Piracy, Price Discrimination and Development : The Software Sector in Eastern Europe and Other Emerging Markets

The international intellectual property regime has been heralded by its supporters as the key that would open the door to technological advancement in developing countries. So far, in Central and Eastern Europe it has failed to deliver on this promise, especially with respect to the software industry. Local programmers have little to gain from a stronger protection of copyright in their domestic markets, and this situation is not likely to change soon. At the same time, piracy has turned out to be a necessary evil for the diffusion of software that is legally priced beyond the reach of most local users. Price discrimination could have provided a solution for this conundrum, but there are important economic and political factors that support the status quo, although the much-feared parallel imports are less of a problem than expected. Nevertheless, there are significant technological and cultural developments that should make the actors involved less comfortable about the status quo. These problems clearly require more innovative thinking. Open source software is likely to be an important part of the answer, but the implementation of this solution will require serious efforts to change the current approach of governments in developing countries and the international organizations involved in development assistance