Kathmandu, Shrawan 17 - There are growing instances of source code theft in Nepal's software industry, especially as technology companies are reporting that former employees or other insiders have stolen their company's proprietary software and have used it to create competing software, raising concerns over software intellectual property protection in Nepal.
In FY 2025/26, the Cyber Bureau of Nepal Police received 10 complaints regarding the source code theft. There have also been complaints to the Copyright Registrar's Office about similar items and a number of software copyright infringement cases have been taken to court. Reports suggest that the majority of incidents are the result of employees or former employees who have permission to access the company's systems, not from outside hackers.
One of the recent cases involves Kathmandu-based Diyalo Technologies that created an enterprise resource planning (ERP) system called WaterMark. According to the company, a number of the former employees then formed another company, and released its own product that imitated the software's source code, database design and internal structure.
Following the investigation by Cyber Bureau, the Kathmandu District Government Attorney's Office has filed charges against five people. Prosecutors say the copies of the software were sold to multiple committees in Kaski, all of which run community drinking-water systems. Such accusations will remain subject the court's determination.
Source code is the underlying set of instruction that is used to create software, applications and computer programs. It may contain a product's programming logic, database architecture, internal structure and other information representing a software company's intellectual property (IP).
Section 44 of the Electronic Transactions Act, 2063 constitutes an offence of unauthorized destruction, alteration or theft of computer source code required to be maintained pursuant to the existing law. Sentences for this offence can be up to three years in prison, up to a Rs200,000 fine or both.
However, legal and technical experts state that source code theft cases will be hard to investigate and prosecute. Determining if software has been copied involves in-depth technical comparisons, since parts of the software could be from a publicly available or open-source software. Companies also may find it difficult to receive proper compensation from the court of law as there is no standardized way to determine the commercial losses arising from software theft in Nepal. Experts also have raised the fear that weak protection of software-related intellectual property will deter investments in the technology sector in Nepal. They have suggested more robust confidentiality and IP clauses in employment agreements, limiting access to source code information, and conducting routine security audits and having more explicit employee departure protocols to mitigate insider risks.
They have also called for reforms to the Electronic Transactions Act, more stringent penalties for source code theft, and a modern compensation system that adequately reflects the financial worth of software and other digital property.
Source: The Kathmandu Post
