US embassy cable - 05LAGOS1413

C O N F I D E N T I A L SECTION 01 OF 02 LAGOS 001413 
 
SIPDIS 
 
E.O. 12958: DECL: 09/05/2015 
TAGS: ECON, EIND, ETRD, KIPR, EINV, CH, NI 
SUBJECT: MICROSOFT LOSING MILLIONS, CHINESE PIRATED 
PRODUCTS GROWING 
 
 
Classified By: Consul General Brian L. Browne for reasons 1.4 (B) 
and (D). 
 
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Summary 
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1. (C) Chinese copycat firms appear to be using Nigeria as 
base for producing and selling pirated computer software. 
Microsoft Nigeria executives complain the number of Chinese 
factories and Nigerian outlets selling pirated software 
products has increased the past year.  Piracy likely will 
increase unless the Government of Nigeria (GON) promotes 
greater intellectual property right (IPR) protection and 
enforces existing IPR laws.  End Summary. 
 
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Microsoft Claims Revenue Losses 
of 10-20 Million/Year Due to Piracy 
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2. (SBU) Consulate staff visited the Otigba Street Ikeja 
Computer Village with Microsoft Nigeria Account Manager, 
George Medebem, to obtain a better sense of the volume of the 
traffic in pirated goods.  The Ikeja Computer Village may be 
the largest information and communication technology market 
in sub-Saharan Africa with over 1,500 businesses selling 
computer hardware and software products, many of them 
pirated.  Microsoft Nigeria sends a representative to attend 
weekly trade forums at the Lagos-based market every Thursday 
morning to encourage consumers to purchase licensed Microsoft 
software. 
 
3. (C) General Manager of Microsoft Nigeria, Gerald Ilukwe, 
told us Microsoft Nigeria is losing between USD 10 to 20 
million per year in potential revenue due to software piracy. 
 According to Ilukwe, his main competitors are Chinese firms 
employing local Nigerians to sell pirated Microsoft products 
in open markets, including the Ikeja Computer Village.  At 
Ikeja Computer Village, consumers can purchase counterfeit 
Microsoft Windows XP software (valued at USD 100) and 
Microsoft Office (valued at USD 150) for less than 2 US 
dollars (naira 200 each).  According to Microsoft Nigeria's 
estimate, for every licensed Microsoft product, one hundred 
fake products are sold, eating into Microsoft's margins. 
 
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Lack of IPR Enforcement, Awareness, 
Drives High Piracy Rate 
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4. (SBU) At Ikeja Market, over 95 percent of Microsoft 
software products for sale are pirated and company 
representatives estimate that piracy rates for Nigeria as a 
whole hovers around 75 to 85 percent.  We did not find one 
shop selling licensed Microsoft software products at Ikeja. 
Microsoft representatives claimed three nearby shops did sell 
licensed products.  On average, total sales volume for 
Microsoft licensed products among all three distributors at 
Ikeja is 30 per week, with numbers reaching between 50 to 70 
during special promotion weeks, according to company sales 
representatives. (Comment: These sales numbers, however, are 
insignificant compared to the hundreds if not thousands of 
pirated products sold openly at Ikeja. End Comment) 
 
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Chinese Firms Engaging Nigerians to 
Produce and Sell Pirated Software 
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5. (C) Chinese firms appear to be using Nigeria as an 
operations base for producing and selling pirated computer 
software.  The number of Chinese firms hiring local Nigerian 
vendors to sell pirated computer products at Ikeja is 
increasing, according to both Microsoft representatives and 
other industry experts. 
 
6. (C) Ibrahim Balogun, President of Computer and Allied 
Products Dealers Association of Nigeria (CAPDAN), told us the 
number of mainland Chinese businessmen frequenting his office 
asking for business contacts has increased since CAPDAN 
established its Ikeja headquarters in November 2004.  Balogun 
presented us the company pamphlets, business cards, and even 
emails from Chinese firms requesting CAPDAN's assistance. 
One such company that visited Balogun recently was Tyce 
Computer Co Limited based in Xianyong industrial area, Panyu, 
Guangzhou, China.  While we were there, we noticed that the 
majority of companies visiting Balogun's office were mainland 
Chinese, particularly Guangzhou or Hong Kong-based firms 
seeking business opportunities in Lagos.  Post has asked 
Balogun to compile a list of mainland Chinese companies 
operating at Ikeja.  According to Microsoft representatives 
and Balogun, Chinese firms are using between three to five 
independent distributors to sell pirated products locally. 
Post estimates that the numbers could be higher. 
 
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Microsoft Goes to Court to Seek IPR Enforcement; 
GON Prosecutes One Company, Slowly... 
--------------------------------------------- --- 
 
7. (C) Microsoft is attempting to enforce IPR laws through 
the courts.  It first sought a criminal case against Computer 
Ports in June 2003, but waited two years before the Nigerian 
Copyright Commission (NCC) brought the alleged pirate to 
criminal court in June 2005.  The long delay has driven 
Microsoft Nigeria to look to the civil courts as a faster 
alternative.  Microsoft sued two companies in civil court in 
June 2005 (Dabmol Nigeria and Franike) for IPR violations. 
Microsoft claims they were using Chinese pirated computer 
software products in building Personal Computers (PCs) 
locally.  Microsoft Nigeria General Manager hopes these 
actions will set a precedent to deter other companies from 
using pirated computer software. 
 
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Microsoft Aims to Build IPR 
Awareness in Nigerian Public 
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8. (SBU) Microsoft Nigeria has taken steps to build greater 
IPR public awareness, including: random weekly visits to the 
Ikeja market and the weekly trade forums there.  Microsoft 
Nigeria seeks to hire a permanent License Compliance Manager 
devoted to IPR/piracy issues to serve as liaison with the 
GON.  The company also intends to hold educational seminars 
at universities such as University of Ibadan, University of 
Lagos and University of Benin in the coming months.  In the 
past, Microsoft Nigeria hired two contract workers at Ikeja 
to promote IPR awareness. 
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CAPDAN Claims Working to Tackle 
Piracy, But Evidence Slim 
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9. (C) CAPDAN President Balogun acknowledged September 5 that 
IPR violations occur at Ikeja, and outlined his 
organization's initiatives to tackle piracy.  He is working 
with local police to remove street vendors selling pirated 
products from Ikeja, confiscate and destroy their pirated 
goods, and trace the source of pirated items.  He stated 
CAPDAN will stage a "major raid" in the next two weeks 
against street vendors.  However, when asked about a raid 
they claim they conducted earlier this year, CAPDAN 
representatives were unable to provide detailed information. 
 
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Comment 
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10. (C) Comment: While a positive step, CAPDAN's planned raid 
in Ikeja will have scant long-term inmpact on this problem. 
The GON must play a more active role.  To date, weak 
regulatory agencies such as the NCC, lack of resources to 
fund IPR enforcement, and the cheap cost of labor make 
Nigeria and Lagos ideal for firms interested in selling and 
producing pirated computer software products. End Comment. 
BROWNE