasingly turned its attention to midsize companies in the United States and fringe markets such as Guatemala’s, hoping to send the message that no company — or country — is too small to be a target. In so doing, BSA is hitting new walls. Smaller U.S. companies tend to be more blas� about having their names tarnished in the press, as are many businesses in developing nations. In Latin America, the Middle East, Asia and Eastern Europe, respect for copyright law isn’t part of the cultural code. In those arenas, the BSA success rate isn’t nearly as high as it has been in North America and Europe. Corrupt police officers tip off suspects, defendants drive tougher settlements, and laws typically don’t provide for punitive damages. Cases can drag on for years, costing the BSA more in fees, and resulting in smaller awards or settlements. BSA’s president, Robert Holleyman, who was senior counsel for the U.S. Senate Committee on Commerce, Science, and Transportation from 1987 to 1990, says that almost half of the $23 million in settlements obtained by BSA occur within America’s borders — even though most of the association’s 10,000 annual raids and seizures happen abroad. The BSA can point to declining levels of piracy in most locales around the world — and corresponding increases in its members’ revenues. The BSA assesses the piracy problem by calculating the difference between the number of software applications installed — extrapolated from the number of computers sold — and the amount of software legally shipped that year. Overall global rates of piracy are on the rise due to increasing problems in Korea, Japan and China in particular. Piracy rates jumped from 47 percent in 1999 to 51 percent in 2000 in Asia, costing the industry more than $4 billion in lost revenue. In 2000, for the first time since 1994, when the BSA started tracking piracy, global rates increased slightly, from 36 percent to 37 percent. There’s another front in this war. As the alliance rises to try to meet fresh resistance, its critics are getting louder. In part, the BSA is likely a victim of its own success — many of its harshest detractors are former opponents, the companies that it has targeted in order to put a public face on piracy. Still, much of the criticism focuses on the BSA’s work in developing nations. Opponents say its legal tactics are too aggressive, that the alliance isn’t sensitive enough to cultural differences, that it uses the Office of the U.S. Trade Representative (USTR) to bully countries into unfair deals. “Piracy is not a black-and-white issue — the heavy hands of the U.S. government tend to force developing nations into making the business interests of the software industry a priority when they shouldn’t be,” says Siva Vaidhyanathan, a cultural historian and author of “�opyrights and �opywrongs: The Rise of Intellectual Property and How It Threatens Creativity.” “We should formulate a global software and information technology policy that fosters software diversity, low barriers to entry, and low cost to consumers. If there are social, cultural, and political benefits to wiring the world, we can only maximize them by keeping an eye on these goals: social stability, cultural diversity, and political democracy.” Since its creation, the BSA’s primary activity has been enforcing the copyrights of its members through raids and letter-writing campaigns. Typically, the BSA gets a tip from an employee on one of its 73 hotlines around the world. Sometimes tips come from member companies’ salesmen who have stumbled upon businesses that claim to have certain software but haven’t had the licenses registered to them. The BSA then investigates those leads (using BSA detectives or hiring professional sleuths) and compiles evidence. At this point, local counsel decide whether to pursue civil or criminal actions. In the United States, retailers or resellers of pirated goods are usually prosecuted criminally, while end users are typically confronted with civil actions. Not every business suspected of pirating is the subject of a raid. The BSA has increasingly relied on a “C&D program” whereby companies receive strongly worded cease-and-desist letters from the BSA. But the letters don’t always work (the company doesn’t agree to buy software or pay for a settlement), and in many cases the BSA fears that the suspected company will delete all its pirated software, thus purging all evidence of wrongdoing. In those cases, the BSA typically seeks a civil search order from a federal judge, which specifically indicates when and where the BSA’s auditors are allowed to look for incriminating evidence, as well as what can be seized by the U.S. marshals who accompany BSA attorneys and auditors on the search. The raid takes place generally with little drama (according to BSA spokewoman Debbi Bauman, no one has ever gotten shot), and the BSA attorneys retreat to their offices to start drawing up settlement documents. The BSA’s attorneys can drive a pretty hard bargain: U.S. copyright law makes businesses liable for as much as $150,000 for each illegitimate software application found, if it be can proven that the law was willfully broken. In Guatemala, it took the BSA a while to find traction. Alliance lawyers tried to pursue civil actions, but their efforts to keep raids secret were foiled by judges who insisted on holding open hearings for search warrants — which alerted the suspected companies. Only in November 2000, after coming under serious pressure from the BSA and the USTR, did Guatemala upgrade intellectual property thefts from civil to criminal offenses. (Because civil proceedings proved ineffective in Guatemala, both end users and resellers are prosecuted for criminal violations.) The laws may still not be as tough in Guatemala as they are in the United States, but enforcement got a small boost in 2001 with the appointment of the country’s first prosecutor for intellectual property crimes, Mar’a De Contreras. Hearings are no longer public, and the raids in Guatemala are fairly formatted. At about nine o’clock in the morning, the prosecutor, accompanied by a marshal and two auditors (one paid by the state, the other by the BSA), arrive at the suspected company’s door. Once inside, they commence a computer audit. At about noon, the BSA’s local counsel, Archila, arrives and begins settlement talks. While computer seizures are rare in the United States, in Guatemala they occur in about 30 percent of all raids. More often, however, Archila leaves the raid with a signed agreement from the company to buy legitimate copies of the software that was found, pay a fine equal or close to its value, and buy advertising space to admit publicly to their wrongdoing. But, though lower evidentiary standards can make raids easier to conduct than in the United States, Guatemalan penalties are less clear, and any settlements tend to be quite small. Because raids are central to the BSA’s mission, a good deal of lobbying has been focused on changing laws to make prosecuting copyright infringers easier — and not just in Guatemala. Evan Cox, a Covington attorney who headed the BSA’s program in Europe, the Middle East and Africa from 1993 to 1998, says that his team of between four and six lawyers successfully lobbied legislators in Denmark, Sweden and Ireland to permit surprise searches. Operating this global network isn’t cheap. In 2000, according to filings with the Internal Revenue Service, the BSA spent about $35 million dollars enforcing member companies’ copyrights. Even though the alliance recoups only about a third of what it spends, its members say it’s a pittance compared to how much the industry loses annually to piracy. What is most noteworthy about the BSA’s budget is how much it spends on legal services. The alliance spent $17 million on legal services in 2000 — far more than other nonprofits engaged in anti-piracy activities. The Recording Industry Association of America, which faces large copyright enforcement problems of its own, had an overall budget of $32 million from April 1999 to March 2000 (its most recent tax filing), of which only $3 million went to legal services. Similarly, the Motion Picture Association of America had an overall budget of $41 million in 2000, $8 million of which went to its antipiracy program, with only a bit more than $3 million going to legal services that year. The BSA’s enormous legal budget underscores its ambition to globalize the U.S. approach to intellectual property law. The alliance has assembled a legal reserve of no fewer than six firms in the United States: Covington; Philadelphia’s Leonard, Tillery & Sciolla; Minneapolis’ Faegre & Benson; Beverly Hills, Calif.’s Keats, McFarland & Wilson; and Oakland, Calif.’s Donahue, Gallagher, Woods & Wood. The number of partners and associates engaged in BSA work at each of these firms varies from one partner and five associates at Faegre & Benson to four partners and eight associates at Covington. Some of these firms work exclusively in the United States, but a few of them help the BSA manage local counsel in the 65 countries in which the alliance is active. Footing the bill for all those lawyers are the BSA’s so-called global members: Adobe Systems Inc.; Apple Computer Inc.; Autodesk Inc.; Bentley Systems Computer Inc.; CNC Software Inc.; Macromedia Inc.; Microsoft Corp.; Symantec Corp.; and Electronic Data Systems Corp. Nine other companies belong to a “public policy” group, which, unlike the global members, doesn’t fund or participate in the enforcement program, only the lobbying activities. Those companies are: Compaq Computer Corp.; Dell Computer Corp.; Entrust Inc.; International Business Machines Corp.; Intel Corp.; Intuit Inc.; Network Associates Inc.; Novell Inc.; and Sybase Inc. Within those two tiers are other gradations. The alliance asks members for annual contributions based on each company’s annual revenue, the number of countries in which it uses BSA’s enforcement support, and the amount of policy advocacy work it does for the company. Jeffrey Steinhardt, legal director for Africa and the Middle East for Microsoft, which had global revenue of more than $25 billion last year, says that Microsoft “pays higher dues [than other members] but [is] active in the greatest number of markets of any member as well.” In places such as Africa, he says, Microsoft pays the lion’s share of the cost. Elsewhere, it splits the bill with other member companies. The BSA and Microsoft won’t say exactly how much the software giant puts into the pot, but Steinhardt says that Microsoft doesn’t pay the lion’s share of the alliance’s global bill. The BSA’s enforcement chief, Robert Kruger, insists that because each company gets only one vote, the interests of all of its 18 members are equally represented. Not necessarily, says Thomas Chan — who, with Microsoft’s former general counsel William Neukom, helped found the BSA’s predecessor, the Coalition against International Software Piracy, in 1985. Chan left his job as in-house counsel for Ashton-Tate, a database company that was acquired by Borland Software Corp. in 1992, to form a seven-lawyer firm, Los Angeles’ Chan Law Group. His firm — which does intellectual property work for Eastman Kodak Company and PC Club Inc. — also represents Asian-owned businesses in the United States that Microsoft and the BSA have sued for copyright infringement. Chan says that Microsoft has de facto control of the BSA, “if the cost is now shared in proportion to the [member companies'] revenues or in proportion to the software seized.” (It is.) “Most of the time, only [Microsoft's] software is being infringed upon,” adds Chan. “They are also a lot more aggressive.” Despite his disappointment at the incompetence of local authorities on this particular raid, Miguel Forastier says that BSA has had even bigger problems to contend with in Guatemala. In 1995, when the BSA first launched its Guatemalan antipiracy campaign, it hired Karen Fischer, a press-hungry local fireball of a lawyer. Fischer (whose anglo-sounding name comes from her Swiss-German ancestry) represented 14 trademark owners including Levi Strauss & Co.; Guess Inc.; and Oscar de la Renta Ltd. She helped pass a law that resulted in a huge bust of the counterfeit markets for software, CDs and clothing in downtown Guatemala City. Thousands of angry rioters responded by storming the Congress in 2000. The group had constructed a pi�ata — made in the likeness of Fischer and labeled “The Devil’s Lawyer” — which they then set ablaze. “They were original,” laughs Fischer, who has since helped found the six-lawyer Fischer, Ramirez, Guzman & Asociados. Not long after the riot, the BSA dumped Fischer for a less aggressive local counsel. But that choice was a bust, too; that lawyer stands accused of embezzling about $20,000 from the alliance’s bank account. The BSA submitted a complaint to Guatemala’s bar association more than a year ago, but Forastier isn’t hopeful that he will be able to lock in the two-thirds vote needed to disbar the lawyer. BSA lawyers have plenty of other headaches, not the least of which is confronting the alliance’s increasingly vocal critics. In the United States and abroad, the alliance is most often accused of being too aggressive, using the law to effectively hold a company hostage until it agrees to the BSA’s terms. Barry Willdorf, of counsel with San Francisco’s Titchell, Maltzman, Mark & Ohleyer, sued the BSA on behalf of his client, Barcelino Continental Corp., a small California retailer. Willdorf says that BSA sent his client threatening letters, warning that it could seize its computers — which would have put the company at risk of breaching several agreements — if it did not agree to certain settlement terms. (The BSA often will write letters to a company suspected of pirating, in place of conducting a raid — particularly in cases in which the company suspected of piracy is unlikely to deny its use of counterfeit products.) Willdorf says that he invited the BSA to come inspect his client’s computers, but that the attorneys never did. “They take all the trouble of spying, but none of the trouble of discovery. [The software companies] are motivated by the volume business generated by this process, [and] the lawyers are motivated by the fees,” he says. The case was eventually settled out of court. “The terms of the agreement were odious to us,” says Willdorf, “but we were willing to buy our peace.” The BSA says that the companies simply are upset about having to own up to their crimes. “People know it’s wrong — they get their hands caught in the cookie jar and don’t want to pay,” says Felicia Boyd, a partner in the Minneapolis office of Faegre & Benson, citing an oft-used defense of her target companies. “[America has] a victim-based society: ‘It’s not my fault because the IT director got behind.’” (If the company can show that the infringement wasn’t willful, damages are capped at $35,000 rather than $150,000.) Some members of the alliance are more sensitive to the criticism of the raids. Marcia Sterling, general counsel of Autodesk, says, “Most of us cringe and worry about the image. Most of us much prefer to educate.” And Batur Oktay, formerly an attorney for Adobe Systems in Seattle and now with Starbucks Coffee Co., says that Adobe made it a practice never to initiate suits against businesses that use its software illegally. “End users are our customers, and even though they are pirates, we don’t want to sue them alone. There’s always going to be a backlash, so that’s something we have to consider,” says Oktay. Not all of the BSA’s detractors are companies that have been targeted. James Love, director of the Consumer Project on Technology, criticizes the BSA and the USTR for pushing developing nations to pay for the software used in all areas of their government sectors. “What that does,” explains Love, “[is] it immediately puts the price squeeze on schools and universities.” The BSA says that it gives educational institutions a generous amount of time to get their licenses in order without further penalty. Still, Love argues that besides schools, all facets of development in poor countries are burdened by the high cost of software. If businesses in developing countries were forced to pay for software at current prices, the resulting increase in the cost of doing business would hinder entrepreneurial activity and reduce overall productivity. Love suggests that those cash-poor countries should stand up to pressure from the USTR and start issuing compulsory licenses, which allow a government to set the price on certain goods in order to achieve a socially or economically beneficial outcome. The U.S. government, for example, issued compulsory licensing fees for music streaming over the Internet in order to resolve a heated dispute between Web broadcasters and the recording industry over pricing. “[Developing countries] should enforce the [copy]rights but deal with the rip-off price [of the software],” he says. Historian Vaidhyanathan agrees that software prices are too high and says software makers’ focus on profits is shortsighted. But he blames the U.S. government for following the BSA agenda — “as if suing, lobbying and threatening trade wars were in the best long-term interests of the United States.” The BSA often calls upon the USTR, which negotiates trade agreements on behalf of the U.S., for help. But should the USTR be so obliging? “The global goals of Microsoft … may be important to the U.S. economy,” says Vaidhyanathan, “but the larger goals of peace, prosperity and diversity should outweigh them. Microsoft can take care of itself.” The BSA’s Kruger doesn’t buy the argument. “That’s somebody trying to find a rationalization for theft,” he says. Besides, adds Forastier, building a culture where intellectual property is valued and protected encourages development of an indigenous high-tech industry. Programmers won’t dedicate their lives to writing software if there are no rewards, the BSA argues. Of course, that assumes that those untapped engineers are code-writers with access to legal software from which they’d be able to learn the craft. Even worse for the BSA is that it doesn’t appear that its global struggle against piracy is getting any easier. Development of the Internet, in terms of both speed and access, is the software industry’s proverbial double-edged sword. On the one hand, software makers hope one day in the near future to sell and distribute their product online; every new Internet user is a potential customer. On the other hand, the more online users with superfast connections there are, the more likely it is that potential customers will go mining for the latest version of Microsoft Word on networks powered by decentralized peer-to-peer technology, which allows software files to be swapped over the Internet as easily as music. The BSA’s militia of lawyers has had enough trouble enforcing copyright laws on foreign soil. How much tougher are they going to have it enforcing the rules in a virtual world? Covington’s Cox doesn’t know the answer. “The percentage [of this problem] that can be addressed through legal action goes down,” he sighs. “We have to keep them on the run. We have to be vigilant.” For Forastier, being vigilant is a career. The third-year associate isn’t likely to continue representing the BSA, at least in the same capacity, for much longer. As he progresses along the partnership track, Forastier’s fees will increase, and Covington will be pressured to replace him with a more junior associate who can continue billing the BSA at favorable rates. But Forastier isn’t worried. “I think [my skills] are very transferable. We have clients in different industries with these kinds of [intellectual property] problems,” he says, naming automobile parts, cigarettes, drugs and condoms as other goods needing trademark, copyright and patent enforcement. “You name it — whatever you can think of — there is a counterfeit in this world.”

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