Software Licensing Piracy and the Law
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Pirate

Numerous misunderstandings exist in the areas of software copyright, and the legal and ethical implications of software use, licensing and copying. The consequences of failure to understand or adhere to these rules and laws can be disastrous.

It is the intent of this tipsheet to clarify some of the more common areas of confusion.

Virtually every package of commercial software that you purchase is accompanied by a license. This license spells out in detail what you can and can not do with the software, and in many cases, you agree to the terms of this license when you open the package or install the software.

In general, the rules are....

Unless SPECIFICALLY STATED IN THE LICENSE you may NOT;

install or operate the software on more than one computer at a time. If you have five computers in your company, each computer must be running a separate copy of the software. That is, you must purchase five copies of the software, one for each system. You MAY NOT simply purchase one copy and install it on all five machines.

Most licenses do not permit installation of software on a multi-user network unless an additional fee is paid.

Some licenses permit installation on more than one machine, as long as the program will never be operated on more than one machine simultaneously. This is the "Like a Book" License.

In many cases, the license agreement states that you do not even own the software, only the disk or tape on which it was shipped. Full title and ownership to the software, and even the documentation remains with the developer. You are only granted a limited license to use it, and only under the conditions of the license.

The law states that you are permitted to make a SINGLE backup copy of the software, but ONLY for backup purposes. If, at a later date you sell or give the software to another person, you are required to destroy any copies remaining in your possession, or give them to the new owner.


It is Imperative That You Read and Understand the Licensing Agreements for All Software Under Your Control!


An excerpt from a LOTUS licensing agreement....

    You May:
  • Use the software on any compatible computer....provided you have the original documentation and disks and you use the software on only one computer and by one user at a time.

An excerpt from a Software Publishing CompanyLicense Agreement....

    You may:
  • Install the program on only one computer.
  • make one (1) copy of the of the program in machine readable form solely for backup purposes, provided that you reproduce all proprietary notices on the copy; and
  • physically transfer the program from one computer to another, provided that the program is used only on one computer at a time.
  • You may not:
  • a. use the program on more than one computer or workstation at a time in a network or multi-user system.

A SWP license further states that.....

"This license is not a sale. Title and copyrights to the program, accompanying documentation and any copy made by you remain with Software Publishing Corporation."


I recently discovered numerous pirated software products in use at the offices of a large magazine publishing firm. They actually claimed that they did not know it was a violation. When I asked them what they would do to a company that made hundreds of copies of an article in one of their magazines without permission rather than ordering reprints, they understood.

THE PENALTIES FOR VIOLATING THE LICENSE

Until recently, enforcement of software licenses was rather loose. Because of recent court decisions in favor of software developers, however, plus the severe impact of piracy and illegal duplication on the bottom line of the developers, stepped up enforcement is in place. Several organizations have established toll free hot-lines and reward systems to encourage people to turn in violators. A disgruntled employee or even a competitor is only an 800 call away from causing you and your company serious trouble if you are in violation of your software licenses. The penalties can be severe, and the consequences devastating.

Acting on a tip from a recently fired employee, ADAPSO, along with a group of software developers started the ball rolling within a small company in California. After gathering testimony from other employees and ex-employees, U.S. marshals armed with warrants raided the company offices. 12 illegal copies of Word Perfect, 8 of Lotus and 15 copies of dBase were discovered. The killing blow was that all of the computers in the company were seized as evidence, along with all backup tapes and disks. The net result was that the company was forced to close its doors.

If a company is caught with illegal software, they can expect to be vigorously prosecuted. If the violation is small, the penalty may only be that they will be required to purchase as many copies of the software as were pirated, at twice the full list price plus damages, depending on the length of the violation. Since software usually lists for about twice the street price, even this seemingly minor penalty can become quite expensive. The secondary penalty is that violation is a felony, to which the officers of a corporation can be held accountable.

To protect yourself and your company, a written "NO PIRACY" policy should be in effect, preferably as part of the employee or standard policy manual. In addition, all employees with access to computer software should be required to read and sign a copy of your policy statement.


QUESTIONS AND ANSWERS

Q. I have Word Perfect at the Office, and I also use it for work at home, do I have to buy two copies.

A. You should check the terms of your license. Many vendors permit the software to reside on two machines as long as it will ONLY be used on a single machine at any given time. If you are using it at home and someone else is also using it at your office, it is probably a clear violation of both your license and the law.

Q. Software is too expensive. Why should I pay $1,500.00 for a product that only costs a few dollars to produce.

A. 'Cause that's the way it is! Even if a product IS more expensive than it is really worth, that is no excuse to steal. People who would never dream of walking into a toy store and shoplifting a Nintendo cartridge have no hesitation in making copies of their latest PC or Apple game for all of the kids on the block. Illegal copying of software IS stealing, and stealing is both illegal and unethical.

Also, while it only costs a few dollars to print a manual and duplicate a few disks, thousands of hours of research, development and programming time go into even the most basic of software products. In order to continue to improve a product and develop new ones, developers must act to prevent the loss of revenue due to piracy.

Q. We're just a small company. We can't afford to buy all of the software we need. We feel justified. It's not like our few extra copies of Windows are going to cripple a big software company like Microsoft.

A. Please see my previous answer. No, your few hundred dollars will never be felt by a software giant. But the combined loss caused by hundreds of companies such as yours forces the cost of software higher. This is much the same as shoplifting increases the retail price of other products. I am sure that your computers cost a lot of money as well, and you probably didn't have the money. Why didn't you steal them?

Q. Can they really seize my computers?

A. The copyright laws are Federal laws, and violations are investigated by the F.B.I. Those folks do not have a strong track record in the humor and compassion departments. They can and they will seize your equipment! How long could you remain in business if suddenly, without warning, every computer in your company, along with backup tapes and disks were seized? While it is unlikely that this would happen it could, and it has.

Q. We chose a particular computer store because their systems came pre-loaded with software at no extra charge. In fact, the value of the software alone was twice what we paid for the computers. We have MS Office, Procomm, Corel Draw, Photo Shop, Illustrator and a LOT more. The manuals that we received were the same books that you can buy at the local bookstore, and some were Xerox copies of the originals. I suspect that the store is distributing pirated software. How can we tell if they are, and if so are we liable in any way.

A. It sure sounds like you are in possession of stolen merchandise. Check the serial numbers within your programs. If all copies of each program have the same serial number, you can bet you have illegal software. You should also have received the original diskettes, registration cards and the original publishers manuals for this software.

If this store is selling computers loaded with pirated software they are in effect selling stolen goods. You, however, could also be held accountable. You may be able to get off the hook, and save yourself a lot of money by reporting these violations to the publishers. I know of one company who turned in a dealer selling pirated software and as a reward was given legal, registered copies of all of their illegal programs.

Q. I didn't get disks with my new computer, but I got a coupon that says I can get a set for 25.00 Is this legitimate?

A. Probably is OK. Many systems now come with the software pre-loaded, and no diskettes or CD's at all. If you recieved genuine manufacturer's manuals and/or registration cards, you have genuine software.

Q. This doesn't apply to operating systems like Windows does it?

A. This is one of the greater myths. Yes -- DOS and Windows are copyrighted programs. If you purchase a computer system loaded with DOS or Windows, you should also expect to receive THE ORIGINAL DISKS and manuals, or at least a Certificate of Authenticity, complete with the Hologram. If you do not, and the vendor will not supply them, it is likely that they, and you are in violation of the law!

Q. What is the difference between public domain software and shareware?

A. Public domain software is software not covered by any form of copyright protection. Often it has been developed for or by a government agency and released to the public. More often is a program of little commercial value which has been released to the public domain by the author. You can jolly well do what you like with public domain software. Modify it, recompile it under your own name and sell it, use it and copy it freely. Though you could resell it under your own name, a copyright on it would probably not be enforceable since it would not be an original work.

You must be careful with Public Domain Software, to be Certain That It Really Is In The Public Domain.

Anyone with some basic programming talent can add a "Released to the Public Domain" Statement to a piece of commercial software.

Your Responsibility is to be Certain that the Person Who Releases It, Has the Authority to Do So. In general, Only the Author Has That Right.

ShareWare on the other hand is copyright protected, and can only be used under the terms and conditions included with the software.

What this usually means is that you can try it for a limited period to see if it is useful to you. If not, you owe nothing, just erase it. If you do find it useful and continue to use it, you are required to send the author the requested registration fee

The license agreement applies even though the shareware may be free. A couple of good examples are the Free Agent Newsreader and Pegasus Mail. Absolutely free for personal use, with no registration fees or other costs. Even though they may be freely copied and given away, you must still comply with the license agreements, and if used in a corporate environment, there is a registration fee.

Shareware is a major weapon on the war against high software prices, and there are many shareware packages which are of high, professional quality. You can try it before you buy it. If you decide to put it in use, the price tag for registration is very reasonable. It also gets you the latest version, announcements of future updates and often, a printed manual.

Shareware is software sold by the honor system. Please, if you are using any shareware on a regular basis, send the author the requested registration fee. It is usually quite modest and will assure continued development of these excellent and reasonably priced products.


SAMPLE COMPLIANCE SECTION FOR COMPANY POLICY MANUAL


A well executed "No Copy" Policy will go a long way toward relieving corporate liability in a piracy action, but only if it is enforced.

(A Signed Copy To Be Placed in Each Employee File)

I understand that during the course of my employment with [company] that I may be given access to computer, electronic mail and other electronic data systems, which are the property of [company]. I understand that the nature of any and all information, programs and data contained on these systems is to be considered confidential. I agree NOT to make copies of any programs, information or data for any purpose outside my duties as an employee of [company]. I further agree that I will not place any personal software, information or data on these systems, unless specifically authorized by the director of information services.

I have received a copy of, read, and understand the text of Software Copying, Piracy and the Law. I understand that violations of software licensing agreements are a Federal Crime, and will constitute just cause for dismissal.

Signed:__________________________________ Date: _____________


DISCLAIMER

I am NOT a Lawyer, and The Above is NOT Legal Advice.

The above are merely guidelines which will vary, depending on the terms of your licensing and contract agreements.

Laws vary from state to state, and are constantly being reviewed and revised. YOU MUST have any forms and or company policy issues reviewed and approved by YOUR ATTORNEY! For the Latest Information, Please Contact the Software Publishers Association.

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Copyright ©1995-2010 by T. S. Eggleston
Updated: September 22, 2010

About the Author

    Stephen Eggleston brings more than 35 years of education, training and diverse, real world experience to the classroom, boardroom, broadcast studio and lecture hall. He is an acknowledged expert in Internet publishing, communications, user interface design, presentation graphics, photography, marketing and knowledge management. Rumored to have associations with a number of three-letter agencies, he is author of numerous articles, editorials and technical papers. His talent for making complex subjects understandable is reflected in his contributions to textbooks, references and on-line course materials from secondary to post-graduate levels.

    His seminars, keynotes and training programs on presentations, speaking, management, quality, technology and the Internet are popular among small business and fortune 100 companies alike.

    Eggleston is currently serving as Director of Internet Technology for a leading importer and distributor of extraordinarily fine wines and a superb line of grappas and specialty spirits.