Lu Xun speaks on the black screens (via Olomo)

Blowback continues following Microsoft's latest attempt to combat piracy in mainland China.

The Windows Genuine Advantage update to Windows XP turns the desktop background black every 60 minutes on bootleg copies of the operating system. The National Copyright Administration has expressed its reservations about the company's strategy, while a Beijing lawyer has filed multiple complaints, alleging that Microsoft hacked users' PCs and violated the country's anti-trust laws.

Netizens, for their part, have had lots of fun whipping up their own black backgrounds. The image above adapts a Lu Xun quote to confusing effect: "Either we perish in silence, or we get black-screened in silence," and an ingenious one below borrows a famous inscription from Wen Jiabao.

Lu Xun also popped up in a column that ran on the Financial Times' Chinese website today. Peter Bowang Lu, president of China IntelliConsulting Corporation (正望咨询), compares Chinese computer users to Lu Xun's famous character Kong Yiji, who offers an unconvincing defense of his book stealing.

Peter Lu argues that widespread use of pirated software harms more than just monopolistic multinational companies: piracy is so prevalent that companies are unwilling to invest in large-scale software development, to the detriment of the domestic software industry. He ultimately feels that Microsoft's black-screen approach will not be effective in its fight against piracy, but he adds that the government, which ultimately has the responsibility to enforce its own intellectual property laws, hasn't come up with much in the way of a solution, either.

By all appearances, the Microsoft black-screen affair has been over-hyped, to the point that a mainland lawyer reported Microsoft to the police department for "hacking." This article will not address the essential difference between Microsoft's black-screening on the one hand and hacking and malware on the other; however, a few viewpoints and attitudes expressed by Chinese netizens in the wake of the "black-screen affair" are worth thinking about.

Rose Luqiu, a well-known journalist with Phoenix TV, wrote on her Sina blog that Microsoft's black-screening would not have been news in Hong Kong. Her reasoning was that in cases of piracy, software pirates and those who use pirated software are both held responsibile. However, Luqiu expressed her surprise that the incident became such a big news item on the mainland — many people stood up to self-righteously defend their own actions, though they were surely wrong. Therefore, as a precondition for discussing the piracy issue itself, we must first clarify right and wrong.

We're all Kong Yiji

Make no bones about it, the majority of China's computer users make use of pirated software. Furthermore, when Chinese people buy computers, how many of them include the cost of software into their computer budget? Many computer users are willing to spend money on newer and better hardware, but starting up and using a computer requires software, without which it we cannot use it as we please, without which it really isn't much of a computer at all. We have many other free yet illegal avenues for obtaining that software. As we instinctively breathe the air, so too do we use pirated software. Few people realize that using pirated software is illegal, and few people feel like criminals or have even the slightest feeling of guilt when they use it.

Why don't we feel guilty? Because we are accustomed to using pirated software, because some of our theorists and critics have encouraged us to use pirated software, or even because we have no need to defend ourselves with Kong Yiji's excuse that "taking books doesn't count as stealing," for we are all of us Kong Yiji.

Wen Jiabao writes about the black screens (see also)

Computer hardware is designed by engineers and produced by thousands upon thousands of workers. It is the same with software. The difference is that software requires more and better engineers to design and develop. A computer chip is awe-inspiring — it is something we can sense, touch, and see. Computer software may be even greater still, yet unfortunately all that we can see of it is a cold disc.

When we use pirated software, we are not only stealing income and profit from developers, we are robbing from the engineers who developed the software of the fruits of their hard work, and their salaries as well.

A relativist look at exorbitant profits

One convenient reason for pirating Windows and Office is that they are priced too high and Microsoft reaps monopolistic profits.

First, about that "monopoly," which seems to have become another name for Microsoft. Whether you are referring to Windows or Office, the company controls 90% of the global market for that class of products. Looking solely at market share data, Microsoft cannot escape the label. However, monopolistic market share does not equate to monopolistic practices, and the anti-trust lawsuits Microsoft has faced in the US and Europe over the last decade have mostly involved the bundling of Internet applications with Windows and have had little to do with Windows and Office themselves.

A monopoly does not necessarily lead to excess profit. If we compare Microsoft's net profits with some other familiar IT companies (see chart at right), we see that Microsoft does not rank as the most profitable company.

Unquestionably, the current price of Windows and Office is too high for the income of the majority of Chinese users. However, the issue here is that in people's minds, hardware is valued over software, and it is this mindset that allows people to dismiss the value of a thin DVD, or to spend a few hours torrenting and installing a piece of software. Computers sold on the Chinese market are no less expensive than those sold outside the country, and some may even be a little more expensive. People accept those costs, yet they can't accept international-level software prices.

The true victim is China's software industry

A certain drug, it is said, was developed in a western country at the cost of ten years and US$1 billion. Imagine if that drug did not enjoy intellectual property rights protections but could be copied and imitated at will, who would be willing to spend a decade and invest a billion dollars to develop it?

It is the same with the software industry. To date, no software giant has appeared in China, and the chief reason for this is not Microsoft's monopoly (which only extends to Windows and Office). No, what holds back the development of China's software industry is piracy. Because of piracy, no one will risk large-scale R&D.

Kingsoft is one of the pillars of the industry, but none of its products — WPS, Powerword, or Duba — have been able to turn it into a software giant. Ultimately, it had to turn to online gaming to generate an IPO opportunity. Was Kingsoft defeated by Microsoft? Qiu Bojun, company founder and one of China's leading programmers, is well aware that the company was defeated by piracy.

China's Internet lacks innovation because China already has a cheap shortcut: piracy.

No hope for "black-screening"

Academician Ni Guangnan believes that Chinese people have been "hijacked" by Microsoft. In my opinion, it's Microsoft that's been robbed and hijacked by the Chinese people. China must be the toughest problem for Microsoft now, because the company has not yet found an effective way to combat Chinese software pirates and pirate software users. Black-screening is not effective, and the Chinese government has similarly been unable to come up with any effective measures.

Cleaning up counterfeit and inferior products ought to be the responsibility of the government, but Procter & Gamble, which had long been plagued by counterfeits, was compelled to join with similarly-suffering multinationals to set up the Quality Brands Protection Committee of the China Association of Enterprises with Foreign Investment to take on various responsibilities that ought to fall within the scope of government agencies: conducting investigations, tracking down cases, doing undercover research, buying off informants, and offering rewards for information. Counterfeit and inferior products harm Chinese consumers directly, so people will willingly support efforts to combat fakes. Why shouldn't it be the same for anti-piracy efforts?

At first glance, it looks like users of pirated software save money and are able to use their computers and the Internet however they please. In addition, we must admit that piracy has done quite a bit to educate Chinese computer users, programmers, software engineers, and to popularize computer awareness. However, the big picture shows that China's software industry has been harmed by piracy, giving the country with the largest computer and Internet user base in the world a software industry that lags far behind India. Just as the environment has been sacrificed for economic development, so has piracy harmed the foundation and future prospects of China's Internet industry.

Piracy also leads to unfair treatment for legitimate users and harms their economic interests: it contributes to financial losses for software companies and makes them keep prices high, transferring some of those losses into the hands of legitimate users. R&D costs of US$1 billion ends up as a vastly different list price for 10 million legitimate copies than when spread over 20 million.

At present, people may find it difficult to resist pirated software, but at the very least, victim companies like Microsoft and Kingsoft should have the power to enjoy support for their legal rights.