Javascript is disabled. Please enable Javascript to log in.
Published: 2012-11-14

Software Computer Piracy and Your Business



The personal computer (PC) has become a necessity for today's successful small business operations. These increasingly powerful machines use sophisticated software programs for a variety of applications. Software can help a small business correspond with its customers, keep track of inventory and even answer the phone and process orders. Unfortunately many computer users make illegal copies of computer software. Called "piracy" in the computer industry, this theft is a violation of federal copyright law.

Software pirates hurt themselves as well as others through their actions. They sacrifice the long term benefits of legitimate software ownership for a cheap, short term fix. This fact sheet identifies the hazards of illegal copying and the benefits for small businesses in becoming "software legal." Software is developed by publishers, including many small businesses relying upon steady sales not only to survive but also to improve their products and invest for the future. The creative teams who develop software -- programmers, writers, graphic artists and others -- also deserve fair compensation for their efforts.

Without the protection given by our copyright laws, they would be unable to produce the valuable programs that have become so important in our daily lives: educational software that teaches us much needed skills; business software that allows us to save time, effort and money making us more competitive, and entertainment and personal productivity software that enhances our leisure time.

The fact sheet you are holding was produced using a licensed word processor on a personal computer. What is Software Piracy? Computer software is protected under the federal copyright law which states that, "Users may not make a copy of a piece of software for any other reason than as an archival back-up without permission of the copyright holder." The unauthorized reproduction of a computer program is considered theft. In 1990, the PC software industry lost $2.4 billion in the United States alone and over $10 billion worldwide, according to estimates by the Software Publishers Association. Computer piracy is different from copying other recorded media, such as videotapes and compact disks, because there is no degradation in the quality of the copy.

The computer industry is the only industry that empowers the end user to become a manufacturing subsidiary. Trust and responsibility is placed in the hands of the computer user. A computer program copied over and over again will work exactly like the original. A program that took years to develop can be copied in a few seconds. And, although software is expensive to develop, almost any PC can be used to generate a cheap copy. Why Is It Important? Why should a computer user be concerned with software compliance?

First and foremost, computer piracy is illegal and there are stiff penalties for breaking the law. Companies and individuals who break the law can be penalized as much as $100,000 for every instance of software copyright violation. Recently, a 75-employee Colorado embroidery and monogramming company paid $30,000 in penalties, and a 200-person New Jersey commodities business paid $46,000. These small businesses were caught and paid the price for illegal software use. There are also valuable benefits for becoming software legal. By using original versions of computer software, users receive upgrade notifications, usually at discounted prices. They are also investing in the quality assurance and reliability of the product. Legal compliance means that the business relationship does not end when the buyer walks out of the store. Full documentation, technical support and product change notices await the rightful owner of computer software. The user also enjoys efficient business functions due to fully operational and productive employees, computer systems and virus protection.

Who Pirates Software? There is no one type of person who misuses computer software. Many people do not even realize that what they are doing is illegal. People who would never think of stealing a candy bar from a drug store may have no qualms about duplicating a $500 software package. In a small business environment, resources may be limited and an owner may even think that such a small infraction can have any serious consequences. After all, a small business is very different from a large corporation. But piracy is theft and theft is against the law. What Types of Piracy Exist? Computer piracy comes in many forms. Software counterfeiting is the illegal duplication and sale of copyrighted software in a form designed to make it appear legitimate. Hard disk loading takes place when computer dealers or consultants load unauthorized copies of computer software onto the hard disks of personal computers, often as an incentive for the user to purchase from that particular person. Electronic bulletin board services (BBS) may offer the illegal opportunity to download copied software using a modem connected to a telephone. Finally, there is the all too common practice of copying software within companies for use in the home or office, or "sharing" software among friends.

This last type of piracy accounts for over half the total revenues lost by the industry. The reasons for piracy differ widely. A small business person may copy one piece of software to trim costs. Another user may feel that "everyone else is doing it" and they do not wish to stand out. Finally, there are those who believe that piracy "doesn't hurt anyone" or "isn't really stealing." They are wrong. Who Must Obey the Copyright Law? Many people do not realize that the copyright law applies to organizations, both large and small, as well as individuals.

More and more businesses have written policies against illegal duplication of software. In a small business, there is a unique opportunity to initiate and oversee a comprehensive software policy. In a smaller environment, software purchases, installations and access can all be easily monitored to help the small business become "software legal." But compliance does not stop when a small business person leaves his or her job. Employees may face disciplinary action if they make extra copies of the company's software for use at home or on additional computers in the office.

A good rule to remember is that there must be one authorized copy of a software program for every computer upon which it is run. What About Upgrades? Generally speaking, upgrading of software does not give a small business the right to give away the earlier version. The upgrade is an improvement of the original software and not a new copy. The earlier version and the upgrade should be treated as elements of the same software product and not distributed. What Can I Do? Because the software industry is relatively new, and because copying is so easy, many people are either unaware of the laws governing personal computer software use or choose to ignore them. It is the responsibility of each and every software user, big or small, to understand and adhere to copyright law.

Small business owners can take the initiative to make software compliance an integral part of their daily procedures. If you are part of a small business, see what you can do to initiate a policy or procedure that everyone respects. Also, suggest that you or your management consider conducting a software audit. You can also help spread the word that users should be "software legal." Finally, free educational materials, including a Self-Audit Kit, are available. The Self-Audit Kit includes SPAudit, which helps as a software inventory program.

Using these tools a small business can find out what software they have on their computers' hard drives and what they must do to become "software legal." The benefits of becoming "software legal" far outweigh the disadvantages. The Self-Audit Kit and SPAudit may be obtained from: Software Publishers Association, 1730 M Street, N.W. Washington, D.C. 20036 phone: (202) 452-1600. How to Get More Information Information is power! - Make it your business to know what business information is available, where to get it and most importantly, how to use it.

Sources of information include: U.S. Small Business Administration - SBA District Offices - Small Business Development Centers (SBDCs) - Service Corps of Retired Executives (SCORE) - Small Business Institutes (SBIs) Consult your telephone directory under U.S. Government for your local SBA office or call the Small Business Answer Desk - 1-800-8-ASK-SBA for information on any of the above resources. Also, you may request a free copy of The Small Business Directory, a listing of business development publications, from your local SBA office or the Answer Desk. Other Sources: - State Economic Development Agencies - Chambers of Commerce - Local Colleges - The Library - The manufacturers and suppliers of small business technologies and products. The SBA's participation in this publication does not constitute an expressed or implied endorsement of any of the cosponsor's opinions, products or services. SBA Auth: 88-1307 All SBA programs are available to the public on a nondiscriminatory basis. Verified Current as of 5-18-01