Introduction Background Information Technology (IT) is one of the most important elements in the development of the world economy. The software industry forms one of the most essential components of IT. The size of the global software market has undergone a significant growth over the past few years. According to a report by Gartner Incorporation (para. 1), the software market averaged $245 billion in May 2011. However, one of the major challenges facing the software industry is piracy which entails infringing the copyright laws associated with products such as music, movies or software. In an effort to curb software piracy, different governments have instituted various Intellectual Property Rights (IPRs). One of the commonly used IPRs in the software industry entails the patent laws. Patent laws give inventors a monopoly over their inventions by prohibiting illegal publication and distribution of software programs either through counterfeiting, rentals, soft lifting and hard disk loading (MacQueen, Waelde & Laurie 4). Considering the fact that development in IT is increasingly being considered as one of the most effective ways through which a country can gain a high competitive advantage, some countries are considering software piracy as an effective way through which they can attain their desired competitive advantage at minimal cost (Jones 24). The rate of software piracy is highest amongst the emerging economies. This arises from a number of factors such as affordability, poor enforcement of IPRs, technical barriers and the comparative value associated with pirated software (Deloitte 2). Most of the developing economies have a relatively low per capita income. As a result, the consumers have other spending priorities rather than purchasing legitimate software. Additionally, individual consumers attach the same value of legitimate software to pirated software. The Peoples Republic of China (PRC) is categorized amongst the countries with the highest rate of software piracy. In 1998, the rate of software piracy in China was 96 %( Jones 24). However, China has continuously implemented measures aimed at curbing software piracy due to pressure from other countries to comply with International IPRs. As a sign of its commitment towards IPRs, China has joined a number of international IPR conventions. This has enabled it to understand the importance of IPRs in dealing with software piracy. As a result, China has experienced a decline in the rate of software piracy over the past few years. By 2008 the rate of software piracy was 80% (Deloitte 24). This shows that the rate of software piracy in China is still high despite the measures implemented. China is ranked as the 2 nd largest market for personal computers and the 10 th with regard to software. This shows that there is a high market potential for software. The gap with regard to software market can be associated with the high rate of software piracy. One of the factors that have contributed to the high rate of software piracy relates to existence of an imbalance between demand for software products such as movies and other entertainment products and their supply. The Chinese government has implemented a quota system that