international software cost $12.5 billion to the software industry,with a loss of $2.2 billion in the United States alone.
Estimates showthat over 40 percent of U.S. software company revenues are generatedoverseas, yet nearly 85 percent of the software industry’s piracylosses occurred outside of the United States borders. The SoftwarePublishers Association indicated that approximately 35 percent of thebusiness software in the United States was obtained illegally, which30 percent of the piracy occurs in corporate settings.
In a corporatesetting or business, every computer must have its own set of originalsoftware and the appropriate number of manuals. It is illegal for acorporation or business to purchase a single set of original softwareand then load that software onto more than one computer, or lend, copyor distribute software for any reason without the prior writtenconsent of the software manufacturer. Many software managers areconcerned with the legal compliance, along with asset management andcosts at their organizations. Many firms involve their legaldepartments and human resources in regards to software distributionand licensing.Information can qualify to be property in two ways; patent lawand copyright laws which are creations of federal statutes, pursuantto Constitutional grant of legislative authority. In order for thegovernment to prosecute the unauthorized copying of computerizedinformation as theft, it must first rely on other theories ofinformation-as-property. Trade secret laws are created by state law,and most jurisdictions have laws that criminalize the violations of atrade-secret holder’s rights in the secret.
The definition of a tradesecret varies somewhat from state to state, but commonly have the sameelements. For example, AThe information must be secret, Anot of publicknowledge or of general knowledge in the trade or business, a courtwill allow a trade secret to be used by someone who discovered ordeveloped the trade secret independently or if the holder does nottake adequate precautions to protect the secret.In 1964 the United States Copyright Office began to registersoftware as a form of literary expression.
The office based itsdecision on White-Smith Music Co. v. Apollo , where the Supreme Courtdetermined that a piano roll used in a player piano did not infringeupon copyrighted music because the roll was part of a mechanicaldevice. Since a computer program is textual, like a book, yet alsomechanical, like the piano roll in White-Smith, the Copyright Officegranted copyright protection under the rule of doubt.In 1974, Congress created the Natural Commission on NewTechnological Uses (CONTU) to investigate whether the evolvingcomputer technology field outpaced the existing copyright laws andalso to determine the extent of copyright protection for computerprograms.
CONTU concluded that while copyright protection shouldextend beyond the literal source code of a computer program, evolvingcase law should determine the extent of protection. The commissionalso felt copyright was the best alternative among existingintellectual property protective mechanisms, and CONTU rejected tradesecret and patents as viable protective mechanisms. The CONTU reportresulted in the 1980 Computer Software Act, and the report acts asinformal legislative history to aid the courts in interpreting theAct.In 1980 The Copyright Act was amended to explicitly includecomputer programs.
Title 17 to the United States Code states that itis illegal to make or to distribute copies of copyrighted materialwithout authorization, except for the user’s right to make a singlebackup copy for archival purposes. Any written material (includingcomputer programs) fixed in a tangible form (written somewhere i.e.
printout) is considered copyrighted without any additional action onthe part of the author. Therefore, it is not necessary that a copy ofthe software program be deposited with the Copyright Office inWashington, D.C. for the program to be protected as copyrighted.With that in mind then a copyright is a property right only. In orderto prevent anyone from selling your software programs, you must ask acourt (federal) to stop that person by an injunction and to give youdamages for the injury they have done to you by selling the program.The Software Rental Amendments Act Public Law 101-650) wasapproved by Congress in 1990, this Act prohibits the commercialrental, leasing or lending of software without the express writtenpermission of the copyright holder.
An amendment to Title 18 to theUnited States Code was passed by Congress in 1992. This amendment.Known as Public Law 102-561 made software piracy a federal offense,and instituted criminal penalties for copyright infringement ofsoftware.
The penalties can include imprisonment of up to five years,fines up to $250,000 or both for unauthorized reproduction ordistribution of 10 or more copies of software with a total retailvalue exceeding $2,500 or more.Under United States law duplicating software for profit,making multiple copies for use by different users within anorganization, and giving an unauthorized copy to someone else – isprohibited. Under this law if anyone is caught with the piratedsoftware, an individual or the individual’s company can be tried underboth civil and criminal law. A Civil action may be established forinjunction, actual damages (which includes the infringer=s profits) orstatutory damages up to $100,000 per infringement. The criminalpenalties for copyright infringement can result in fines up to$250,000 and a jail term up to five years for the first offense andten years for a second offense or both.
When software is counterfeitor copied, the software developer loses their revenue and the wholesoftware industry feels the effect of piracy. All software developersspend a lot of time and money in developing software for public use. Aportion of every dollar spent in purchasing original software isfunneled back into research and development of new software. Softwarepiracy can be found in three forms: software counterfeiting, which isthe illegal duplication and sale of copyrighted software in a formthat is designed to make it appear to be a legitimate program; Harddisk loading, whereby computer dealers load unauthorized copies ofsoftware onto the hard disks of personal computers, which acts as anincentive for the end user to buy the hardware from that particulardealer; and downloading of copyrighted software to users connected bymodem to electronic bulletin boards and/or the Internet.
When softwareis pirated the consumer pays for that cost by new software and/orupgrade version being very expensive. Federal appellate courts in theU.S.
have determined that operating systems, object code and softwarecotained in ROMs are protected by copyright, and some lower federalcourts have also determined that microcode (the instructions set onmicroprocessor chips), and the look and feel of computer screens issubject to copyright protection. Which leads to the problems of thewidespread development of multimedia applications that has brought outmajor problems in clearing copyright for small elements of text,images, video and sound.The United States Government has been an active participant inprotecting the rights of the software industry. When the BusinessSoftware Alliance (BSA) conducts a raid, Federal Marshals or local lawenforcement officials participate also. An organization known as theSoftware Publishers Association (SPA) is the principal tradeassociation of the PC software industry. SPA works closely with theFBI and has also an written enforcement manual for the FBI to helpthem investigate pirate bulletin board systems and organizations(audits).
With the help of the FBI, the result of enforcement actionsresulted in recoveries from anti-piracy actions totaling $16 millionsince the program started in 1990.The Software Publishers Association (SPA) funds a educationalprogram to inform individuals and corporations about software use andthe law. This program provides all PC users with the tools needed tocomply with copyright law and become software legal. The SPA alsopublishes brochures free of charge about the legal use of software forindividuals and businesses. Also available to help corporationsunderstand the copyright law is a 12-minute videotape, which iscomposed of the most commonly asked questions and answers to them. Thevideo tape is available in French and Spanish and all together over35,000 copies of the tape had been sold. SPA has also compiled a freeSelf-Audit Kit with which organizations can examine their software usepractices. Included in the kit, is a software inventory managementprogram designed to help an organization track their commercialsoftware programs that are on all hard disks.
The program searches PChard disks for more than 1300 of the most common programs used inbusiness.Also available is the SPA Software Management Guide whichhelps companies audit their current software policies, educateemployees about the legal use of software, and establish procedures topurchase, register, upgrade and backup computing systems. The guide inaddition also provides an Internal Controls Analysis andQuestionnaire. The guide also contains all of the SPA’s currentanti-piracy materials.
The U.S. software industry is facing thechallenges of more sophisticated network environments, greatercompetition among software companies along with hardwaremanufacturers. At this moment more software than ever before isdistributed on a high volume, mass marketed basis. There are manytypes of software out on the market and increasing every day. Theyrange from graphical user interfaces for application programs such asmass-market spreadsheets, to more sophisticated technical softwareused to design integrated circuits.
The use of software plays a morevital role daily in our lives such as embedded software, which iscritical to equipment in locations as a doctor=s office or anautomotive shop. The instrument and devices found there depend moreand more on software, because software provides the flexibility tomeet the many different needs to the end user. As our lives our shapedand enhanced more by technology, there is already a greater demandthat impacts the software industry.One of the main concerns of the software industry is how todeal with the issues of Asoftware licensing. More and more customerswant customized software suited for their business or personal need,and expect the software development firms to accommodate to theirwishes. The other side of this issue is that software developmentfirms are concerned with unrealized revenue and excess costs in theform of software piracy, unauthorized use, excess discounts andlengthened sales cycles.
For the customer and the software developmentfirm, both have high administrative costs in regards to softwareprograms. Software licensing policies were originally a result ofsoftware developers’ need to protect their revenue base in the face ofpotential piracy. Product delivery for software is made up of a numberof different components, which are referred to as ‘softwarelicensing’.
The following factors are taken into consideration whendetermining a cost for a ‘software license’; physical deliverypricing, metric discounts, license periods support and maintenance,license management Tech support, change in use bug fixes and PlatformMigration Product enhancements. The most commonly found type ofsoftware license found in business is known as a, ‘Network license’.There are four types of categories that are classified as a networklicense.
Concurrent use licenses authorized a specified number of usersto access and execute licensed software at any time. Site licensesauthorize use at a single site, but are slowly being phased out andreplaced by enterprise licenses. Enterprise licenses cover all siteswithin a corporation because of more virtual computing environments.Node licenses are also slowly being phased out because they are mainlyused in a client/server environment, since the licensed software maybe used only on a specified workstation in which a user must log on toin order to access and execute the software application. Currently thetrend in a network system is to use measurement software, which allowsvendors to be more flexible in licensing arrangements. This managementsoftware monitors and restricts the number of users or clients who mayaccess and execute the application software at any one time.
This issignificant because a user pays only for needed use and a vendor canmonitor such use to protect intellectual property. A new type oflicense that is emerging is known as a, ‘currency-based license’. Thistype of license work on the basis that it provides to the end user aspecified dollar amount of software licenses. For example, licensesfor different business application software, so long as the totalvalue in use at a given time is less than dollars.
Another type oflicense emerging is known as a ‘platform-independent’ licensing, whichone license permits software to be used on a variety of differentcomputer systems within a business, instead of buying a differentlicense for each version of the same software used by differentsystems. The most common type of licensing is known as ‘Shrink-wrap’,the concept behind this that the licenses terms are deemed acceptedonce the end user breaks a shrink-wrap seal or opens a sealed envelopecontaining the software. A reason for these new types of licensingemerging is that when software licensing was first introduced, thesoftware development firms assumed that most businesses would use thesoftware for a 8 to 10 hour period. Yet, did not take intoconsideration that with the advancement of technology, more businesseswould want a ‘floating license’ across the world for 24 hours – thusit was not cost effective for the software development firm. Afloating license is a license that is made available to anyone on anetwork. The licenses are not ‘locked’ to particular workstations,instead they Afloat to modes on the network.Shareware, freeware and public domain are different type ofsoftware available to the end user, and are distinguished by differentrules about how programs may be distributed, copied, used andmodified.
The term ‘shareware’ refers to software that is distributedat a low cost, but which requires usually a payment after a certaintime period and registration for full use. Copies of this software areoffered on a trial basis, the end user is free to try a scaled downversion of the program. If the end user wants the shareware program,included in the program is information specifying how to register theprogram and what fee is required. Once registered the end user willtypically receive a printed manual, an updated copy of the software(often with additional features), and the legal right to use theprogram in their home or business. The advantage that shareware has isthat it lets the end user thoroughly test a program to see if it=suseful before making a purchase. The authors of shareware programsretain their copyright on the contents, and as other copyrightedsoftware should not be pirated.Freeware is also distributed at a very low cost and likeshareware is found mainly on the Internet. The authors of the freewareprogram do not expect payment for their software.
Typically, freewareprograms are small utilities or incomplete programs that are releasedby authors for the potential benefit to others, but the drawback tothis is that there is no technical support. Public domain software isgenerally found on the Internet and is released without any conditionupon its use. It may be copied, modified and distributed as the enduser wishes to do. A license manager is a system utility-likeapplication that controls or monitors the use of another end-userapplication. It is generally implemented to protect intellectualproperty (meaning to stop illegal copying) and/or to become morecompetitive by offering new ways in which to evaluate, purchase andpay for software. Since the license manager controls the number ofapplication users, there is not a need to control the number ofapplication copies. This process lets the end user run one ormore applications between machines, without violating the terms of thelicense agreement.SPA has created a program that companies can use to helpdiscover and correct problems before they result in legal actions,fines and also negative publicity.
The eight point program is asfollows:1. Appoint a software manager to implement and monitor all aspects ofcompany software policy.2. Implement a software codes of ethics for everyone to adhere to.
Theethics should state that copyrighted software, except for backup andarchival purposes, is a violation of the law.3. Establish a procedure for acquiring and registering software.Determine your companies software needs, evaluate software packages,and also have supervisors approve the plans. Keep the lines ofcommunication open.4. Establish and maintain a software log.
The log should state thedate of when the software was acquired, the registration of it, serialnumber, network version, location of where the software is in use,where the original is, licensing agreement and the location of theoriginal disks.5. Conduct periodic audits or on a as needed basis comparing thesoftware log and/or other purchase records.6. Establish a program to educate and train your employees about everyaspect of software and its uses.7. Maintain a library of software licenses and provide users withcopies of the agreement.8.
Having done the above seven points, the company can benefit byhaving obtained software legally, receive full documentation,technical support when needed and also upgrade notices.Patents do not cover specific systems, instead they coverparticular techniques that can be used to build systems or particularfeatures that systems can offer. Patent grants the inventor a 17 yearmonopoly on its use. Once a technique or feature is patented, it maynot be used in a system without the permission of the patent-holder -even if it is implemented in a different way. Since a computer programusually uses several techniques and provides many features, it caninfringe many patents at once. A computer program is built out ofideal mathematical objects whose behavior is defined, not modeledapproximately, by abstract rules. An example of this is BorlandInternational, Inc. complained in the 1st Federal District Court gaveLotus Development Corp.
the benefit of patent protection to Lotus1-2-3 menu commands and their order, but failed to require Lotus tomeet the requirements of patent law, including novelty, examinationand contribution to the prior art. The Supreme Court sided with the1st Circuit decision that one entity cannot own the user interface toprograms. Meaning such as file formats, menu structures andprogramming languages.Software license agreements emerged as the most popular meansof protection of proprietary rights in computer software.
They coexistwith other forms of intellectual property rights as patent andcopyright. Software license agreements serve several functions intransactions involving the transfer of computer technology. One of themost important legal functions is the protection of the proprietaryrights of the licenser in the transferred software. Other functionsinclude controlling the revenue generated by licensed software anddetermining the rights and responsibilities of the parties regardingthe performance of the licensed technology. Issue related to thesefunctions include the applicability of Article 2 of the UniformCommercial Code, including offer and disclaimer of warranties,determining the appropriate types of licenses to utilize, such assingle users/CPU licenses, Site/enterprise licenses andnetwork/concurrent licenses.
Trade secret, copyright and patent laware emailprotected forms of protection in the sense that they may existindependently of any underlying business transactions and do notnecessarily require any transfer of intellectual property from oneparty to another.Whereas, the need for a license agreement usually arises asone of the contractual forms of protection when the underlyingbusiness transaction involves the transfer of intellectual property,such as computer software. Transactions involving the transferof computer software are subject to both federal and state laws.Generally, state law governs contractual and trade secrets aspects ofthe transaction, while federal law governs aspects related to patent,copyright and antitrust issues. Each state has its own version of adoctrine of a trade secret, the common thread through thesestate-specific laws is that if you show that you are seriouslytreated information as confidential and that the confidentialinformation helped your competitive position, you can stop others fromusing it if the information was improperly acquired by them, and evencollect damages from the wrongdoers.A computer is useless without software. The two types ofsoftware typically found on a computer are operating systems softwareand application software.
Operating system software ‘providesinterface’ that makes it easier to develop programs for the system byreducing the amount of code that must be written. The operating systemacts as an interface between the computer hardware, applicationprograms and the end user. Application software consists of one ormore computer program that fulfill a specific function for the userlike word processing, bookkeeping or financial analysis. Two legalcases recently within the last few years has brought to light thecontroversy regarding the copyright protection of software elements.
Until 1992, most of the federal courts followed the decision inWhenlan v Jaslow Dental Laboratory as a precedent of similar cases.Whenlan, a small software company wrote a accounting program forJaslow Dental Laboratory company. Jaslow rewrote the software to runon personal computers and proceeded to sell the product. The softwarewas identical to Whenlans in the data structures, logic, and theprogram structure, except for the source code. Jaslow argued that theduplicated elements were part by the of the idea – not the expression.The court in response felt that the data structures, logic, and theprogram structure comprised to make a single function of a computerprogram, therefore copyright protection should be given to thoseelements also.In 1992, this protection was weakened by Computer Associatesv.
Altai, Inc. , when Altai a software developer was accused ofcopying various modules of a software package developed by ComputerAssociates which controlled the running of applications on IBMmainframes. The court rejected Whelan=s premise that a computerprogram embodies one function because programs are made up ofsub-routines that contain their own idea. The court recognized thiswould narrow the scope of software copyright protection and found thisin accordance with Congressional intent of computer programs withcopyright. This resulted in why currently software copyright is not asbroad as it once was.—BibliographyBrandel, William, “Licensing stymies users,”URL:”http://www.
viman.com/license/license.html#policy”, VimanSoftware, Inc., 1994.
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spa.org/piracy/pi_back.htm”, Software PublishersAssociation, 1995.