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Mark Grossman

Software Licensing

17 December 2004

How many people in your business use Microsoft Word? How many licenses do you have? If the answer to the first question is a lot and the answer to the second question is not as many, you have a problem waiting to cost you big bucks.

When you "buy software," what you are typically buying is the right to use it in the ways your license specifically permits. So, for example, it might allow you to install a copy on your office computer and your home computer--or it might not. There is no standard answer to this question. You have to read the license agreement.

Misusing software in the office is simply an invitation for trouble. Everyone has a disgruntled former employee and there is no faster path to negative attention than one of your former employees reporting you to an organization like the Business Software Alliance (

If you ever get a letter that starts with something like, "The Business Software Alliance (BSA), an association comprised of leading software-publishing companies, has received information that your company may have illegally duplicated proprietary software products installed on your computers," you have a problem. Sometimes these letters will ask you to conduct a self-audit of your systems and report the results to the BSA.

If your first instinct is to cooperate, please control your instincts. Your next move should be to call a tech lawyer because you probably have an expensive problem on your hands. You will need an attorney with the right experience and knowledge to help you salvage a bad situation. This isn't the time for you to learn how to handle a software audit by yourself. You may find that the "tuition" is expensive.

Conceivably, your company could face a statutory penalty of $150,000. If the way you handled your software crossed the line into criminal, you could be looking at a fine of $250,000 and five years in jail for a first offense. If you're lucky, the BSA will only ask you to buy the number of licenses you should have AND pay a hefty penalty for your past non-compliance. I repeat – you need experienced counsel to salvage this bad situation.

If your lawyer assists with the audit, you may be able to shield some of the information gained during this self-audit behind attorney-client privilege. Put another way, the more you do before you involve your tech lawyer, the more chances you have to make a bad situation worse.

While having the attention of the BSA or other similar organization puts you in a salvage operation, you should realize that BSA sees itself as trying to salvage a bad situation too. According to one recent study, 23 percent of all software in the U.S. is not properly licensed and this costs the industry billions of dollars.

My point with these statistics is to help you see that the software industry sees itself at war with software misuse. When they get you in their crosshairs, you need to immediately recognize that you have a major problem before they quantify your problem into some ugly demand for money. If that's when you first seek competent counsel, you may have already cut your own throat.

Software Licensing is republished from
Mark Grossman
Mark Grossman