Convenience & Impulse Retailing Article

Category: Legal & Accounting

Issue: Sep/Oct 2003

Managing your software - a Practical Guide for Small Businesses

By Jim Macnamara - Chairman of the BSAA

You may have seen a story on Channel Nine's Small Business Show about using unlicensed software - or as it's commonly known, software piracy. Software piracy is the copying and use of software outside the terms of the licence (usually one program one user, or a prescribed number of users under a multiple user licence) or without the permission of the copyright owner or software manufacturer. Such copying and use is illegal under the Copyright Act and carries high penalties, yet interestingly, the biggest culprits in the use of illegal software are often small businesses.

Software copyright infringement can occur through:

  • Individual copying of programs (eg. from friends or colleagues);
  • Copying at work;
  • Hard-disk loading of illegal copies by unscrupulous dealers;
  • Internet downloading of illegal copies (eg. from pirate sites); or
  • Counterfeiting which is the production of illegal copies (eg. CDs).

    • While it might seem like a 'victimless crime' that doesn't hurt anyone, illegal software copying does not only affect big software companies. It is stealing from local software developers, local distributors and local retailers by reducing their sales. It also defrauds consumers who are deceived into believing they are receiving licensed software. Software piracy hurts Australian businesses and costs jobs.

  • Software piracy costs manufacturers $260 million a year in lost sales in Australia.
  • Software piracy costs local distributors and retailers $286 million a year in lost sales in Australia.
  • PriceWaterhouse Coopers estimates the total cost of software piracy to the Australian economy as $1.2 billion a year.

    • It is also a major risk to those who do it. Illegal software users face large penalties, risk viruses, do not receive manuals and are not eligible to receive technical support. Furthermore, those who make and use illegal software risk civil and/or criminal legal action leading to heavy fines or damages.

    Recent research conducted by International Planning & Research Corporation (IPR) in 2001 found 27 per cent of business PC software in Australia is illegally copied. Australia's PC software piracy rate is higher than other developed markets such as the US, UK, New Zealand and Canada.

    Penalties for Using Illegal Software

    Under the Copyright Act, it is a criminal offence to copy software for sale or other commercial purposes and the Act prescribes fines of up to $93,500 for an individual, and more than $467,500 for companies.

    Where copied software is not for sale, but for internal business or personal use, it is a civil offence and legal action by the copyright owners can lead to awards of damages of an unlimited amount, as well as court costs. In recent cases in Australia brought by the BSAA, damages ranging from $10,000 up to more than $200,000 were gained against users of illegal software.

    The BSAA does not discriminate in its investigations of illegal software use in terms of organisational size. Companies ranging from two employees through to multi-national corporations have been investigated and all faced the same risks of legal and financial penalties.

    A further risk facing company directors is that they can be held personally liable for offences occurring in companies even if they are not involved in the piracy, and can face damages payouts. In most cases, ignorance is no excuse.

    FACT: Rewards of $5,000 are offered for information that leads to a successful action against a software copyright offender (conditions apply and are available at www.bsaa.com.au). This results in many successful legal actions and sends a warning to business owners that their actions may be reported.

    Avoiding illegal software

    The most effective way to avoid using illegal software is to be proactive. Introduce a software policy, monitor and maintain a software asset register and conduct regular software audits to ensure all your software is licensed.

    10 Tips to Avoid Illegal Software

  • Check all your software is licensed (use the BSAA four-step self-audit outlined below);
  • Establish a Software Asset Register (see the BSAA four-step self audit);
  • Conduct regular formal software audits to keep your Register up to date;
  • Appoint an internal Software Auditor and conduct unannounced spot software checks;
  • Keep original software disks safely locked away;
  • Ensure you have a clearly stated senior management position on the use of legal software and company commitment to having legal software;
  • Have a Software Code of Ethics. A sample Code is available from www.bsaa.com.au
  • Ensure all employees sign an Employee Compliance statement. A sample statement is available at www.bsaa.com.au
  • Educate all users about software copyright and the penalties for illegal software copying and use. Sample staff guidelines, notices, presentations and emails are available at www.bsaa.com.au
  • Review budgeting and purchasing procedures to ensure provision is made for software as well as hardware.

    • Steps to Establish a Software Register

  • Complete a Software Audit Form so you know what software you have and which computers it is loaded on. This form is available free of charge at www.bsaa.com.au
  • Check the license agreement terms with the software vendor. You can do this online by visiting the vendor 's license agreements pages;
  • Once you have the information from the software vendor double check you have the right licenses.
  • Every software vendor has different license conditions.
  • If you have illegal software or software you no longer require, you must either uninstall the software or contact the software vendor to purchase the correct licenses for your needs.

    • The BSAA publishes a Software Compliance & Audit Manual on its Web site which can be downloaded free of charge. The manual contains a range of practical, helpful guides and tools including software audit forms, employee management resources including a corporate code of ethics, check-lists, and employee notifications and warnings that can be copied and adapted for use.

    If you'd rather a printed copy just call the BSAA hotline: 1800 021 143 and one will be sent out to you.

    About the BSAA

    The Business Software Association of Australia is an industry association founded by leading software companies in 1989 to raise awareness of the problem of software piracy and encourage and enforce copyright compliance.

    BSAA conducts an active public education campaign; produces management assistance tools to help businesses monitor their software and comply with licences; and co-ordinates litigation against software copyright offenders.

    In Australia, BSAA members include Adobe; Autodesk Australia; Macromedia, Microsoft and Symantec, as well as local software developers.