The pirates arent only in Pittsburgh

August 28, 2011
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An advocacy organization for the personal computer software industry recently reported that software theft rose globally by 14 percent in 2010 and reached a record commercial value of $59 billion. The piracy rate hit 42 percent last year, and was second only to the 43 percent recorded in 2009.

The Business Software Alliance noted in its latest study that the commercial value of software pirated in the U.S. alone was $9.5 billion last year — the highest dollar figure of any nation and up from $8.4 billion a year ago, while the U.S.  tied with Japan and Luxembourg for having the lowest worldwide piracy rate of 20 percent.

Nearly half of all the suspected cases of corporate software piracy in the U.S. last year originated in six states, and BSA said Michigan was one of the six. The manufacturing industry accounted for 24 percent of all the unlicensed software reports in the state last year. One local manufacturer reached a $125,000 settlement with BSA for having unlicensed copies of three software programs installed on its computers.

“In a very simple sense, pirated software is a product that is copyrighted and the user uses it in a way that makes it an infringing copy,” said Peter Beruk, BSA director of compliance marketing.

“In the corporate realm, the prevalence of piracy is when an organization will buy one, or 100, or 1,000 licensed copies of a particular application, but they will make additional copies where the license that they got with that software doesn’t permit,” he added.

A less frequently occurring but just as serious offense is counterfeiting. Illegal copies of copyrighted software are made and then sold as legitimate, most often but not exclusively via the Internet. Jenny Blank, senior director of America’s Enforcement, an arm of BSA, said what makes it difficult to stop the spread of fake copies is there isn’t any such thing as a stereotypical counterfeiter.

“At the top of the food chain, I suppose you might want to say, would be the organized rings that are making the software. Then that goes downstream to smaller resellers and that could be anybody: somebody who is doing this as a side business; it could be a very legitimate business that is also doing this on the side; it could be a main business,” said Blank.

“A couple of years ago, we arrested a grandmother who was counterfeiting software to supplement her retirement account. There really isn’t a stereotype,” she said.

Beruk said BSA has created a video series called “The Faces of Piracy,” which is available at bsa.org/faces. The series contains interviews with people who have been affected by piracy and with some who have been convicted of pirating software, including one who worked for a software developer at the time.

“There is no, sort of, primary face here,” he said. “The other stories we have are how piracy impacts some of our member companies, and we’ve also got some interviews from representatives of the Department of Justice as to why they will investigate these types of crimes, as much as BSA will.”

As having the DOJ involved might suggest, counterfeiting is a federal offense that can carry some prison time.

Unlike counterfeiting, Blank said some copyright violations are made unknowingly by companies. More often, though, using software illegally is done purposely.

“In some companies, somebody had to know what was going on, but there are companies where senior management may not have been aware,” she said.

Blank said companies need to care about this problem for their own good. One reason is a firm’s cyber security. Downloading software from the Internet, instead of buying it from the manufacturer, doesn’t always result in a quality product, and a firm’s records and system could be at risk of being stolen or destroyed because these versions could contain malware or malicious software that has viruses, worms and Trojan horses.

“People shouldn’t want to play Russian roulette with their systems,” she said.

Blank said another reason companies should care is those that use software products illegally will pay stiff fines if they’re caught, like the Grand Rapids company did. Others could even face litigation.

To stay on the safe side, Blank said firms need to audit their software usage to determine if every piece is installed according to the licensing contracts. That involves making a record of all software being used on each computer and comparing the list to the firm’s purchasing agreements.

“Now that’s a simple concept. But the reality of how complicated it is can vary drastically between a five-person shop and a 1,000-person shop,” she said.

Beruk said firms also should create a management audit that tracks which machines have what software and how many employees have access to each one. He also said if one worker doesn’t use a particular application, then it should be removed from that computer or transferred to another worker who will use it. Companies need to keep the tracking of software current, which will make it easier for a firm to get a grip on what it’s actually using. He called it software assets management, or SAM.

“It allows you to track what’s installed. It allows you to track where things are coming from, what has maintenance, what doesn’t have maintenance, and everything in between,” said Beruk, whose organization works in 80 countries. Its members include Microsoft, Quark, Dell, HP and Apple.

“In the U.S., we have a 20 percent piracy rate. One of every five copies of software is unlicensed so you have to imagine that most businesses may have some unauthorized software. The path that they can choose is a path of not doing anything or being proactive by conducting an audit to determine what is installed versus what it has licensed. Or take a little bit more of an aggressive posture but one that will yield a natural return, which would be implementing a software assets management program,” said Beruk.

“I just want to encourage people to take this matter seriously from a business point of view and a risk point of view, from malware and legal risks,” said Blank. “Software licensing and software asset management should really be on a company’s top 10 checklist of corporate governance, and a responsibility that they have to look at.”

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