MICROSOFT'S IPR WOES

UNCLAS ALGIERS 000190

SIPDIS

SIPDIS

STATE PASS TO USTR - PBURKHEAD
COMMERCE FOR NMASON

E.O. 12958: N/A
TAGS: ECON BEXP KIPR ETRD AG
SUBJECT: MICROSOFT'S IPR WOES

REF: 07 ALGIERS 1581

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SHARED OUTSIDE USG.


1. (SBU) SUMMARY: During a February 19 meeting, Microsoft
Algeria Director General Samir Said outlined Microsoft's
priorities for Algeria and underscored the negative impact
weak intellectual property rights (IPR) protection is having
on Microsoft's financial bottom line and growth potential.
Said estimated that Microsoft is losings tens of millions of
dollars each year to software piracy in Algeria and argued
that the Algerian government has not demonstrated the
political will to enforce IPR. Said stated that, in addition
to antipiracy efforts, Microsoft's main priorites are to
continue working with the Algerian government (its largest
customer in Algeria),to recruit qualified employees, and to
revive partnerships with Algerian ICT companies. END SUMMARY.


2. (SBU) Microsoft Algeria DG Samir Said lamented that the
Algerian government is not taking stronger action to prevent
software piracy and argued that the situation had worsened
during 2007. According to a Business Software Alliance
Survey, the rate of software piracy increased slightly from
2006 to 2007, from 84 percent to 85 percent. Said stated that
"losses are huge" and asserted that Microsoft is losings tens
of millions of dollars each year. Said estimated that a 10
percent reduction in software piracy -- from the current
estimate of 85 percent to 75 percent -- would yield an
additional 25 million USD in annual profits.


3. (SBU) Said emphasized that Algeria is an important market
for Microsoft and that there is clear potential here if the
Algerian government provides greater support for IPR
protection. While he noted that there is a trend towards
purchasing licensed software in government ministries,
licenses have only been purchased as part of new system
purchases and many ministries continue to use unlicensed
software on previously purchased computers. Said stated that
he is not seeing any will to enforce IPR protection in terms
of software licensing. He told us that none of the estimated
50 to 60 thousand home personal computers sold as part of the
Algerian government's "Ousratic" initiative to expand home
PC-ownership were sold with Microsoft-licensed software.
Although Microsoft informed the Minister of Communications
Technology of this breach, Said said that the government has
not taken any action to enforce compliance. During the
October visit of Microsoft CEO Steve Ballmer (reftel),the
Algerian government promised to address enforcement, but Said
stated he had seen no change since then. He added that he
often hears the argument that Microsoft must give a "good
price," but in the end licensed software will always be more
expensive than the pirated version.


4. (SBU) Said stated that, in addition to antipiracy efforts,
Microsoft Algeria's main priorities are to continue working
with the Algerian government, recruit qualified employees,
and revive partnerships with Algerian ICT companies. Between
ministries and state-owned enterprises, the government
remains Microsoft's largest customer in Algeria and Microsoft
will continue to work with it despite IPR concerns. Said
echoed an oft-heard complaint in saying that he is unable to
find qualified employees among recent graduates. Although
there are nearly 2500 graduates with degrees in ICT,
according to Said, there are few who have the skills required
to be competitive in the job market. Microsoft Algeria is
also interested in partnering with Algerian ICT companies to
help promote local software development; however, Said noted
that this goal is dependent upon improved IPR protection.


5. (SBU) COMMENT: Serious antipiracy efforts in Algeria are
critical not only for Microsoft but for Algeria's economy
writ large. Although the Algerian government has stated its
intent to develop the local ICT sector, rising rates of
software piracy will do little to encourage the necessary
investment or technology transfer. The Embassy's Special 301
Review (septel) will address the Algerian government's
overall IPR protection efforts.
FORD