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Software piracy pushes companies to be more competitive, study claims • The Register

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Software piracy, long a source of anxiety among app makers and large software companies, may have some beneficial effects.

Wendy Bradley, assistant professor of strategy, entrepreneurship, and business economics at Southern Methodist University’s Cox School of Business, and Julian Kolev, an economist at the United States Patent and Trademark Office, recently examined the impact of software piracy in a paper [PDF] titled “Software Piracy and IP Management Practices: Strategic Responses to Product-Market Imitation.”

The economists looked at mentions of piracy in the SEC-mandated annual 10-K filings of 106 publicly traded companies that generated 40 per cent of their revenue between 1991 and 2000, based on the belief that software firms, so dependent upon patent, copyright, and trademark protection, “benefit disproportionately from cumulative innovation.”

They compared the intellectual property (IP) strategies of these firms, alongside a control group of companies not facing significant IP risk, before (1991-2000) and after (2001-2007) a major “piracy shock” – the debut of BitTorrent in July, 2001.

The authors consider the arrival of BitTorrent in July, 2001, to be an ideal dividing line because the decentralized file sharing protocol can handle large files in a way that Napster could not, and because IP rights holders were unable to shut it down.

What they found was “piracy shock” pushed affected firms to innovate, as measured by an uptick in research and development spending and in patent, copyright, and trademark applications.

This increase does not appear to be driven by efforts to directly prevent software piracy. Instead, it may be the result of companies innovating and changing strategies to, at least in part, overcome any effects of piracy.

“When comparing the IP strategies of software firms at risk of piracy (the treatment group) against those of not-at-risk firms (the control group), we find that our treatment group significantly increases its innovative activity after the piracy shock in terms of R&D expenditures and granted copyright, trademark, and patent applications,” their paper says.

“Our analysis also reveals a dynamic response: firms tend to increase their R&D expenditures and copyright filings sharply in the first two years following the piracy shock, while the impact on patents is most significant over longer horizons of three to seven years.”

Previous studies on film and music piracy, the authors note, did not establish an increase in IP-based innovation, though those research projects did indicate that unauthorized copying does not reduce the number of films made per year (Danaher and Smith, 2017 [PDF]) or the number of songs (Waldfogel and Aguia, 2018 [PDF]).

Bradley, in an email to The Register, said, “Fortune 500 companies have long understood the importance of IP management practices to their bottom line, from Xerox to IBM; there’s a lot of value in patents, including (but not limited to) patent-licensing royalties.”

“Many people thought piracy was going to have a tangible and immediate negative impact on firms, especially in the software industry,” she said. “Our results show that, instead, increased rates of piracy led software firms to innovate more. This innovation was in the form of new, highly-cited patents in the software sector, specifically.”

Asked to what extent this innovation was defensive – efforts to protect existing revenue – and to what extent it was creative – efforts to explore new opportunities – Bradley said the research data indicates the innovation was not defensive.

“Defensive patenting would not likely generate citations, and our citation-weighted patent outcome specifically aims to address this concern,” she explained. “The citation-weighted results are broadly similar to the unweighted patent measure, so I’d conclude that most of the patenting is not defensive.”

Bradley said that she and her co-author did look at the revenue impact of software piracy and found that it increased disproportionately among the piracy prone “treatment” group.

“We don’t delve into the content of the patents, so we don’t know whether this innovation is about new features or business processes, but we do think this is an opportunity for follow-on research, particularly case studies or qualitative work,” she said. “For example, subscription-based software has meaningfully changed the competitive landscape in recent years.”

Tolerate or not?

Asked whether the piracy findings suggest adopting policies that aim to tolerate piracy, based on its perceived benefit, Bradley said she’s not making that argument.

“The policy implications are tricky, and we wrote the paper for a managerial audience suggesting that more innovation is an effective response to piracy,” she explained. “There are plenty of reasons to support anti-piracy policies, particularly coordinated efforts across countries attacking the supply-side.

“Without overreaching in terms of policy suggestions, I think one implication is that anti-piracy efforts could be focused on industries that are already highly innovative or highly competitive. We aren’t pushing for ‘tolerance’ of piracy, but there are limited resources governments can dedicate to enforcement, and we would want to send those to areas where piracy’s net effect is most negative.”

Similarly, she said managers dealing with these issues should consider whether it makes more sense to invest in anti-piracy policies like litigation or to develop new and better versions of their products that motivate people to buy them legally.

We aren’t pushing for ‘tolerance’ of piracy, but there are limited resources governments can dedicate to enforcement, and we would want to send those to areas where piracy’s net effect is most negative.

Bradley contends her research is applicable even in dominated markets where there’s little competition.

“We are highlighting the interpretation that innovation increases because of a rise in competition,” she said. “We do want to be careful when talking about two-sided platform markets, like the iOS App Store, where the concept of competition is more complex. Using a platform lens, our paper is more about competition between apps than competition between operating systems.”

Bradley said that in a monopolistic environment, firms have little incentive to innovate and while that’s outside the scope of this particular research project, she nonetheless sees the findings as an indication that, even in the absence of policy intervention, piracy increases those incentives.

“Another way to think about it is: for a dominant incumbent firm in a strong position, piracy could push them to increase innovation more so than they would without it,” she said. “Past examples include telephone features and the old Bell monopoly, or more recently, Apple adding in the features that the jailbreak community pioneered in the iPhone.”

Piracy, she suggests, encourages people to try out and compare products without committing to a purchase and that can provide a way for smaller software firms to gain traction through word-of-mouth.

“This, in turn, pushes large companies to innovate to stay competitive and maintain their market dominance, as opposed to relying on a potentially anti-competitive position or low consumer awareness of alternatives (given Apple, Google, and Microsoft’s superior marketing and branding advantages),” said Bradley. ®

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Chinese could hack data for future quantum decryption, report warns | Hacking

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Chinese hackers could target heavily encrypted datasets such as weapon designs or details of undercover intelligence officers with a view to unlocking them at a later date when quantum computing makes decryption possible, a report warns.

Analysts at Booz Allen Hamilton, a consulting firm, say Chinese hackers could also steal pharmaceutical, chemical and material science research that can be processed by quantum computers – machines capable of crunching through numbers at unprecedented speed.

In a report titled “Chinese threats in the quantum era”, the consultancy says encrypted data could be stolen by “Chinese threat groups”. It says quantum-assisted decryption will arrive faster than quantum-assisted encryption, giving hackers an edge.

“Encrypted data with intelligence longevity, like biometric markers, covert intelligence officer and source identities, social security numbers, and weapons’ designs, may be increasingly stolen under the expectation that they can eventually be decrypted,” the report says. It says “state-aligned cyber threat actors” will start to steal or intercept previously unusable encrypted data.

However, it adds there is a “very small” likelihood that quantum computing could break the latest encryption methods before 2030. The analysts say quantum computing’s advantages over classical computing – the computing used in everything from laptops to mobile phones – are at least a decade away.

“Although quantum computers’ current abilities are more demonstrative than immediately useful, their trajectory suggests that in the coming decades quantum computers will likely revolutionize numerous industries – from pharmaceuticals to materials science – and eventually undermine all popular current public-key encryption methods,” the report says.

Quantum computing is viewed as an exciting development. For example, experts say it could predict accurately what a complex molecule might do and thus pave the way for new drugs and materials.

China is already a strong player in the field, and Booz Allen Hamilton says it expected the country to surpass Europe and the US – where IBM recently made the most powerful quantum processor – in quantum-related research and development.

“Chinese threat groups will likely soon collect encrypted data with long-term utility, expecting to eventually decrypt it with quantum computers,” the report says. “By the end of the 2020s, Chinese threat groups will likely collect data that enables quantum simulators to discover new economically valuable materials, pharmaceuticals and chemicals.”

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UK Space Agency asks kids to make a logo for first launches • The Register

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Good news for those in the UK with primary school-aged kids and wondering what to do when the next bout of home-schooling hits: design a logo for the first UK satellite launches.

2022 could be a big year for launching satellites from Blighty’s shores as the first launchers gear up for a historic blast-off. Assuming the facilities have been built and all the necessary consents given and boxes ticked.

There are currently seven possible spaceport sites across the UK, from Cornwall in England through Llanbedr in Wales and up to the Western Isles in Scotland. Cash has been lobbed Cornwall’s way to support a horizontal launch by Virgin Orbit from Spaceport Cornwall and more toward Scotland for Orbex’s ambitions to launch vertically from Sutherland.

Should all the approvals happen and construction be completed, there is every chance the UK might host its first launch at some point in 2022.

Hence the need for a logo and thus a competition aimed at inspiring kids to consider a career in the space industry. And, of course, it is all worthy stuff: “Logo designs,” intoned the UK Space Agency, “should reflect how data from small satellites can help inform solutions to climate change as well as generate a source of pride in the UK’s space ambitions.”

What, we wondered, could possibly go wrong?

We put this question to Rob Manuel, one of those behind web stalwart b3ta.com. B3ta has a long history of (among other things) image challenges, the results of which tend to pop up, often unattributed, in timelines around the world. Now heading into its third decade, the site continues to push out a weekly Friday newsletter to email subscribers.

In terms of how to engage participants, Manuel said: “If anyone asks me, and they rarely do, I encourage competitions to be as open as possible – publish the results as they’re coming in. Try and create a buzz that something is happening rather than everything going in the bin.”

“As for things going wrong,” he went on, “well, there’s always an element who’ll want to subvert it.”

The competition is open to children aged 4-11 and will run until 11 March 2022. There are two age categories (4-7 and 7-11) over 12 regions in the UK. Designs can be drawn, painted, or created on a computer and either submitted on the logoliftoff.org.uk site or via post. Some basic questions also need to be answered, and children can work on their own or in a team of up to four.

We asked the UK Space Agency if it would take Manuel’s advice and post entries ahead of the competition close. We will update should it respond. ®

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Video analytics platform RugbySmarts named ‘most investable’ at SportX

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The Galway tech start-up was one of two winners at the sport-focused pre-accelerator programme.

A start-up developing real-time video analytics for sports has been named ‘most investable’ at SportX, a new pre-accelerator in Ireland for founders with sports and wellness business ideas.

RugbySmarts took the title at the inaugural SportX showcase last week, securing a cash prize.

The Galway-based start-up aims to automate and simplify sports analytics using AI,  machine learning and computer vision, helping coaches to improve player and team performance with a platform that could also be transferred to other sports.

RugbySmarts was founded last year by CTO William Johnstone, who has previously worked with Connacht Rugby, and CEO Yvonne Comer, who is a former Ireland international rugby player.

Meanwhile, the award of ‘best impact on sport’ was given to TrojanTrack. This start-up, founded in 2021 by Dublin-based Stephen O’Dwyer, is looking to combine quantitative biomechanical analysis with deep neural network tech in the equine industry.

The aim is to gain feedback on a horse’s injury or gait imbalance without using invasive technology, such as motion-tracking software that requires markers to be attached to the animal’s skin.

‘Next-gen sports-tech entrepreneurs’

SportX was launched earlier this year by advisory firm Resolve Partners, Sport Ireland and ArcLabs – the research and innovation centre at Waterford Institute of Technology.

The aim of the pre-accelerator programme was to build on tech and business ideas for the sport and wellness industries, giving founders access to academic, clinical and commercial resources.

The six-week programme involved workshops and engagement with advisers, entrepreneurs, subject experts and investors. Participants also had the opportunity to pitch to the US-based Techstars Sports Accelerator.

At the SportX showcase last week, nine teams had five minutes each to pitch their business ideas to a panel of judges.

The two winners were selected by the panel, which featured Gary Leyden of the ArcLabs Fund 1 GP, Sport Ireland’s Benny Cullen and Niall McEvoy of Enterprise Ireland.

At the launch of SportX earlier this year, Leyden said the goal of the programme was to find “the next generation of sports-tech entrepreneurs who can leverage the amazing enterprise and sports-related supports within the south-east of Ireland”.

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