Computer Software Piracy

3/25/2003

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Software piracy is any unauthorized use of computer software. It includes the following:
  1. "Softloading" -- the purchase of a single user software license that is subsequently loaded onto multiple computers or servers;
  2. "Counterfeiting" -- the making, distributing and/or selling of software copies that are faked to look like they come from an authorized source;
  3. "Renting" -- the rental of software to consumers without the permission of the copyright holder;
  4. "Unbundling" -- the distributing and/or selling of software that has been “unbundled” or separated from the products with which it was intended to have been “bundled” or sold;
  5. "Internet downloading" -- the downloading of copyrighted software from the Internet or bulletin boards without permission from the software copyright owner.

Software Piracy and the Law
Software is automatically protected by federal copyright law from the moment of its creation. The rights granted to the owner of a copyright are clearly stated in the Copyright Act, Title 17 of the U.S. Code. The Act gives the owner of the copyright "the exclusive rights" to "reproduce the copyrighted work" and "to distribute copies ... of the copyrighted work" (Section 106). Consumers who purchase a license for a copy of software do not have the right to make additional copies without the permission of the copyright owner, except

  1. to copy the software onto a single computer and
  2. to make another copy for archival purposes only.

Software creates unique problems for copyright owners because it is easy to duplicate, and the copy is usually as good as the original. This fact, however, does not make it ethical or legal to violate the rights of the copyright owner. Such violators can pay a heavy price.

Software pirates are liable for a software copyright infringement whether or not they know their conduct violates federal law. Penalties include liability for damages suffered by the copyright owner plus any profits of the infringer that are attributable to the copying, or statutory damages of up to $100,000 for each work infringed. The unauthorized duplication of software is also a Federal crime if done "willfully and for purposes of commercial advantage or private financial gain (Title 18 Section 2319(b))." Criminal penalties include fines of as much as $250,000 and jail terms of up to 5 years.

When a few people steal software, everyone loses.

Permissible Software Use
Anyone who buys a license for a copy of software has the right to load it onto a single computer and to make another copy "for archival purposes only." It is illegal to load that software onto more than one computer or to make copies of that software for any other purpose unless specific permission has been obtained from the copyright owner or otherwise permitted in the license accompanying the software program. The law applies equally, for example, to a $25 game and a $750 project management program. Each product reflects a substantial investment of time and money by many individuals.

Regardless of sales price, software piracy inhibits innovation. The software industry is filled with new developers trying to break into a crowded market. They can survive only if their products are purchased. Each theft makes staying in business more difficult.

Software Piracy and Businesses
In the workplace, software piracy takes two common forms: 1) extra copies of software are made that employees take home; and 2) extra copies are made for the office. Both situations mean a greater number of computers can run more copies of the software than were originally purchased. However, unless a special arrangement has been made between the business user and the software publisher, the user must follow a simple rule: one software package per computer. This means that a copy of software should be purchased for every computer on which it will be used. For example, if there are 25 employees using word processing software on their computers, each employee must have a licensed copy.

Software development involves a team effort that blends the creative talents of writers, programmers and graphic artists. Piracy diminishes the value of a program and deprives the developers of fair compensation.

By buying the correct number of programs or the right type of license, a company removes the incentive for employees to make unauthorized copies. Following these rules pays off in the long run. Businesses that illegally duplicate software expose themselves to severe criminal and financial penalties.

A Software Policy for Businesses
It is highly recommended that businesses adopt a software policy to help avoid any violations of software licensing. Below is a sample policy provided by the Software Publishers Association (SPA). To report a case of software piracy, call 800.388.7478.

Sample Software Policy

  1. General Statement of Policy. It is the policy of [Name of Business] to respect all computer software copyrights and to adhere to the terms of all software licenses to which [Name] is a party. [Name] will take all steps necessary to prohibit users from duplicating any licensed software or related documentation for use either on [Name] premises or elsewhere unless [Name] is expressly authorized to do so by agreement with the licensor. Unauthorized duplication of software may subject users and/or [Name] to both civil and criminal penalties under the U.S. Copyright Act.

    [Name] must not permit any employee to use software in any manner inconsistent with the applicable license agreement, including giving or receiving software or fonts from clients, contractors, customers and others. [John Doe is [Name’s] software manager, and is charged with the responsibility for enforcing these guidelines.

  2. User Education. [Name] must provide and require a software education program for all of its software users (to be crafted by the software manager). Upon completion of the education program, users are required to sign the [Name] Employee Personal Computer Software Usage Guidelines. New users will be pro-vided the same education program within 10 days of the commencement of their employment.

  3. Budgeting for Software. When acquiring computer hardware, software and training, [Name] must budget accordingly to meet the costs at the time of acquisition. When purchasing software for existing computers, [Name] must charge the purchases to the department’s budget for information technology or an appropriate budget set aside for tracking software purchases.

  4. Acquisition of Software. All software acquired by [Name] must be purchased through the [MIS, purchasing, or other appropriate] designated department. Software may not be purchased through user corporate credit cards, petty cash, travel or entertainment budgets. Software acquisition channels are restricted to ensure that [Name] has a complete record of all software that has been purchased for [Name] computers and can register, support, and upgrade such software accordingly. This includes software that may be downloaded and/or purchased from the Internet.

  5. Registration of Software. When [Name] receives the software, the designated department (MIS, purchasing, etc.) must receive the software first to complete registration and inventory requirements before installation. In the event the software is shrink-wrapped, the designated department is responsible for completing the registration card and returning it to the software publisher. Software must be registered in the name of [Name] and department in which it will be used. Due to personnel turnover, software will never be registered in the name of the individual user. The designated department maintains a register of all [Name] software and will keep a library of software licenses.

  6. Installation of Software. After the registration requirements above have been met, the software will be installed by the software manager. Once installed, the original media will be kept in a safe storage area maintained by the designated department. User manuals, if provided, will either reside with the user or reside with the software manager.

  7. Home Computers. [Name] computers are organization-owned assets and must be kept both software legal and virus free. Only software purchased through the procedures outlined above may be used on [Name] machines. Users are not permitted to bring software from home and load it onto [Name] computers. Generally, organization-owned software cannot be taken home and loaded on a user’s home computer if it also resides on [Name] computer. If a user is to use software at home, [Name] will purchase a separate package and record it as an organization-owned asset in the software register. However, some software companies provide in their license agreements that home use is permitted under certain circumstances. If a user needs to use software at home, he/she should consult with the software manager or designated department to determine if appropriate licenses permit home use.

  8. Shareware. Shareware software is copyrighted software that is distributed via the Internet. It is the policy of [Name] to pay shareware authors the fee they specify for use of their products. Under this policy, acquisition and registration of shareware products will be handled the same way as for commercial software products.

  9. Quarterly Audits. The software manager or designated department will conduct a quarterly audit of all [Name] PCs and servers, including portables, to ensure that [Name] is in compliance with all software licenses. Surprise audits may be conducted as well. Audits will be conducted using an auditing software product. Also, during the quarterly audit, [Name] will search for computer viruses and eliminate any that are found. The full cooperation of all users is required during audits.

  10. Penalties and Reprimands. According to the U.S. Copyright Act, illegal reproduction of software is subject to civil damages of as much as US$100,000 per title infringed, and criminal penalties, including fines of as much as US$250,000 per title infringed and imprisonment of up to five years. An [Name] user who makes, acquires, or uses unauthorized copies of software will be disciplined as appropriate under the circumstances. Such discipline may include termination of employment. [Name] does not condone the illegal duplication of software and will not tolerate it.

I have read [Name] anti-piracy statement and agree to bind the [Name] accordingly. I understand that violation of any above policies may result in both civil liability and criminal penalties for the [Name] and/or its employees.

___________________________
Signature of Employee.

Reality Check
The following are just a few of the reasons why using software ethically is so important for businesses and consumers:

    Software piracy is illegal. It is a Federal offense to duplicate software without proper license authorization.

  • Software piracy is risky. Stolen software can be infected with computer viruses, incompatible with computer systems, or not fully functional. It also lacks manuals and/or technical support.

  • Software piracy is unproductive. Software typically becomes out-dated very quickly and piracy leaves no access to product upgrades or innovations.

  • Software piracy is wrong. Put yourself in the shoes of a software developer and ask yourself how you would feel if your property and life’s work were stolen and used without your permission or compensation.

Software piracy costs the software industry over $10 Billion in lost revenue each year and costs U.S. businesses millions in fines and legal fees. Software piracy translates into higher costs for consumers, less technical support and innovation and fewer jobs.

Outside Resources
To learn more about Software Piracy issues, contact the following:

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