Software Piracy: Looting and Pillaging in the '90S

By Barney, Kevan | The National Public Accountant, June 1997 | Go to article overview

Software Piracy: Looting and Pillaging in the '90S

Barney, Kevan, The National Public Accountant

In the Roaring '20s, Hollywood depicted the age of pirates as a time of swashbuckling, high-seas adventure. Pirates roamed the open seas, looting and pillaging towns and cities along the coast, hoping to eventually retire to some uncharted island to live out the rest of their days with their illgotten gains. Most pirates, however, were captured and suffered severe punishments for their crimes.

Piracy continues, but instead of using wooden ships and cannon fire to loot and pillage, today's pirates use computers to plunder and steal from software companies and users.

Ed Morin has seen many different approaches to software piracy in his years as manager of Novell's anti-piracy program. Novell, a Utah-based software company, is the world's leading provider of networking software, and its NetWare and IntranetWare are legally used by more than 50 million people.

"Software piracy is a huge, worldwide money-making enterprise," Morin says. "Most people are unaware of how widespread software piracy has become. There are several contributors to the rise in software piracy, including ease of copying, lax enforcement of copyright laws in some countries and uninformed end-users."

According to the Business Software Alliance (BSA), an industry group dedicated to fighting software piracy, software piracy accounts for more than $13 billion in lost revenues each year.

Piracy affects software companies, honest resellers and end-users. Software companies invest large amounts of time and money to develop products. As the product sells, some of its earnings are used to research and develop new and improved software. When software is pirated, a software company receives no return on its investment and has less to spend on future development of new products.

Piracy seriously affects honest resellers and end-users as well. Honest resellers can't compete with the price of illegal copies, and some of the losses caused by software pirates are made up by higher software prices to consumers. End-users may also be deprived of improvements in software as revenues go to pirates instead of software developers, and they may end up having to purchase legal software after already paying for pirated software.

Since 1980, software has been protected under the U.S. Copyright. Act. The copyright act states users cannot duplicate software for profit, nor can they make copies for different users within an organization or share copies with their friends. As with piracy in the old days, software piracy has some stiff penalties attached. Although not as severe as those inflicted upon pirates of old, penalties for software piracy are still painful.

By pirating software, individuals and businesses open themselves up to both civil and criminal legal action. Under the copyright law, civil courts can grant actual damages, including lost profits, or statutory damages up to $100,000 per infringement. The law allows companies to file criminal charges against pirates, which could include fines up to $250,000 or imprisonment for up to five years, or both.

"Reseller piracy and software counterfeiting do the most damage to network software developers like Novell and their users," Morin says. "Pirates can sell multiple copies of a single software package to unsuspecting buyers with little or no investment on their end."

In some cases, a software developer who has created an application for a specific market - such as the legal profession - will sell Novell's networking software along with his program. And although the developer's program is legal, he will have loaded the same Novell package onto several computers. Each customer pays full price for what he or she believes is a legal, fully registered Novell program, but it's merely a copy that is also being used by several other unwitting customers.

Counterfeiting occurs when copyrighted software is illegally duplicated and sold as legitimate product. …

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