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Mark Grossman

Hefty Penalty for Using Unlicensed Software

19 July 2001

How many computers do you have in your office running Word? How many licenses do you have for Word? If the answer to the first question is "many" and the answer to the second question is "not as many," or if you simply don't know the answers, you need to immediately clean up your act. If you don't, you risk hefty monetary penalties.

You must remember one basic fact about software. When you ``buy'' software, you don't typically buy the copyright to the software. What you buy is a license to use the software.

Every license is different and there's no such thing as a typical license. Some licenses require one license per computer. Some allow you to put the software on a server for many people to use. Others let you use your work software at home without having to buy a second license. The variations are endless.

You know that little box that pops up as you're installing your software. You know — the one that includes the license you didn't read before you clicked "I Accept." I have a suggestion for you. Next time, read it before you click "I Accept." You should assume that it's a legally binding agreement and you might consider understanding it.

License Enforcement

The Business Software Alliance (BSA) is one trade group in the business of enforcing its member organization's licenses. Its members include low profile companies like Microsoft, Symantec and Adobe Systems.

If you don't have the proper number of licenses for the software you use, your problem might just start with a disgruntled former employee calling BSA at 1-888-NoPiracy. I don't know about you, but I don't know of many businesses without disgruntled former employees.

Simply put: using software without having the proper license is an invitation to financial disaster. It might start with a letter requesting an audit of your software licenses. It could also start with an unannounced raid by U.S. Marshals. Either way, you will wish that you had just simply paid for the correct licenses from the beginning.

BSA will not accept after-the-fact compliance as a way to resolve your piracy. They always want sizable monetary penalties and then they insist on you buying the correct number of licenses after you pay the penalty. It's not unusual to hear of settlements in the range of $50,000 to $500,000. With this much at stake, you should take any inquiry by BSA as a reason to call your tech lawyer. You're playing with fire here.

Settlement is a good option when you consider that if the copyright owner sued you, it could immediately stop you from using its software and get money damages of as much as $150,000 for each program copied. Then bad gets worse when you consider criminal prosecution could lead to a fine of up to $250,000, or a jail sentence up to five years, or both.

Scope of the Problem

According to BSA, in 1999 in the U.S., about 25 percent of the software they studied was pirated. Florida had an above average piracy rate of 30.7 percent, which put it eighth in the nation. The lowest rate was in Virginia (16.2 percent), the highest rate was in Utah (33.7 percent) and Washington, D.C., came in at a below average 23.5 percent.

Internationally, the problem is far worse. For example, in Bahrain in 2000, it is estimated that 80 percent of the software used there was pirated. In Russia, it was 88 percent. The winner (or is that loser?) is Vietnam, where it is estimated that in 2000, 97 percent of all software was pirated. Still, I would like to take a moment to applaud Vietnam for its improvement in this area, since in 1994 they were at a perfect 100 percent. Obviously, they take stealing other nations' intellectual property quite seriously.

Preventing a Problem

One of the most important steps in preventing software theft and copyright infringement is to educate your employees. You need to teach your employees about all software piracy and the consequences for involving themselves in such actions. The best place to start with your employees is the Computer Use Policy.

Another good step is using metering software, which allows you to inventory and track usage of your company's software.

If you find that your company is using pirated software, you can't undo what you did, but you can and must immediately buy the proper licenses so that you are in full compliance.

If you have a server, you should get a server software license that will allow a certain number of users to connect to the network on which the application is stored. It comes down to this: Software companies are serious about reducing piracy. Like with the IRS, while it's true that you may never be caught cheating, if you are, you will have a massive problem. I suggest that you just pay for the licenses. Besides everything else, it's just the right thing to do.

Hefty Penalty for Using Unlicensed Software is republished from
Mark Grossman
Mark Grossman