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Business Software Alliance: Industry protector or bully?
FEATURE B u s i n e s s
The standard opening shot from C o v i n g t o n & B u r l i n g m i g h t say that they had r e c e n t l y been "advised" that the
Software
unlicensed"lf the search revealSof copies softwarewhich software on the hard
ployeesViCtim'mayem-be s using copies of
Alliance" • Industry Protector or
B Ily?
excee theoum disks (and this is ber
of
legal
has authorizationC°pies the victim
to use.~heletter the serial numbers of may then go on to
state that this is
U
NeflMaybury The
Business Software A l l i a n c e ( B S A ) comprises a number of leading software companies including Adobe Systems, A u t o d e s k , L o t u s , M i c r o s o f t , Novell and the Santa C r u z Operation. The BSA has been actively pursuing corporate overuse of its members' software in the UK since 1991, and has achieved many high profile successes against leading companies. Using Anton Piller Search and Seize Orders, representatives of the BSA and their lawyers arrive unannounced at the premises concerned and carry out a diligent search of the hard disks of all the company's PCs. If the search reveals unlicensed copies of software on the hard disks (and this is usually identified by the serial numbers of the software), the infringers have generally been required to pay damages and costs and, in some cases, make abject p u b l i c apologies, In the early days, the evidence to support a court application for a Search and Seize Order was obtained more by luck than careful planning, very often from disaffected e x - e m p l o y e e s offering the necessary evidence out of the blue. More recently, the BSA has installed a confidential telephone hotline which offers a financial inducement to anyone prepared to blow the whistle on corporate overuse. Given the right evidence, the BSA's lawyers spring into action. The Washington law firm of Covington & Burling opened an office in London some years ago and now does the enforcement work for the BSA.
usually identified by
copyright infringement and that, in a d d i t i o n to
!he.software),the
infringers have generally been required to pay damages and costs"
g i v i n g rise to d a m a g e s , it is also a criminal o f f e n c e punishable by fines and imprisonment up to two years. It also reminds the recipient that, where infringement is p r o v e n to have taken place with the c o n s e n t or connivance of a director or manager of the company, that person is also liable to criminal prosecution. The letter then usually invites the recipient to investigate the situation fully within a few days and report back to the BSA. A form of audit report is usually suggested. Most companies' management is unaware of any u n a u t h o r i z e d use o f s o f t w a r e and is anxious to investigate the position as quickly as possible. Such investigation often does reveal a number of unlicensed copies and, in good faith, the companies concerned then complete the audit report showing this. It is at this point that the tactics of the BSA and their lawyers becomes questionable. On return of the audit report, a form of settlement agreement is sent out immediately inviting the company concerned to give an undertaking not to infringe copyright, to delete unlicensed copies of software and to pay damages "which amount to the retail price of the software". On a without prejudice basis, the BSA lawyers often indicate that their clients will be prepared to accept 75% of the recommended retail price of the software. Such a claim to damages is not only unfounded in law but is also oppressive. The recommended retail
ComputerFraud&SecurityApril1999 3723/99/$20.00© 1999ElsevierScienceLtd.Allrightsreserved
FEATURE price is most usually the value without any discount and is very often way above the available market price. By asking for such damages and also asking the victim to erase the
"Most companies' management is unaware of any unauthorized use of software and is anxious to investigate the position as quickly as possible."
unlicensed copies, the victim will not only be faced by a
high f i g u r e for d a m a g e s but will also have to purchase new licences to c o v e r its actual needs for the f u t u r e . The v i c t i m is s o m e times required to submit to the BSA once a year for the following three years invoices evidencing all purchases of such new software. The victim is also required to agree to draw up and submit for approval a compliance programme to ensure that no further unlicensed copying takes place. The BSA claims that its loss on infringement can be measured by the costs of research, development and p r o d u c t i o n they have incurred in p r o d u c i n g the product and, as these amount to approximately 75% of the retail
"The victim is sometimes requnrea-' -' to submit to the BSA once a year for the following three years invoices evidencing all purchases of such new software."
price, they b e l i e v e that this is w h a t they would be a w a r d e d by the court. They also go on to c l a i m 'additional' d a m a g e s for the infrin-
g e m e n t and s u g g e s t that 10% of the recommended price would be appropriate. Very little of this can be justified as a matter of established law. The measure of damages in a case such as this is the loss of royalty which the software publisher would
Computer Fraud & Security April 1999 3723/99/$20.00 © 1999 Elsevier Science Ltd. All rights reserved
expect to receive on the sale of the product. As a recommended retail price covers such things as the retailer's profit, distribution costs, marketing costs and other incidental costs, none of which are attributable to the licensor, they must be eliminated. Similarly, research and development costs in the product are not recoverable as such. When the BSA is asked to specify the actual revenue an individual software publisher receives in respect of each sale, they are remarkably coy and reluctant to give such information. However, whatever
"One can have sympathy with software publishers and their need to protect their investment and do what they can to stem the flow of unauthorized copying, adopting high handed and unjustified tactics will not exactly enhance their reputations." view is taken, clearly 75% of the recommended retail price is n o t the correct basis for calculating damages for c o p y r i g h t i n f r i n g e m e n t . As for +additional' damages, these are awarded at the discretion of the court to take into a c c o u n t any f l a g r a n c y of the infringement and any benefit accruing to the defendant. As these damages are "at large', it is wholly inappropriate to claim that '10%" should be added to the bill. This approach may not be adopted in every case. But settlements reached on such a basis without the infringer taking appropriate legal advice are clearly questionable. Whilst one can have sympathy with software publishers and their need to protect their investment and do what they can to stem the flow of unauthorized copying, adopting high handed and unjustified tactics will not exactly enhance their reputations.
The standard opening shot from C o v i n g t o n & B u r l i n g m i g h t say that they had r e c e n t l y been "advised" that the
Software
unlicensed"lf the search revealSof copies softwarewhich software on the hard
ployeesViCtim'mayem-be s using copies of
Alliance" • Industry Protector or
B Ily?
excee theoum disks (and this is ber
of
legal
has authorizationC°pies the victim
to use.~heletter the serial numbers of may then go on to
state that this is
U
NeflMaybury The
Business Software A l l i a n c e ( B S A ) comprises a number of leading software companies including Adobe Systems, A u t o d e s k , L o t u s , M i c r o s o f t , Novell and the Santa C r u z Operation. The BSA has been actively pursuing corporate overuse of its members' software in the UK since 1991, and has achieved many high profile successes against leading companies. Using Anton Piller Search and Seize Orders, representatives of the BSA and their lawyers arrive unannounced at the premises concerned and carry out a diligent search of the hard disks of all the company's PCs. If the search reveals unlicensed copies of software on the hard disks (and this is usually identified by the serial numbers of the software), the infringers have generally been required to pay damages and costs and, in some cases, make abject p u b l i c apologies, In the early days, the evidence to support a court application for a Search and Seize Order was obtained more by luck than careful planning, very often from disaffected e x - e m p l o y e e s offering the necessary evidence out of the blue. More recently, the BSA has installed a confidential telephone hotline which offers a financial inducement to anyone prepared to blow the whistle on corporate overuse. Given the right evidence, the BSA's lawyers spring into action. The Washington law firm of Covington & Burling opened an office in London some years ago and now does the enforcement work for the BSA.
usually identified by
copyright infringement and that, in a d d i t i o n to
!he.software),the
infringers have generally been required to pay damages and costs"
g i v i n g rise to d a m a g e s , it is also a criminal o f f e n c e punishable by fines and imprisonment up to two years. It also reminds the recipient that, where infringement is p r o v e n to have taken place with the c o n s e n t or connivance of a director or manager of the company, that person is also liable to criminal prosecution. The letter then usually invites the recipient to investigate the situation fully within a few days and report back to the BSA. A form of audit report is usually suggested. Most companies' management is unaware of any u n a u t h o r i z e d use o f s o f t w a r e and is anxious to investigate the position as quickly as possible. Such investigation often does reveal a number of unlicensed copies and, in good faith, the companies concerned then complete the audit report showing this. It is at this point that the tactics of the BSA and their lawyers becomes questionable. On return of the audit report, a form of settlement agreement is sent out immediately inviting the company concerned to give an undertaking not to infringe copyright, to delete unlicensed copies of software and to pay damages "which amount to the retail price of the software". On a without prejudice basis, the BSA lawyers often indicate that their clients will be prepared to accept 75% of the recommended retail price of the software. Such a claim to damages is not only unfounded in law but is also oppressive. The recommended retail
ComputerFraud&SecurityApril1999 3723/99/$20.00© 1999ElsevierScienceLtd.Allrightsreserved
FEATURE price is most usually the value without any discount and is very often way above the available market price. By asking for such damages and also asking the victim to erase the
"Most companies' management is unaware of any unauthorized use of software and is anxious to investigate the position as quickly as possible."
unlicensed copies, the victim will not only be faced by a
high f i g u r e for d a m a g e s but will also have to purchase new licences to c o v e r its actual needs for the f u t u r e . The v i c t i m is s o m e times required to submit to the BSA once a year for the following three years invoices evidencing all purchases of such new software. The victim is also required to agree to draw up and submit for approval a compliance programme to ensure that no further unlicensed copying takes place. The BSA claims that its loss on infringement can be measured by the costs of research, development and p r o d u c t i o n they have incurred in p r o d u c i n g the product and, as these amount to approximately 75% of the retail
"The victim is sometimes requnrea-' -' to submit to the BSA once a year for the following three years invoices evidencing all purchases of such new software."
price, they b e l i e v e that this is w h a t they would be a w a r d e d by the court. They also go on to c l a i m 'additional' d a m a g e s for the infrin-
g e m e n t and s u g g e s t that 10% of the recommended price would be appropriate. Very little of this can be justified as a matter of established law. The measure of damages in a case such as this is the loss of royalty which the software publisher would
Computer Fraud & Security April 1999 3723/99/$20.00 © 1999 Elsevier Science Ltd. All rights reserved
expect to receive on the sale of the product. As a recommended retail price covers such things as the retailer's profit, distribution costs, marketing costs and other incidental costs, none of which are attributable to the licensor, they must be eliminated. Similarly, research and development costs in the product are not recoverable as such. When the BSA is asked to specify the actual revenue an individual software publisher receives in respect of each sale, they are remarkably coy and reluctant to give such information. However, whatever
"One can have sympathy with software publishers and their need to protect their investment and do what they can to stem the flow of unauthorized copying, adopting high handed and unjustified tactics will not exactly enhance their reputations." view is taken, clearly 75% of the recommended retail price is n o t the correct basis for calculating damages for c o p y r i g h t i n f r i n g e m e n t . As for +additional' damages, these are awarded at the discretion of the court to take into a c c o u n t any f l a g r a n c y of the infringement and any benefit accruing to the defendant. As these damages are "at large', it is wholly inappropriate to claim that '10%" should be added to the bill. This approach may not be adopted in every case. But settlements reached on such a basis without the infringer taking appropriate legal advice are clearly questionable. Whilst one can have sympathy with software publishers and their need to protect their investment and do what they can to stem the flow of unauthorized copying, adopting high handed and unjustified tactics will not exactly enhance their reputations.