Small businesses that grow swiftly or that frequently acquire new hardware sometimes find it hard to stay on top of their software licenses. Unlike most things you buy, software doesn't necessarily belong to you. When you pay for a program, you become a licensed user -- not an owner. The ramifications are profound. This article looks at key issues surrounding software piracy and the steps you can take to keep your business far removed from such activity.

Businesses large and small face legal risks because of software piracy. Under the law, a company can be held liable for its employees’ actions. For example, if an employee installs unauthorized software on a company’s computers or downloads illegal software via the Internet, the company can be sued for copyright infringement -- even if management was unaware of the employee’s actions.

Definition and types
So what exactly is software piracy? As generally defined by the software industry, it is the illegal copying or distribution of a copyrighted software program. The use or possession of an illegal copy is also considered software piracy.

How big of a problem is it? According to the most recent survey by the Business Software Alliance, the rate of global software piracy has declined 10 percent in the past eight years, while the cost of piracy has jumped sharply – from $10.97 billion in 2001 to $13.08 billion in 2002, an increase of 19 percent. As that survey made clear, software piracy comes in many shapes, with the following being the most common:

• End-user piracy. This occurs when an employee reproduces copies software without appropriate licensing for each copy. It ranges from using one licensed copy to install a program on multiple computers (also known as “softlifting”) to taking advantage of upgrade offers without having a legal copy of the version to be upgraded.

• Internet piracy. Intellectual property theft via the Internet has grown by leaps and bounds in recent years, to the extent that virtually every software product can be found on a pirate Web site. These include Web sites that make software available as a free download, Internet auction sites that offer counterfeit software, and peer-to-peer networks that enable the unauthorized transfer of copyrighted programs. According to the Software and Information Industry Association, over 90 percent of software sold through online auctions is pirated.

• Hard-disk loading. This takes place when unauthorized copies of software are installed on a computer’s hard drive before sale in order to make the machine more attractive.

• Client/server overuse. This occurs when too many employees on a company network are using a central copy of a program at the same time. If you have installed programs on your local area network for several employees to use, you must be sure that your licenses entitle you to do so.

• Counterfeiting. This is the illegal duplication and sale of copyrighted material with the intention of directly imitating the copyrighted product. Counterfeit registration cards with unauthorized serial numbers are often included in these packages.

Stiff penalties
The software license is not the only way in which a program is protected. Copyright and patent law can protect software from unauthorized copying, distribution, and sale. In the case of the Internet, the law prohibits users from uploading, downloading, or transmitting unauthorized copies of software online. An individual who breaks these laws – and a company that ignores an employee who breaks these laws – is liable to civil and criminal action. According to the Business Software Alliance, the copyright owner can choose between actual damages and statutory damages, which can be as much as $150,000 for each program copied. Moreover, the government can criminally prosecute for copyright infringement. If convicted, offenders can be fined up to $250,000, sentenced to jail for up to five years, or both.

Keeping Legal
Staying within the legal boundaries of your license agreement doesn't have to be a hassle. Once you create a system, it’s easy to maintain.

• Take stock. Conduct an inventory of all your computers and what applications they are running. Then, gather your licenses and be sure each machine is covered. Create steps to follow so that you know exactly how to comply with your license agreement when, for example, you add a new computer, application, or employee. You should review and update this information regularly -- perhaps as often as twice a year.

• Confirm authenticity. If you want to be sure your license agreements are in proper working order, check the applications you are using for a certificate of authenticity. This seal will appear on the CD-ROM or floppies, or as a stand-alone certificate. Certificates of authenticity are usually complex documents using multicolored graphics, text, and holograms.

• Spread the word. This cannot be overemphasized: train your employees in the importance of abiding by copyright regulations. Be sure everyone is familiar with your software license agreements and knows how to observe them. If necessary, create a company-wide software licensing policy, including guidelines for ordering new software. Make sure that the policy is included in any information that is given to new employees and distributed to all current employees.

• Report it. If you have observed software piracy that you'd like to report, there are many organizations you can contact. Most manufacturers have an anti-piracy line so you can report copyright infringement confidentially.

Following through with employees
The steps outlined above are essential to any software management plan. But remember: effective software management is an ongoing process. It is essential that you monitor employee adherence and protect against the introduction of illegal software. A growing number of companies conduct spot checks on individual computers to make sure illegal software hasn’t been inadvertently or deliberately installed. Another suggestion: when employees leave your company, make sure they don’t remove software that belongs to you.

Conclusion
Software piracy is not a victimless crime. Piracy denies software developers rightful revenue – money that could be fruitfully channeled back into research and development of new products. When you put your company’s software licenses in good order, you’re going a long way toward steering clear of the dangers associated with illegal software.

For more information, check out the Web sites of the Business Software Alliance (www.bsa.org) and the Software & Information Industry Association (www.siaa.net).