SOFTWARE PIRACY: DON’T LET YOUR COMPANY BECOME AN EXAMPLE

by Robert J. Tribeck & Kevin M. Gold

Need another copy of this program? That’s easy, just copy it from my computer. Wrong answer! And it could cost your company hundreds of thousands of dollars and, perhaps more importantly, created unnecessary and unwanted publicity.

The Business Software Alliance (BSA) is a non-profit organization funded by major software and hardware producers, such as Microsoft, Apple, Cisco, Dell, IBM and Intel. The sole mission of the BSA: to convince current or former employees to report software license and copyright violations by their employers, thereby starting a chain of events that inevitably leads to an expensive and embarrassing result for the employer.

Once the BSA gets a tip, it aggressively (often over-aggressively) pursues the alleged offenders. The fines associated with copyright violations can be as high as $150,000 per occurrence. The BSA repeatedly reminds and threatens targeted companies with such fines and its history suggests it will do everything in its power to pursue such a claim. The BSA makes even the most intrusive IRS Audit seem like a walk in the park, since the BSA is neither governed nor constrained by Federal Laws as are governmental agencies.

Upon receiving what it views as a credible tip, the BSA will contact the company, indicating that a tip has been received and seeking information from the company on its software and licenses. The information sought will include a detailed explanation of all computer software maintained by the company, plus evidence of the appropriate licenses for each piece of software, often under oath. Companies should understand that when the BSA poses such questions, it usually already has the answers. BSA will push a company for answers, often leaving little or no response time, coupled with a threat of action if a response is not received. And BSA has and will follow through on such threats.

Eventually, the company is left with two choices: purchase the required number of licenses and pay BSA a hefty fine, or risk the consequences of the BSA obtaining essentially a search warrant for the company’s premises, then appearing and “seizing” the company’s computers. Such actions inevitably result in expensive and time-consuming litigation, as well as significant business interruption. Equally important, however, the BSA has a policy of taking violators on in the press: the BSA will author embarrassing articles from the company’s perspective for publication in newspapers in and around the company’s offices. The purpose is deterrence to other companies. The BSA is so zealous on this issue that it has even ignored specific Court orders in seeking to embarrass a company.

Software piracy is sometimes “intentional” in that the company knows what it is doing is wrong but looks the other way. However, software piracy is often unintentional from the company’s perspective. For whatever reason, the company does not know (or chooses to ignore) what its IT professionals are doing relative to the securing of appropriate software licenses. Additionally, and perhaps most troubling for employers, a violation can occur when an employee loads copies of software from home onto a company’s computers, often without the knowledge or approval of the IT Department. Such software copying may in fact be illegal and the company is responsible for such actions.

Illegal software piracy can take many forms, including:

Duplication or sale of software;

Installation of one licensed copy of software on multiple computers;

Copying of disks for installation or distribution;

Exceeding the maximum number of employees using a central copy of software at the same time;

Sale of computers already containing unauthorized software;

Copying software to disk for use outside the workplace; and

Use of academic or non-retail software for commercial use without appropriate licenses

What can and should a company do to avoid becoming the BSA’s next poster child?

First, the company should conduct an audit of the company’s software and licenses. This can be performed in-house or through a consultant, but should be overseen or reviewed by counsel. Next, the company should create and implement a software licensing policy. Such a policy, if in place, can be an effective tool for limiting liability and establishing good faith in the event of a breakdown. Moreover, the BSA almost always mandates implementation of such a policy in the event of a report. Third, the company should be adamant with its employees that illegal duplication of software will not be tolerated. Interestingly, it is not unusual for the person responsible for illegal piracy within a company to be the person who ultimately provides the BSA with its tip. Finally, and perhaps most importantly, no company should feel safe under the theory that “No employee here would go to the BSA.” Such a posture is precisely what gets many companies into trouble. If a company has any employees, no matter its size, it runs the risk of one of those employees (or former employees) becoming disgruntled and make a report.

If your company does receive a target letter, you should immediately consult counsel. BSA will do everything in its power to obtain any and all information from unsuspecting companies before counsel is obtained. Though the time provided by BSA is short, entry of counsel into the picture before dealing with BSA should almost always occur. BSA tends to be more reasonable in dealing with counsel, and recognizes that its “bullying” techniques are not as effective.

Periodically, the BSA will offer an “amnesty period” whereby employers who are not in compliance may register and purchase the requisite licenses. If they do, the BSA will not pursue the employer for any alleged violations prior to the amnesty period. However, the amnesty program does not apply to any company already the subject of an investigation by BSA.

From February 1, 2003 through February 28, 2003, companies in and around the Harrisburg, Pennsylvania area are eligible for the amnesty program. If you believe your company has unlicensed software, now may be the time to act. However, because participation in the amnesty program involves at least a tacit admission of non-compliance and registration with BSA, companies are strongly urged to consult with and use counsel in connection with any contact with BSA.

Robert J. Tribeck or Kevin M. Gold are attorneys in Rhoads & Sinon’s Business & Technology Practice Group. If you have additional questions regarding BSA or this article, or seek assistance with a software audit or compliance program and policy, please contact Mr. Tribeck, Mr. Gold, or any other members of this Practice Group.

http://www.rhoads-sinon.com

First published March 1, 2003