Does It Matter What Your Employees Store on Your Computers

January 1, 2000
Does it matter what your employees store on your computers? You bet it does.

Just ask the CEO of Budget Rent-A-Car or the president of Marketing Management Inc. Each company paid $400,000 to settle claims that they had unlicensed software installed on their computer systems. More recently, Gemini Industries Inc., a custom electronics packaging wholesaler headquartered in New Jersey, paid $275,000 for similar software copyright violations.

Even higher-education institutes are not fully aware of their responsibilities. In 1998, the Berks Technical Institute paid over $100,000 to resolve copyright software infringement allegations.

Two of the largest software trade associations, the Business Software Alliance (BSA) and the Software Publishers Association (SPA) have estimated that approximately 228 million software applications installed around the world during 1997 were pirated. This was approximately 40 percent of all installations.

Pirated software doesn't just include the illegal duplication of computer disks. When an employee brings a copy of a word-processing program or a drawing program from home and installs it on a company workstation this is a copyright violation. Soon, others in your office want to use the program or game, and it is easily downloaded to a disk and copied. Before you know it, your company has an illegal software problem and management may not even know about it.

Even worse, your MIS manager tries to save money by only buying 50 licenses of Microsoft Office when you have 100 computers. Should this matter, since he only needs to install one copy of the program on the server? Well, when you fork over a six-figure settlement, ask the former MIS manager if it matters.

Pay attention or pay the price.
Copyright law isn't something to take lightly. One reason Bill Gates is so wealthy is because copyright law prohibits others from copying Microsoft's programs. Once the copyright owner discovers that you maintain unlicensed copies of software on your computers, there's almost no defense. Either you have licensed software on your system or you do not. Your company may still be liable even if management did not know of the existence of the illegal or unauthorized software.

Once you've been found liable for copyright infringement, then the copyright owner, at their choice, can request from the Court statutory damages. These damages provide for penalties of $500 up to $20,000 per violation for non-willful offenses. Even if management did not know of the problem, your company can still suffer up to $20,000 for each copyright violation. This adds up very quickly. If the copyright holder can show that the violations were willful, then the damages can be increased up to $100,000 per violation. Try and explain that to your Board of Directors.

You might be thinking, "how does the BSA or SPA find out what is on my computer systems?" Unless you are a "Mom and Pop" operation, you have probably terminated an employee at some point. That employee is now disgruntled and if he has any knowledge of unlicensed software, he is going to rat you out.

Once the BSA or SPA or any copyright holder believes that your company is infringing their copyrights, do not expect a polite note asking you to stop. Because the software and all evidence of your use of such software can be easily deleted, the copyright holder may secure a seizure order from a Federal Court on an ex parte basis. This means that you will not know about it until a lawyer and some U.S. Marshals walk into your office demanding to conduct an audit of your entire computer system.

Good luck if your biggest customer is sitting in your office at that time. While you are frantically calling your attorney, the copyright holder is obtaining a printout of all computer programs in your system. Now, unless you can prove that you have purchased licenses for your software, you have an expensive problem. Besides the six-figure settlement and your attorney's fees at $300 an hour, you may potentially pay the copyright holder's attorney's fees and costs.

If you still don't care about what's on your computers, ask the Kansas accounting firm of Myers and Stauffer, LC, which paid BSA $250,000 after such an audit revealed unlicensed software on their system.

An ounce of prevention.
How can you protect yourself if you don't even know if you have a problem? First, you may want to meet with your company's legal counsel who understands intellectual property law to determine your risks.

Conduct an internal audit on a regular basis to see what software is on your system. Determine that all of your software is legitimate and that you have purchased enough copies or licenses for everyone who is using such programs. Properly delete all unauthorized copies. Next, along with your counsel, develop a written company policy for installing and maintaining software. Always keep receipts and licenses for all software purchased.

Finally, educate all your employees on the importance of copyright law. If this is too much trouble or you do not think it is important, keep a look out for U.S. Marshals they are the armed football players wearing ties and jackets.