Microsoft is seeing some improvements to the considerable problem of software piracy in China, it's top lawyer said on Thursday.

"I think the last year has been the most important and encouraging year for software protection under the copyright law in China," said Brad Smith, senior vice president and general counsel for Microsoft, during a news conference in Tokyo.

"We're starting to see new PCs in China delivered to customers with legitimate software installed," he said. "That's a very encouraging step. We're starting to see more enterprises and government ministries purchase legitimate software. That's an encouraging step."

China has one of the highest piracy rates in the world. Software companies lost $3.9 billion in the country in 2005, according to the Business Software Alliance, an industry group of which Microsoft is a member. Its most recent report said that 86 percent of software installed on PCs in China in 2005 was pirated. That gave it the fourth-highest piracy rate in the world, tied with Pakistan and behind Vietnam, Zimbabwe, and Indonesia.

Despite the positive signs, a lot remains to be done in China, Smith said. "There will need to be a continuing focus on the improvement in copyright protection and reduction in piracy levels," he said, adding that more work must also be done worldwide.

Smith's comments came three days after the U.S. government said it would file two complaints against China with the World Trade Organization, one of which accuses the country of being lax on enforcing copyright.

Addressing the problem will also benefit China's own companies and citizens in the future, he said.

"For the long term I think it's worth noting that China is graduating four times as many engineers as the U.S.," Smith said. "There are many creative and talented engineers in China and every year there is an opportunity for those engineers to create great products in China and to benefit and innovate from intellectual property protection in China."

"It's very clear that over the coming decades more and more individual engineers, scientists and entrepreneurs are going to be creating great inventions in China and they'll likely want to benefit from intellectual property protection for these things," he said.