It began with a dream. All people would be treated as equals under the law, and they'd be equally protected. Those with the ability would produce goods and services and sell them at fair prices to those with the need. But it ended in repression, the crushing of dissenters, and government storm troopers knocking down doors in the night.
I'm speaking, of course, not of Communism's history under Stalin, but of Copyright Law under Putin. Once upon a time, you see, software makers such as Microsoft (NASDAQ:MSFT), Electronic Arts (NASDAQ:ERTS), and Activision (NASDAQ:ATVI) viewed Russia as an opportunity -- an emerging market, rich in oil wealth, into which they could sell their wares. Over time, though, they realized that while the Russians loved their software, they weren't too wild about paying for it. As repeated pleas to the government to "do something" about the piracy problem fell on deaf ears, one company, Microsoft, came up with an innovative approach: It would continue to press for enforcement on the one hand, while selling special versions of its software on the cheap on the other.
The approach, widely imitated by other software makers, and also music companies, appeared to make progress. Whereas a decade ago, it was almost impossible to find legal versions of software for sale, today, the International Intellectual Property Alliance estimates that the market is "only" 65% to 80% pirate. In fact, the last time I visited the "Gorbushka" market in Moscow (infamous in the Yeltsin era for its brazen selling of pirated software and music), the vast majority of the products on offer bore holograms confirming they were licensed for sale at discounted prices.
So much for progress
The latest news out of Moscow, however, promises to make a mockery of copyright law, and undermine years of tireless effort by Microsoft and its peers. According to a report in this morning's Moscow Times, Russian authorities are laying the groundwork for suppressing dissent in the upcoming State Duma (parliament) elections in December. Using allegations of copyright infringement as a pretext, police are raiding nongovernmental organizations hostile to the Kremlin's agenda, confiscating computers, and impounding them for as long as two months at a time while searching for pirated software.
In late August, for example, police in Nizhny Novgorod raided the offices of the "Tolerance Support Foundation," and also one of the last remaining independent newspapers, Novaya Gazeta. Adding insult to injury, the latter raid was scheduled to take place on the anniversary of the murder of prominent Kremlin critic and Novaya Gazeta reporter Anna Politkovskaya. In each case, entire computer systems were confiscated and carted away, rendering the organizations incapable of functioning. In May, another NGO, and another Novaya Gazeta office, were hit in Samara, as was as an opposition party office in Tula. While police assert that such raids are "standard practice" and take place every week, when pressed for an example of another raid, the best the Nizhny police spokesman could come up with was "a bread factory." Prominent Kremlin-affiliated businesses such as Sberbank or Gazprom, state media outlets like RTR or ORT, and government agencies with a history of pirated software use apparently weren't deemed worth of investigation.
So what?
But assume that the police do find pirated software on the confiscated computers (not a far-fetched assumption, considering the still-high piracy rates in the country). The apparent "selective enforcement" going on in Russia today, evident also in other spheres, such as oil, where companies such as ExxonMobil (NYSE:XOM), BP (NYSE:BP), and Shell (RDS-A) often make headlines as the subject of environmental investigations, has serious implications for Microsoft and its peers. After years of working hard to apply the same rules to all and going out of its way to make its products accessible even to Russians with sub-oligarch incomes, Microsoft may now become "guilty by association" of selective copyright enforcement. The software-buying public may associate the company with Kremlin-sponsored witch hunts, damaging both its credibility and its good name.
Meanwhile, the more resources the Kremlin devotes to prosecuting small-time copyright offenders with big-time political significance, the fewer resources it will have available to prosecute major offenders in business -- and government -- offices. That's where Microsoft is losing the most money. That's where the focus should stay.
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