Consumer Software Piracy

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Consumer Software Piracy

The unauthorized use, possession, downloading, duplication, distribution, or sale of copyrighted computer software.

Copyright infringement is a serious problem for the computer software industry. Programs can be copied easily on a personal computer, thus making detecting and prosecuting infringements of software copyrights extremely difficult. By estimates of the Software Publisher's Association, nearly 25 percent of all software in use in the United States is pirated (acquired through unlawful copying), and domestic and international losses ran to $10.9 billion in 2001 alone. The growth of computer networks, especially the Internet, presents further problems by providing the means for the almost effortless transmission of data. In the 1990s, Congress strengthened protections for software, and aggressive litigation by the computer industry targeted corporations, individuals, and counterfeiters in an effort to clamp down on this massive theft. Yet during the early 2000s, law enforcement remained difficult as software pirates turned to new technologies to share files illegally.

The Copyright Act (17 U.S.C.A. §§ 1 et seq.) gives exclusive rights to the authors of computer software. Their work is a type of Intellectual Property, which the law treats differently from tangible property. Software companies own their copyrighted programs even after selling them to consumers. For consumers, buying software is different from buying a car: Purchasers of cars are called owners, whereas purchasers of software are called licensees. Although software buyers own the disc or CD-ROM on which the software is stored, they are entitled to use it in only a specific, limited way. The law provides that manufacturers, as owners of the copyright, retain the exclusive right to reproduce and distribute copies of the software. Consumers, as licensees, do not have the same right. They may only copy the software onto a single computer and make another copy for archival purposes.

Consumers break the law when they make unauthorized copies of software. Whether for profit, free distribution, or personal use, such duplication constitutes copyright infringement. Copyright owners can sue infringers for damages that may include profits made by the infringers, or statutory damages of up to $100,000 for each work infringed. The penalties are more severe when software copying is done

Software Publisher's Association

The Software Publisher's Association (SPA) is an 1,100-member trade group representing the legal interests of U.S. software companies. Founded in 1988, SPA fights Copyright infringement from its offices in Washington, D.C., and Paris. SPA is a division of the Software & Information Industry Association (SIIA), which offers rewards of up to $50,000 to individuals who report verifiable corporate end-user Piracy to SIIA through the SIIA hotline or through the SIIA Corporate End-User Piracy Internet Report Form. Its chief goal is to eliminate the unauthorized duplication of computer programs.

On December 16, 1997, President bill clinton signed into law the No Electronic Theft (NET) Act of 1997, Pub. L. No. 105-147, 111 Stat.2678. The act was passed to address a loophole in copyright law, which was successfully exploited by a 21-year-old MIT student, David LaMacchia, who escaped federal prosecution for distributing free copyrighted software on the Web. The NET Act punishes software pirates who willfully copy, distribute, and traffic in protected software on the Web whether or not they enjoy a financial gain. David LaMacchia set up a bulletin board on the Internet which he named "Cynosure." LaMacchia then solicited bulletin board correspondents to upload popular software applications such as Excel, WordPerfect, and various computer games such as Sim City. He then transferred the uploaded software to a second encrypted address, named "Cynosure II." Users who had access to the Cynosure password could then download the software. The worldwide traffic generated by the offer of free software attracted the notice of university and federal authorities. During the brief six-week life of Cynosure, software copyright holders claim to have lost one million dollars as a result of the free trafficking of their products. Even though a federal Grand Jury returned a one-count indictment charging LaMacchia with conspiring with unknown persons to violate the wire-fraud statute, the government could not prosecute under the criminal copyright statute because there was no evidence that LaMacchia made any profit.

SPA efforts are targeted primarily at the U.S. market, where the industry generates approximately 60 percent of its revenues and where, SPA estimates, nearly 85 percent of losses to software piracy occur. Successes in cracking down on infringement have made SPA a major player in copyright law. The organization's enforcement actions netted $14 million in recoveries between 1988 and 1995. Among these were a half-million-dollar settlement against a corporation, resulting from an audit, and a $350,000 settlement in May 1991 from a successful lawsuit against Parametrix, an environmental engineering firm. In 2002, in a case originating from SIIA, Yaroslav Suris, 27, of Brooklyn, New York, was convicted of one felony count of Criminal Infringement of a Copyright, in violation of 17 U.S.C. 506(a)(1) and 18 U.S.C. 2319(b)(1). Suris was sentenced to two months incarceration, followed by 14 months of home detention. He was also ordered to pay $290,556 in restitution for computer piracy.

In the area of Lobbying, SPA has asked Congress for tougher legislation designed to stop copyright infringement over computer networks, especially the Internet. SPA anti-piracy department conducts public education campaigns and distributes auditing software that allows businesses and organizations to ensure that they are following the law.

According to SPA, Web framing can be a form of piracy when a viewing window is created for all or a portion of a Web page or a particular piece of content residing on a Web page. Problems with framing typically arise when the manner in which the Web site is framed removes, obscures, or alters navigation tools, links, indicators of source, Trademarks, logos, or advertising located on the Website that is framed. Framing of third-party content into another Web page raises many legal issues, including passing off content as one's own, Unfair Competition, trademark infringement, trademark dilution, misappropriation, and perhaps copyright infringement.

Further readings

Albert, G. Peter. 1999. Intellectual Property Law in Cyberspace. Edison, NJ: BNA Books.

Zoellick, Bill. 2001. CyberRegs: A Business Guide to Web Property, Privacy, and Patents. Boston, MA: Addison-Wesley Longman.


Copyright; Internet; Trademarks.

"willfully and for purposes of commercial advantage or private financial gain" (17 U.S.C.A. § 506). This is a federal crime, carrying fines of up to $250,000 and jail terms of up to five years.

The remote possibility of arrest and prosecution hardly hinders most software thieves. The chances of being caught are slight, and the allure can be difficult to resist. Software packages are often expensive—from around $50 to several hundred dollars—and copying is literally as simple as clicking a mouse.

The rise of computer networking—in which computers are linked within an office or across cities by means of telephone modems—has made illegal copying even easier. Network communication is hard to monitor, especially when it takes place over large geographic distances between or among users who can conceal their identities. Thousands of computer bulletin boards, as well as the Internet, proved fertile ground for young computer enthusiasts who saw copyright law as a minor hurdle in their acquisition of new warez (computer hacker slang for "illegally acquired software"). During 1995, the Usenet news group <> amounted to a bonanza where thousands of dollars worth of copyrighted software was uploaded weekly by anonymous hackers, free for the taking.

Despite gaining ground against infringers, the computer industry's battle is still ongoing. The Software Publisher's Association (SPA), an industry trade group that sues infringers on behalf of its members, claims to have greatly reduced illegal copying in the workplace. However, home copying by individuals and counterfeiters has remained a persistent problem.

In 1994, federal district Judge Richard Stearns dismissed a case against David LaMacchia, a Massachusetts Institute of Technology student who had set up an Internet bulletin board over which users traded more than one million dollars worth of software. The judge ruled that federal copyright law did not cover not-for-profit copying of computer software. Subsequently, the software industry blamed this so-called "LaMacchia loophole" for the proliferation of online Piracy during the middle and second half of the decade. The industry argued that because federal copyright law defined violations strictly in terms of financial gain, most casual violators fell through the cracks.

During the late 1990s, software manufacturers successfully lobbied Congress to enact stringent, new federal legislation to curb software piracy. The first of two major laws, the No Electronic Theft (NET) Act of 1997, Pub. L. No. 105-147, 111 Stat. 2678, immediately closed the LaMacchia loophole. Under the NET Act, the definition of a violation includes unauthorized reproduction or distribution of copyrighted materials, and financial gain is understood to mean mere possession. The NET Act provides severe penalties for violating the copyright of materials worth more than $1,000 in a six-month period by copying, distributing, or receiving software.

One year later, Congress enacted a second, more sweeping law in the Digital Millennium Copyright Act (DMCA) of 1998. The DMCA broadly revamped U.S. copyright law to keep pace with changing international treaties as well as evolving technologies. One major provision, essentially aimed at hackers, criminalized the use of any device or technology to break anti-copying protections on software or other media such as movies and music. But while being embraced by the software and entertainment industries, critics including scientists, scholars, and civil-liberties advocates have argued that the DMCA limits legitimate professional research and stifles technological innovation.

Further complicating antipiracy efforts, new technologies arose following the introduction of Napster in 1999. As a free, online software program used to trade MP3 music files anonymously, Napster proved wildly popular with millions of Internet users before prompting Congressional hearings in 2001 as its parent company came under fierce litigation from the music industry. After the company filed for Bankruptcy, file trading moved to other socalled peer-to-peer (or "P2P") networks, such as the popular Gnutella, which similarly allowed users to connect online in order to trade software, music, and movies. Critically, P2P decentralized file trading through the use of programs designed by computer hobbyists, making enforcement efforts all the harder.

As the P2P phenomenon spread, attempts to combat it came from industry, academic administrators, and lawmakers. Industry representatives chiefly targeted colleges where students reportedly were slowing campus computer systems to a crawl with their volume of illegal file trading. Some educational institutions restricted computer use in the face of copyright-infringement lawsuits. Under combined Lobbying from the software, music and movie industries, a subcommittee of the U.S. House Judiciary Committee held hearings into potential policy solutions in 2003.

Because of the ease with which software piracy may be carried out, and the substantial revenue losses that it causes, software manufacturers continue to call for more stringent legislation and to search for improved methods for detecting and preventing software theft.

Further readings

Business Software Alliance. February 26, 2003. "Press Release: BSA Applauds House Subcommittee for Attention to P2P Piracy Problem." Business Software Alliance. Available online at <> (accessed November 20, 2003).

"Congress at 45 RPM." 2001. The Palm Beach Post. (April 10): 14A.

Legard, David. February 13, 2003. "IIPA estimates U.S. Global Piracy Losses at $9.2 Billion in 2002." IDG News Service.

Steinberg, Gene. 2002. "Internet File Sharing without Spyware." Gannett News Service (August 19).

"Timeline of Events in Napster Case." 2001 Associated Press (February 12).

Warren, Mackenzie. 2002. "Online music swapping still rocks on campus: Students Zero in on Peer-to-Peer Sites for Freebies." Gannett News Service (July 15).


Computer Crime; Copyright; Intellectual Property.

West's Encyclopedia of American Law, edition 2. Copyright 2008 The Gale Group, Inc. All rights reserved.
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