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Software Piracy

We're part of the first generation that has taken the computer and made it an integral part of our workplaces and homes. For many, learning about computers started years ago as a hobby. Trading copies of software among students and friends was just something people did.

Now, we're grown up, and we're running businesses. Studies show that we haven't stopped trading and copying software. The difference now is that we're flirting with real consequences.

The simple fact is that federal copyright law protects software from the moment of its creation. The protection the law gives is quite straightforward. The copyright owner has "the exclusive rights" to "reproduce the copyrighted work" and "to distribute copies."

When you buy a copy of software, you don't have the right to make copies without the copyright owner's permission, with two exceptions. The most obvious one is that you can make a copy to put on a single computer system. Obviously, the software doesn't do you much good if you can't copy it to your computer. The second legitimate copy is for archival purposes - your backup copy.

The good news is that many times, the license for your software (you know, that screen full of legal mumbo-jumbo that you didn't read before you pressed the "I agree" button during the software's install routine) allows you more rights than the law requires. Many licenses for single user, but not network software, allow you to use a single copy of the software at the office and at home too. So, read that license next time.

The Consequences

I'm not here to condone the improper copying of software for home use, but the simple fact is that I've never heard of anyone ever having a legal problem because of it. Clearly, it's illegal, but it's also about as enforceable as a law that said that all cigarette smoking must be outdoors. You're not likely to see the smoking or software police in your home.

Now, improper copying for business is different. No, there aren't roving patrols of software police, but there are industry trade groups out there looking for illegal software use, and infringing businesses have deeper pockets than the home user. There are also disgruntled ex-employees looking to turn you in.

The most common scenario is that a former employee calls one of the industry hotlines for reporting software piracy - and now you have a problem.

Federal law says that the penalties are the damages suffered by the copyright owner plus any of your profits that are attributable to the copying, or statutory damages of up to $150,000 for each work infringed. You've even entered the world of a criminal offense if the copying was done "willfully and for purposes of commercial advantage or private financial gain." Criminal penalties for the individual include fines up to $250,000 and jail terms of up to five years. Criminal penalties for businesses can be much higher.

Watch Your Networks

It's easy to get careless about software licensing if you have a computer network. The simple and basic rule is that you must a have one license for each computer that uses the software. So if you have 25 people running an expensive CAD (computer-aided design) program, you'll need 25 copies. The good news is that the basic rule has exceptions.

Many software companies sell what are called "site licenses" or "concurrent use licenses." That allows a company to make a specified number of copies for use in the business. There is a cost saving with this type of license because the number of licenses is not based on the number of computers, but the number of people using the software simultaneously.

So, if you have 50 computers and employees, but you never have more than 20 using Microsoft Word simultaneously, you need to pay for only 20, not 50, copies of the software.

Costs of Piracy

From its inception, the software industry has had to live with the reality that software is easy to copy and that a copy works as well as the original. Many companies have experimented with technical solutions that inhibited the ability of users to copy and use software improperly. The most common copy protection system we see today is the ability of the software to "phone home" to activate itself over the Internet.

Legitimate paying users dislike these copy protection schemes because they can be inconvenient or hurt the functionality of the software.

A few years ago, I had an experience that is typical of what happens with copy protection. I bought an upgrade to a program that I'd been using for years. I installed it at the office. The license was one that permitted a legitimate second copy for home use.

That night, I tried to install the software at home. The problem was that the copy protection program built into the installation program knew that the software had been installed somewhere else and refused to let me install it at home.

Of course, it was after business hours, so I couldn't call technical support - and I couldn't finish my work that night.

The next day, I called tech support. Let's just say that the person on the other end of the phone was not a doctoral candidate for a degree in rocket science. I explained the situation to him and he said that I needed to buy a second copy of the software for home use. I calmly read him the language in the license that authorized home use and he still insisted that I needed a second copy. (Did you ever want to rip someone's lungs out through a phone line?) Oh, yes, and let's not forget that this endless long-distance telephone chat with this under-brained (I meant under-trained) person only happened after my interminable wait "on hold." And all of that fun was on my nickel.

Finally, two supervisors up the food chain, I spoke to someone who, God bless her, understood and gave me the secret code number that permitted a second installation. So much for copy protection schemes.

This type of story is just one example of the problems caused by some copy protection schemes.

Scope of the Problem

The software industry is serious about fighting software privacy, and when you look at the revenue the industry is losing every year, you can see why.

According to one study, 35 percent of all software installed on personal computers worldwide in 2004 was pirated, at a cost to the industry of over $33 billion that year.

North America only pirates 22 percent of its software. The same study estimated that in the European Union, 35 percent of all software is pirated. In Latin America, the number is 66 percent, and in the Asia-Pacific region, 53 percent.

The winner (or is that loser?) is Vietnam, where it was estimated that 92 percent of all software was pirated. I would like to take a moment to applaud Vietnam for its efforts in this area, since in 1994 they were at a perfect 100 percent. Obviously, they take stealing other nations' intellectual property quite seriously.

Software Audit

The best way to keep your company out of trouble is to do a periodic software audit of all your computers. You need to check whether you're using more copies of software than you are licensed to use, or whether you are using software that was never purchased.

Your IT department or a computer lawyer can guide you through this process. There's special software that they can run that speeds the process along.

If you ever get a letter from a software company or trade association demanding that it be permitted to do a software audit of your systems, you have a major legal problem that you must take seriously. The consequences can be expensive. The best cure is prevention.

Read your software licenses and abide by them. After all, everybody has disgruntled former employees.



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