Abstract: In recent years, piracy has a deleterious impact on the software industry, therefore the software companies need to develop appropriate intellectual property protection strategy. This paper considers a vertically differentiated market, which means that software products compete in quality, meanwhile there is pirated software in the market. When a new technology software company enters the market, the original monopoly software company and the new technology software company should take what kind of protection strategies, thus enabling companies to maximize benefit. Based on this, we establish a model and the model analysis suggests that when a new technology software company enters, the original software company should adopt a non-protection strategy. The original technology software and the new technology software companies should adopt a simple and low-cost protection measures. When the new technology company produces relatively high quality software, the new technology software companies tends to adopt a non-protection strategy