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

"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 <alt.binaries.warez.ibm-pc> 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.