Who Owns The Software?

After you paid all that money for your new program, you may be surprised to find out that you do not actually own it! This is usually discovered when you are about to open the envelope containing the program diskettes or CD-ROM. There is likely a seal on the envelope that states you are only licensed to use the program - as long as you abide by certain rules. We'll discuss the rules later. First let's review some background.


Developing software is a very expensive, time-consuming operation and companies in this business need to protect their investment. By doing so, they can continue to develop better programs and sell them at reasonable prices. We, the end users, will be the beneficiaries of their effort and imagination.

But software is different than other copyrightable products, such as books, because it is easily copied. Software companies quickly found that for every legitimate copy sold, there were tens or hundreds of illegal copies being used.

Copy Protection

In the "old days," when people actually owned their software, a common way to discourage copying was to copy protect the program diskettes. Copy protection involved some very sophisticated technical schemes that would prevent, or at least make it very difficult, for anyone to make copies of the program diskettes.

Some companies marked areas of the installation disks that were inaccessible to MS-DOS. Others would only allow the program to be installed a certain number of times. A few used both methods, and required that the license be "removed" back to the floppy disk so that the program could be reinstalled.


Copy protection created some significant problems that eventually caused software companies to abandon the whole idea. If the program cannot be copied, how could backups be made? What happens when the computer hardware is updated or replaced due to failure and the program has to be installed on the new disk drive? These problems alone would have led to the downfall of copy protection, but in addition, a whole new industry emerged to sell programs to copy the copy protected programs!

Software Licensing

The problems with the copy protection approach have led to software licensing as a way to control software distribution. A software license gives you the right to use the software under certain conditions. If these conditions are not met, the manufacturer has the right to remove the software and collect any damages from its "misuse."

Software licenses can differ widely from one manufacturer to another, and even between different programs from the same company. For many, the underlying concept is analogous to a book. The software may be used by any number of people and may be freely moved from one computer to another - as long as it is not possible for more than one person at a time to use it.

Other manufacturers, now including Microsoft, require that a license be purchased for each PC on which the software is installed, regardless of how many users use the software at once.

In theory, manufacturers can put any terms they want into license agreements, so it is worthwhile to read the terms of your new software's license agreement before you break that seal.

Penalties for Piracy

Since their software can easily be copied illegally, or pirated, software manufacturers have taken action to strengthen the enforcement of their licensing agreements. The Software Publishers Association has been formed to act on behalf of its members in this regard and some significant penalties are possible.

Illegally copying software is actually a violation of U.S. Copyright law. Civil penalties are up to $100,000 for each title infringed. If the offender is charged with a criminal violation, the penalty is up to $250,000 per title infringed, and up to five years imprisonment!

What to Do?

We strongly recommend that your business abide by the licensing agreements for each of the software programs your company has purchased. In addition, you should have a clear policy prohibiting unauthorized use of software. This should include software employees might bring from home to install on their PCs at work. ITS has a strict policy against working on systems with illegally copied software.

The Software Publishers Association has an excellent Internet web site explaining software piracy. They provide self-audit kits containing software to audit your computers, as well as suggestions for internal policies for your company. The SPA's web site is www.spa.org, and the anti-piracy hotline is 800-388-7478. You can also write to the Software Publishers Association at: 1739 M Street NW, Suite 700, Washington, DC, 20036.

December 1998

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