October 1, 2003

RE: Software Licenses & Company Policy

Many people misunderstand (sometimes on purpose) the legal implications of software use, licensing and copying. The consequences of failing to adhere to the laws can be disastrous.

Quite simply, to make or download unauthorized copies of software is a copyright infringement that exposes a business to civil and criminal penalties. Whether one worker is casually making an extra copy for a friend, or your MIS people are buying a single software program and installing it on multiple computers, the firm is committing copyright infringement software piracy. Under the copyright laws, it may be liable for actual damages or as much as $150,000 in statutory damages for each program copied. Criminal prosecution for copyright infringement can result in a fine of up to $250,000, or jail for up to five years or both.

What's Legal?
Although software license terms vary, the general is: one purchased copy per computer, unless the terms of the license agreement allow for multiple use of the program. Most often, the licenses say a user has the right to load the software onto a single computer and make one backup copy. Microsoft licenses are non concurrent. If you have 10 computers that run Office XP, but no more than six ever run it at the same time, you still need to buy 10 licenses. Some licenses allow for remote or home use of software. Users may be permitted to copy their software onto a second machine for use when they are not at their office computer. The specific license says whether users are allowed to do this.

Software piracy can happen when:

• One licensed copy is used to install a program on multiple computers;
• Software is acquired using an upgrade offer without having a legal copy of the version to be upgraded;
• A company acquires academic or other restricted or non-retail software without a license for commercial use; or
• Unauthorized copies of licensed software are made and distributed within or outside the workplace.

Preventing employee piracy
Employee software piracy is a growing business threat. Under the vicarious liability provision of the U.S. Copyright Act, an employer is liable for acts committed by its employees when those acts are within the scope of their employment duties. Another theory of liability is the doctrine of contributory copyright infringement, whereby a party who does not commit an infringing act but who aids or encourages it is liable for the infringement.

To protect a business from potential software copyright infringement liability, a written policy on the use of personal computer software should be established. The policy should cover the following topics: general statement of policy purpose; software acquisition; registration of software; installation of software; employee software usage; and penalties and reprimands.

Each employee should acknowledge accepting the policy and agree to abide it. A well-executed no copy policy will help relieve the business from liability in a copyright infringement action.

Several organizations have established toll-free hotlines and reward systems to encourage people to turn in violators. A disgruntled employee is only a phone call away from causing a company serious trouble if it is in violation of its software licenses.

All software installed at a business should comply with the developer's license agreement. Along with the implementation of a written software guideline policy, this is the key to reducing a business' potential liability for software copyright infringement.