App piracy in China hurts developers' bottom lines

— -- For smartphone and tablet app developers, China is the new wild, wild west — a promising market, but one that offers little copyright protection.

App piracy is proliferating in China, depriving app developers of millions of dollars in revenue from app purchases, on-app advertising and in-app buys.

To list an app in an online app store, operators strike a listing agreement with individual developers. But a black market store can list apps illegally in several ways, explains Dov Cohn of Appia, a legal Android app store in the U.S. It can copy an app and list it as is, delivering some ad revenue to the developer. Or hackers can modify the app's software and graphics, and resell the app as a knockoff, cutting all ties and profits to the original developer.

Software companies operating in China have always found enforcing their intellectual property rights a challenge. But the issue is coming to the fore again as smartphones proliferate worldwide and violators can access apps' software codes relatively easily.

PicFace, a which-celebrity-do-I-resemble app, is a hit in the Android market, with about half a million downloads. But Alon Atsmon, who developed the free app, had no idea it had a following in China, too, until he received a letter from a Chinese app store, AppChina.com, asking him to approve the app's listing after it had already been made available to users. Atsmon ignored the form because it was written in Chinese, and he figured the hassle of fighting it was not worth his time and effort.

"Losing control of your app can be dangerous in many ways," says Atsmon, whose other product, iOnRoad, the free version of a distracted driver prevention app, was also taken by the same Chinese app store without approval. "You don't know how many downloads. There's no control for changing or updating the app."

The problem is more prevalent for Android (owned by Google), since no Google-sanctioned app market exists in China, which has blocked many Google sites. Apple also deals with Chinese piracy, mostly from "jail-broken" iPhone users, but the problem isn't as extensive because the company runs an approved Apple app store in China.

According to a 2011 study of two Chinese app stores by Lookout Mobile Security, about 17% of apps were pirated or repackaged likely by someone other than the developer. It also found that 85% of the apps in one Apple app store for jail-broken phone users in China were pirated versions of the paid apps in the Apple App Store.

Chris Pruett, founder of gaming company Robot Invader, says his Android app, Wind-up Knight, was pirated in China. He loses money because Chinese users can't make in-app purchases in the version available there. He estimates about 12% to 15% of the app's users are Chinese who have downloaded the pirated version.

Google has offered some software tools that developers can use to protect their apps against piracy, including a "license verification" feature that can be programmed into the app. It forces users to verify that the app has been paid for. "It's all about making it harder" for hackers, says David Richardson, lead Android developer for Lookout.

Another encryption tool for Android devices works only on the latest version of Google's Android operating system, known as Jelly Bean, and allows the app to run only on the device that properly downloaded it. But few devices run on Jelly Bean, Richardson says. Hackers can use an older device to download apps.