A joint investigation by the United States Federal Bureau of Investigation and China's Public Security ministry has led to the seizure of more than $500 million in counterfeit software and more than twenty arrests. Software industry representatives have welcomed the cooperation. Daniel Schearf reports from Beijing.

The FBI's Los Angeles office issued a statement Tuesday saying the two-year cooperative effort with Chinese police involved investigations in both countries of groups who manufacture counterfeit software and distribute it around the world.

Criminal organizations were discovered in the Chinese cities of Shanghai and Shenzhen, producing and distributing illegal disks including Microsoft and Symantec software.

Chinese officials arrested 25 people and seized more than 290,000 software compact disks with an estimated retail value of more than $500 million, most of them bound for the United States.

The FBI statement described this as an "unprecedented cooperative effort" with China's Public Security Ministry.

Victor Zhang is director of the China office for the Business Software Alliance, a trade association representing the world's leading software providers, including Microsoft and Symantec. He says international cooperation is vital to fighting software piracy.

"This represents a positive step forward in efforts to crack down on the global piracy threat. The Chinese Ministry of Public Security's encouraging collaboration with the FBI and Microsoft to close down this illegal operation demonstrates China's ongoing determination to tackle software piracy," said Zhang. "While we are seeing significant successes in the battle against software piracy, the size of this counterfeit operation reflects the challenges the industry faces."

Zhang says in 2006, 35 percent of all software purchased worldwide was pirated, causing business losses of $40 billion. In China alone, the Business Software Alliance says losses were $5.4 billion.

Pirated software, music CDs and digital videos are widespread in China as is the sale of fake name-brand clothing, watches, and other accessories.

China has focused investigation and punishment on manufacturers of pirated goods, allowing retailers to avoid fines and administrative punishment that experts say are more a cost of doing business than a real deterrent.

From 2006 government departments have been required to only purchase computers with legitimate software pre-installed. But, the Business Software Alliance says the government has been slow to replace past pirated software purchases still in use with new legitimate ones.

Zhang says that better enforcement of intellectual property rights laws has helped China's piracy rate to drop by ten percent since 2003. However, the Alliance said, in 2006, 82 percent of all software sold in China was pirated.