The alliance said in its annual study, now in its eighth year, that it lost nearly $11 billion in sales to software piracy in 2001.

A more telling statistic, it said, was that 40 percent of all new software installed by businesses last year was obtained on the black market, up from 37 percent in 2000.

"In the seven years that we have conducted this study, this is the first time piracy has increased for two years in a row," said Beth Scott, vice president for the group in Europe.

"This is particularly disturbing in light of the fact that more and more software companies are moving their distribution systems to the Internet."

The software alliance, formed in 1988 to tackle software piracy, saw declining world-wide piracy rates through the mid-1990s. Piracy levels picked up in 2000 though, just as illicit software became widely available on the Internet.

The movie, music and video game industry has also been hit hard by piracy. The availability of bootlegged media on the Internet, particularly in file-sharing networks such as Kazaa and Morpheus MusicCity, has eaten into sales, industry leaders say.

CALLS TO GET TOUGH

Scott told Reuters that the group's education tactics are not working. It needs to be tougher with violators, she said, who tend to be small and mid-sized businesses that look for cheap or free software to run their computer operations.

This year, the alliance will push ahead with efforts to lobby politicians to toughen piracy laws, which do not exist in most nations or carry only a small fine for offenders, she said.

The global industry group consists of 46 software makers including Microsoft Corp., Symantec Corp. and Adobe Systems Inc. .

Scott noted that software piracy rates in France and Germany increased last year despite the group's increased vigilance in Europe, where in 2001 it issued over one million notices to companies to alert them they might have run afoul of software copyright infringements.

The more traditional piracy havens of Eastern Europe and Latin America topped the charts again, with piracy rates of 67 percent and 57 percent, respectively, the alliance reported.

North America, where the copyright infringement laws are toughest and awareness is the highest, saw piracy increase from 24 percent to 25 percent, still the lowest regional rate in the world, the alliance said.

In Asia, piracy rose in Malaysia, India and the Philippines, though the region as a whole was down slightly.