Beware a Bust

It’s an ordinary day. As president of a small San Francisco company offering business telemarketing services, you’ve projected a reasonably healthy bottom line when — Bleep! Bleep! Bleep! Into your life comes the Business Software Alliance with a little surprise: You owe BSA’s software clients licensing fees and penalties in the six digits.

You’ve just been busted by the “software police.”

That’s what happened to Barry Hanson  (San Francisco, California), president of CAS Systems, Inc.

“I came back from vacation in August 1996 and found a letter waiting for me from a law firm representing the BSA,” Barry says. “The letter said that CAS Systems may have installed more copies of software products than we were licensed to use. It also said I must not destroy any copies, which were now evidence.”

Barry called the BSA attorney and the news got worse.

From Software to Nightmare

Apparently a former employee had installed all sorts of software copies on computers throughout CAS Systems. Since no one used most of this software, Barry had no idea the copies existed. The attorney said CAS would have to conduct a special audit to determine how many programs on its 75 computers were “unauthorized.”

In other words, CAS had to collect the very evidence that would subject them to the six-figure payout.

Who blew the whistle? According to a BSA spokesperson, it’s usually a former employee. And, though Barry and his staff knew nothing about the copies, CAS would still have to pay.

“I don’t think a lot of CEOs know this can happen,” Barry says. “When I told my Vistage group, their mouths dropped open.

“But it’s easy for a company to have unauthorized software when employees bring software from home or computers get moved around and used for new purposes without anything being deleted.

“I’ve heard that some penalties get into seven figures and that a sheriff can just show up at your company with a search warrant.”

Who are the Software Police?

The Business Software Alliance, based in Washington, D.C., is a nonprofit trade association of software publishers including Adobe, Lotus, Microsoft and Novell. Another similar organization is the Software Publishers Association (SPA), which includes manufacturers of computer games, hardware and a spectrum of applications.

The manufacturers expect every computer running their software to be running a purchased, fee-paid program-not a freebie copy. The BSA and SPA carry out the policing of corporate “software piracy” like high-tech bounty hunters.

Both groups maintain Web sites and solicit “information regarding unauthorized usage” with ads in computer magazines. Anyone can contact a group anonymously with the name of a “pirate” company.

Violating Copyright Law

“We have 50-plus hotlines around the globe and in 1996 we got 10,000 calls in the U.S. alone,” says Diane Smiroldo, BSA’s vice president for public affairs.

Infringement of the U.S. copyright law is a felony punishable in both criminal and civil courts, Smiroldo says.

“We work with federal and local law enforcement agencies. In a few cases, we get a search and seizure warrant for a raid. In most cases, we send a letter. We rarely get taken to court and have never lost a case,” she says.

That may be why Barry took his attorney’s advice.

“He told me if I went to litigation, I’d lose-big time. So I started negotiating with them,” Barry said. “I asked if they wanted me to go out of business and lay off workers, and they said no. But they did want the penalty to hurt.”

Payout Is Painful Lesson

In December 1996, the BSA agreed to settle for the sum of $82,000, and CAS made a painful adjustment to its end-of-year bottom line. By the following February, CAS had paid an additional $23,000 for previously unlicensed software.

And that’s not all.

The BSA reserves the right to audit CAS Systems twice a year. And CAS agreed to educate its employees about the new software policies.

“We’ve even developed our own system that goes over the network. It checks what’s loaded on a given computer and compares it with what’s authorized. Anything without a license is deleted,” Barry says.

He shared his story with Vistage World News in the hope that other CEOs would learn from his experience and avoid a “bust.”

“In my opinion, the penalties (for using unlicensed software) are too harsh and punitive,” Barry says. “It would be nice if the BSA would just say, ‘We know you’re using this software, so pay us.'”

Protect Yourself from Piracy

To avoid getting busted by the “software police,” Vistage member Barry Hanson and Diane Smiroldo of the Business Software Alliance make the following suggestions.

  • Establish a written company policy about licensed software and make sure your employees are aware of it.
  • Check out your company’s computers for unauthorized “freebies.” You can download a special software audit program at Web sites of the Business Software Alliance or Software Publishers Association.
  • Buy from reputable software retailers and keep a complete file of proof-of-purchase receipts and licensing agreements for all software you use.
  • Run your company’s audit program at least once a month to check for newly loaded, unauthorized software. If you get busted anyhow:

    “Your knee-jerk reaction will be to find your problem and clean it off your computers,” Barry says. “But that’s illegal, and the person who reported you may still be working for you.”

    A better move is to consult your attorney and start negotiating the best deal you can with the offended software manufacturers.

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