A research house in China is defending the country from accusations of software piracy, saying the picture is not nearly as bad as has been portrayed by "some international organizations" (read: The Business Software Alliance, or BSA).

So, do they have a leg to stand on? Not so much, I'm thinking.

The report says:

Pirated software sold in the Chinese market accounted for 24 percent of the value of the country's total software industry in 2006, which is down two percentages from that in 2005.

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The report was based on studies carried out by Chinalabs, a leading domestic Internet research institute. In 2005, the State Intellectual Property Office tasked Chinalabs with the researching of software piracy.

It attributed the decline to the robust growth of free software, a continuous government anti-piracy campaign, and the development of competitive domestic IT companies which produce reliable and affordable software products.

Ye Xiumin, a researcher with Chinalabs, said the report is more accurate than the estimates by some international organizations, which mistakenly counted free software as counterfeit products.

She cited a 2003 estimate by The Business Software Alliance which claimed that the piracy rate in China was as high as 92 percent.

"We have deducted free software from the research pool to make sure the results reflect the true situation of piracy in China," Ye said.

I am not sure what this free software that they are referring to is, exactly. Yes, there are a lot of free IM clients, Web toys, add-ons and other ad-supported trivia. There are also online games that are free to download, but cost money to play. But since they're free, it's hard to figure out how Chinalabs is valuing them exactly, or how their use affects the piracy rate. If you assume free software can't really be pirated (I suppose it could be distributed or used outside of its license terms, but let's not split hairs that fine), then the piracy problem, defined as unlicensed use of commercial software, remains huge.

I'm not a huge fan of BSA's statistics. It has an unfortunate habit of counting any pirated software usage as a foregone sale when calculating financial damage, which does produce wonderful eye-popping numbers at the cost of methodological robustness. But I am not sure Chinalabs has quite swung my opinion the other direction.

Piracy is rampant in China. China has a real incentive to spin the figures because it faces WTO lawsuits over IPR problems. BSA has a real incentive to spin the figures, too, in order to put pressure on China on behalf of its members. It's hard to know where the truth lies. But, anecdotally speaking, China is still awash in pirated software, especially in the case of high value stuff that matters, such as the Microsoft Windows OS, big-time art, 3D packages and other similar stuff.

Fortunately for everyone, China has its own nascent commercial software industry to protect. If anything will drive real change here, it will be that.