Do You Have Pirated Software In Your Business? The Answer May Surprise You!
No matter what size your business is, you likely have at least one computer. Most of you have multiple computer systems in various portions of your business used by multiple users. If that describes you, allow me to introduce you to someone with whom you need to become very familiar before they become familiar with you. They’re called the Business Software Alliance (BSA). The BSA is the copyright enforcement agency which represents the software companies which produce the software inside your computer. It is the signature focus of this group to find businesses (especially small businesses) which are using “pirated” copies of computer software.
“Pirated” is a word that has some very broad definitions. Clearly, a software package someone copied to a floppy disk would certainly qualify. But the definition covers far more subtle things than that. For instance, according to the BSA, when you purchase a software package, you are not actually purchasing the software itself, but only a license to use it. Contained within that license is the number of times that particular copy of the software can be downloaded onto your computer systems. Let’s say you have 5 computers, and you purchase a software package which licenses you to use it for 3 computer systems, that means legally you have to purchase two software packages in order to install that particular software on all five of your computers. If you use only one of those packages for all five of your computers, the fourth and fifth copies are considered “pirated.”
But it gets even more subtle than that. Let’s say you have a legally licensed copy of software on a computer system used by Person A in your company. Let’s say Person A needs an upgrade
in his/her computer system, so you purchase a new computer for person A and proceed to move the old computer to Person B’s work area. If Person B uses that computer with the software still on it, it is considered pirated even if person B never accesses that particular program. By BSA’s definition, you are expected to delete that software off of the computer and repurchase it if Person B has a need for it.
I know–it gets really ridiculous after awhile. In fact, it gets so ridiculous that many small business owners decide they have better things to do than worry about those matters. I understand that senitment completely. But let me suggest you reconsider.
What follows is material directly off of the BSA’s website. Listen to what they say:
Washington, D.C. – January 8, 2008 As part of an effort to deter businesses from using unlicensed software, BSA today announced that three financial services companies paid over $420,000 in damages to settle claims that they had unlicensed software on their computers. In addition to the damages paid, the companies agreed to delete all unlicensed copies of software installed on their computers, acquire any necessary replacement licenses and commit to implementing stronger software license management practices.
IBG LLC of Chicago, Illinois, paid $175,000 to settle claims that it was using unlicensed copies of Microsoft and Symantec software. American Mortgage Consultants, Inc., based in Liberty, Illinois, paid $136,750 for to settle claims that it had more copies of Adobe and Microsoft software on its computers than it had licenses. Nova Star Mortgage, Inc., of Kansas City, Missouri, paid $112,000 to settle claims that it had unlicensed copies of Adobe, Autodesk and Symantec software on its computers….BSA believes that most businesses want to run efficiently, competitively and legally, which is why BSA provides tools and educational materials on how to implement the first steps of the software license management process.
“We are committed to educating the public on the benefits of software license management, but time has shown that to stop software piracy and deter businesses from using illegal or unlicensed software, we need to enforce our members’ copyrights,” said Jenny Blank, Senior Director of Legal Affairs for BSA. “We wish it weren’t necessary, but enforcing copyrights has proven to be the best way to encourage businesses to review their installed software and take any steps necessary to become compliant.”
Unlicensed software use poses serious threats for businesses, including legal liability, financial costs, technical problems, and jeopardizes the technological innovation that is crucial to the growth and success of businesses across the nation. In 2006 alone, the United States software industry lost $7.3 billion as a result of software piracy, an increase of $400 million over the previous year…. Businesses trying to determine whether their organization is using unlicensed software can download software audit tools from the BSA website at www.bsaaudit.com.
“We hope that businesses in the financial services industry take advantage of the available tools and software management information on the BSA website,” said Rodger Correa, Compliance Marketing Director for the BSA. “Proactively managing your software through a sound license management program will not only help ensure copyright compliance, but may also help a business manage its software budget more effectively and increase return on investment.”
That is all very intimidating, but the worst is yet to come in the following statement. Remember–this is directly from their website–
BSA offers rewards of up to $1,000,000 for qualifying reports received via its hotline or online reporting form. Confidential reports can be made by visiting www.bsa.org or by calling 1-888 NO PIRACY. Reward payments are subject to eligibility requirements, the details of which are available on the website. Software piracy is against the law and can result in damages of up to $150,000 for each software title copied and increases the risk for security and technical complications.
There it is. BSA is offering a bounty of $ 1 million to anyone (including any of your employees) who reports pirated software, and the penalty can be as much as $150,000.00. Suddenly this becomes something worth your attention, doesn’t it? With this reward hanging out there, all of your employees have a great motivation for keeping an eye out on how you are operating where your software is concerned.
If you haven’t been contacted by the BSA yet concerning an investigation of your company, you need to make sure your house is in order. Download the audit tool at the BSA website. Hire a computer consultant to do a thorough investigation to let you know how you are doing. Most of all, save every receipt for every piece of software you own. The BSA considers any software for which you do not have a receipt to be pirated–regardless of how long you’ve owned the software. So it is vitally important to save every single receipt for all software in your business.
That’s how to keep the BSA off your back. But, what if you have already received the letter notifying you of a pending BSA investigation of your business. What should you do? Ericka Chickowski wrote an excellent article answering that very question for Baseline. I am including excerpts of it below:
The BSA is known to be a persistent enforcement agency which rarely grants clemency to organizations once it begins settlement proceedings. The following eight tips are offered by two attorneys who specialize in BSA defense cases; they give advice on what to do once your business receives a letter requesting a BSA audit.
1. Retain a lawyer.
The BSA is an efficient organization when it comes to extracting punitive damages from companies found to be in a non-compliant licensing situation—its experts and lawyers know copyright laws inside and out because that is all that they do. For that reason, Scott recommends seeking legal counsel as soon as an audit request is received from the BSA.
2. Cooperate—carefully.
As much as a business person would love to screw up their eyes and wish the BSA away, the trouble will only multiply through inaction. Though the BSA is not a law enforcement agency it is acting on the behalf of the software companies and it will take matters to civil court if a business does not cooperate with the self-audit process and settlement negotiations.
3. Don’t let the BSA’s rhetoric intimidate you.The BSA’s threat letter can be a pretty scary item when it is addressed to your business, but Helland says that businesses shouldn’t despair. “Things are probably not as bad as the bsa suggests they are,” he said. “If you’ve seen a sample of the bsa’s threat letters, they say that copyright law allows for $100,000 in damages per infringement, but what they don’t tell you is that the number of cases in which that level of damage is awarded is extremely rare.”
4. Don’t rush out and buy any software.When many businesses first receive an audit letter from the BSA the first impulse may be to panic and rush to action. Scott recommends strongly against buying a lot of software to ‘make up’ for the amount of non-compliant seats an organization may find once they’re faced with an audit.
“Any software that you purchase after the date of the letter is not going to help you in the audit matter whatsoever,” Scott said. “You can uninstall software that you don’t need on a go-forward basis.”
5. Preserve evidence with confidentiality.As an organization goes through the self-audit process, it is critical to collect evidence so that it is protected from being discoverable evidence during litigation. Scott recommends having an attorney oversee the process to ensure the confidentiality of the audit information.
6. Find your allies.Don’t forget that it pays to ask for help when you need it. Helland suggests enlisting the help of software resellers or even the software vendor itself if there is a previous relationship.
7. Create a compliance plan.The self-audit process will need to be completed quickly and the BSA will definitely make demands for an organization using unlicensed software to get into compliance. Scott believes the best way to negotiate is to prove the organization is serious about making amends by developing a compliance plan.
“It’s just a basically a crash course in software asset management,” he said. “Make sure that you’re SAM folks are either cooperating with whoever you have working on the audit to do the work that is needed to complete the project in a way that is much faster than what typically it organizations are accustomed to dealing within terms with software license compliance and software asset management.”
8. Negotiate non-monetary aspects.One common mistake businesses make while negotiating with the BSA is they focus only on the amount of money they’ll have to pay to settle. However, there are other non-financial factors at play as well.
Non-monetary aspects to a settlement may include agreements as to how and when the BSA can inspect a business in the future and whether or not the BSA can publicize the details of that business’ case. Scott advises those negotiating a BSA settlement to carefully consider the future impact to the business that such settlement agreements may have before signing on the dotted line. Unless a business includes the right stipulations within the settlement, the BSA could end up issuing a press release for all to hear about the investigation and settlement fine.
That’s it–you’ve been introduced to the BSA. You’ve been advised how to stay out of trouble before they start snooping around your business. You’ve been advised how to handle them if they have already started snooping around your business. The rest is really up to you. But of all the things you could possibly do, don’t ignore this issue. It will not go away.
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