SOFTWARE PUBLISHERS ASSOCIATION COPYRIGHT PROTECTION CAMPAIGN Background Information May, 1996 ---------------------------------------------------------------------------- TABLE OF CONTENTS * Introduction * Piracy - The Problem Defined, Types of Software Piracy * Why People Pirate Software * Software Piracy Equals Higher Software Prices * Public Awareness and Education Programs * Investigations * Litigation * Chart of Increases From 1994-1995 * Corporate Audits * International Efforts * How to Reach SPA * Worldwide Anti-Piracy Hotline Telephone Numbers For more information, contact: David Phelps, Public Relations Director 202-452-1600, ext. 320 202-223-8756 (fax) dphelps@spa.org ---------------------------------------------------------------------------- INTRODUCTION In 1985, the Software Publishers Association (SPA) initiated a comprehensive, industry wide effort to fight software piracy. The campaign has two broad charters: * Educate personal computer users about the copyright law and provide them with the tools necessary to comply with it, and * Execute a legal campaign to fight software piracy. The SPA's efforts since 1985 have grown dramatically. Since that time, SPA has received over $16 million in settlements from its anti-piracy actions. Those funds are used to support anti-piracy activities by the SPA, SPA Europe, and other anti-piracy organizations around the world. SPA's anti-piracy efforts, like all of the SPA's programs, are conducted at no charge on behalf of any member who wants to be involved. SPA members are plaintiffs in cases in which their products have been pirated. The SPA's membership now exceeds 1,200 companies. PIRACY - THE PROBLEM DEFINED Piracy is a very serious problem. Conservative analysis by the SPA estimates revenue lost to software piracy in the U.S. during 1994 was $1.05 billion. Worldwide, the problem is estimated at $8.08 billion. The federal copyright law, which governs the use of commercial software, is very straightforward -- it is illegal to make a copy of a piece of software for any reason other than as a back-up without permission from the copyright holder. Civil penalties for companies and individuals who break the law can be as high as $100,000 for eachcopyright infringed. Since October 1992, commercial piracy of software is a felony offense. Penalties include prison terms of up to five years (ten years for repeat offenders) and fines of up to $250,000. Forms of software piracy include: * Softlifting, purchasing a single licensed copy of software and loading it on several computers, contrary to the license. This includes sharing software with friends, co-workers and others; * Renting, software for temporary use, like you would a video; * Software counterfeiting, which is the illegal duplication and sale of copyrighted software in a form designed to make it appear to be legitimate; * Hard disk loading, whereby computer dealers load unauthorized copies of software onto the hard disks of personal computers, often as an incentive for the end user to buy the hardware from that particular dealer; and * Downloading of unauthorized copyrighted software to users connected by modem to electronic bulletin boards and/or the Internet. The unauthorized copying of personal computer software for use in the office or at home, or "sharing" of software among friends, is the most pervasive form of piracy encountered is estimated to be responsible for more than half the total revenues lost by the industry. Though it is a misdemeanor to make fewer than ten unauthorized copies of a program, small-scale offenders may be subject to substantial civil penalties. WHY PEOPLE PIRATE SOFTWARE Although there are many reasons why people pirate software, some of them include greed, carelessness, lack of awareness of the law, or general disregard for the importance of treating software as valuable intellectual property. Managers who duplicate software to trim costs may feel that "everyone else is doing it." Others may mistakenly believe that it is legal to make and distribute copies so long as the copier derives no profit from the distribution or use. Still others may truly believe that software copying is a harmless activity that "doesn't hurt anyone" or "isn't really stealing." Software presents a unique theft problem for the industry because it is so easy to duplicate and because the copy functions identically to the original. Unlike other products such as audio and video tapes, there is no degeneration in quality from copy to copy. And the copying process is effortless. A program that reflects years and millions of dollars of development takes only a few seconds to copy. The cost, too, is negligible; a product that may cost anywhere from $20 to $20,000 can be copied by any PC user for no more than the cost of a few blank diskettes, and hard disk users avoid even that minimal cost. SOFTWARE PIRACY EQUALS HIGHER SOFTWARE PRICES Software piracy, however, harms all software companies and ultimately the end user by leading to higher prices. Piracy is also a significant drain on the resources of one of America's most competitive industries. Few other industries lose as much revenue to theft. This ultimately curtails the industry's competitiveness. If software were not stolen so frequently, developers could recover their development costs more quickly and go on to fund new development efforts, creating even better software. And the problem has a ripple effect on everyone - from distributor to retailer and even to end user. It translates into fewer jobs and less revenue to local economies. For the end user, pirated software means there is no support, documentation, warranties or updates provided by the software publisher. In the long run, illegal software duplication costs more time and money for everyone. PUBLIC AWARENESS AND EDUCATION PROGRAMS In an attempt to inform individuals and organizations about the law governing software use, the SPA funds a comprehensive education program that provides all PC users with the tools needed to comply with copyright law and become software legal. Ensuring compliance with federal copyright law is not difficult. SPA publishes a brochure entitled, "Software Use and the Law." This brochure provides a summary of the copyright law in the United States and Canada as well as a sample corporate policy statement. The SPA also publishes a second brochure, "Is it Okay to Copy My Colleague's Software?" These brochures are excellent guides for end users seeking to understand the legal use of software and are available free of charge. The SPA has compiled a free Self-Audit Kit with which organizations can examine their installed software. SPAudit, version 3.1, a software inventory management program which accompanies the SPA Self-Audit Kit, is designed to help an organization track commercial software programs that are on all hard disks. The MS-DOS version of the program searches PC hard disks for more than 1500 of the most common programs used in business. KeyAudit, published by Sassafras Software Inc., and distributed by SPA, searches for all Macintosh software. To date, more than 150,000 copies of the audit kit have been distributed free of charge. SPAudit has been translated into French, Spanish, Swedish, German and Italian. The SPA also has produced a videotape to help corporations understand the copyright law. "It Could Have Been So Easy" is a seven minute dramatization demonstrating not only how to avoid litigation and the negative publicity associated with it, but also how to implement and receive the full benefits of an effective software management program. This video is available for $20.00. The SPA Software Management Guide helps companies to audit their current software policies, educate employees about the legal use of software, and establish procedures to purchase, register, upgrade and backup computing systems. The Guide provides an Internal Controls Analysis and Questionnaire, a Software Audit Guide, and the SPA Eight Point Program for Ensuring Compliance. It also contains copies of many of the SPA's current anti-piracy materials. The items include: SPAudit (DOS and Macintosh versions), "It Could Have Been So Easy" video, an Information Week feature article about the SPA, and educational brochures that include suggested corporate policies, a memorandum to employees, and information about the copyright law. The Software Management Guide costs $99, including shipping and handling charges. The most comprehensive education tool is the SPA Certified Software Manager (CSM) Course. This course is a total immersion training seminar that contains all of the information and materials computer professionals need to establish a complete software asset management program. The SPA Certified Software Manager course stresses the fundamental issues of software licensing and compliance, and also teaches the skills necessary to optimize the legal use of software. Since June 1994, over 2,000 computer professionals have attended a CSM seminar and 99% of these believe CSM will enhance their job skills. CSM seminars are also being conducted in the UK, France, Germany, Japan, and Singapore, and will be introduced in, India, China, and seventeen Latin American countries in the first six months of 1996. In its first effort at reaching young people, the SPA produced a rap music video "Don't Copy That Floppy." The 8-minute video uses rap music and hip-hop dance to teach students about the legal and ethical ramifications of stealing intellectual property. More than 20,000 copies of the video and accompanying lesson plan have been distributed to teachers nationwide. "Don't Copy That Floppy" is available from the SPA for $15. The association maintains an active anti-piracy speakers bureau. SPA representatives regularly speak at seminars on the topic of software piracy and the copyright law. Hundreds of presentations have been given to a variety of audiences in cities across North America. The SPA is continuing to heighten public awareness through the publication of feature articles, print ad placements, and billboard advertising. Feature articles have run in a wide variety of publications, including general business, computer, accounting, and legal publications. The anti-piracy awareness ad is also getting lots of attention, appearing in magazines and journals, as well as on billboards. INVESTIGATIONS The SPA's Anti-Piracy Department investigates cases of copyright infringement involving corporations, educational and non-profit institutions, dealers, bulletin boards and Internet sites, and software rental operations. Most investigations begin with a call to the anti-piracy hotline (800-388-7478 or via email at piracy@spa.org). Many of the reports come from employees, temporary workers and consultants. In dealer cases, customers who have received illegal copies of software on their computer hard disks may notice the absence of documentation or they may become aware that they are not entitled to customer support or updates. Purchasers of illegally "loaded" PCs realize that receiving a pirated copy of software is no bargain. In response to all calls, the SPA conducts a thorough investigation before proceeding further. Depending on the strength of the information received and the extent of the infringement involved, SPA's response can take one of the following forms: * Cease and desist letters; * Corporate audits (in lieu of litigation) or * Litigation. Since the SPA's anti-piracy activities are designed to pursue copyright compliance on behalf of the entire PC software industry, SPA takes action against businesses and individuals who pirate not only business software applications, but also consumer and educational software products. Each member whose copyright is violated is invited to join as a plaintiff. Calls pour into the hotline at a rate of about 30 per day. Based on these leads, the SPA took action in 1995 against 586 organizations, an increase of 23% from 1994. All money from settlements goes into a segregated bank account and is used to fund worldwide educational anti-piracy programs. Increase in Calls 94-95 24% Increase in Cases 94-95 23% Increase in $100,000+ penalties 17% Increase in International Litigation 94-95 100% LITIGATION SPA, on behalf of its members, has filed hundreds of lawsuits against corporations, computer dealers, training schools, bulletin board systems and educational institutions. The statutory penalty for willful infringement is up to $100,000 per copyright infringed. When it is warranted, the SPA will apply to federal judges for permission to conduct ex parte searches (raids) of defendants' computers. These searches are used to prevent the destruction of evidence pending trial. Recently, a raid was conducted against a Florida based Junior College, International Fine Arts College. The complaint, filed March 1, alleged that International Fine Arts College had unlawfully duplicated computer programs published by several software companies. The court issued an ex-parte temporary restraining order ("TRO") one week later, which allowed the plaintiffs' representatives, accompanied by deputy United States marshals, to audit the computer programs installed on the defendant's computers. The lawsuit was settled for $135,000 with the agreement that the school destroy the illegal software and repurchase authorized software. The SPA has a close working relationship with the Federal Bureau of Investigation (FBI), U.S. Customs, and the Justice Department. When SPA feels that it is necessary to enlist the assistance of these organizations, SPA may forward information to these agencies to begin their own investigations. SPA has cooperated with the FBI in bulletin board investigations and counterfeit matters. Only one of SPA's lawsuits has reached trial--a civil copyright infringement suit against Global Software & Accessories, Inc. for unauthorized rental of computer software. This lawsuit was the first case to test the Computer Software Rental Amendments Act of 1990, which prohibited the unauthorized rental of computer software. The software retailer, Global Software, operated three stores on Long Island in New York at which software was offered pursuant to a "deferred billing plan". The plan allowed customers to take software home and keep it up to five days for a "non-refundable deposit", which was only a fraction of the purchase price. If the customer kept the software for more than five days, the customer was charged the difference between the "non-refundable deposit" and the purchase price. Evidence showed that the software was returned by the customer in 99% of the cases. The court ruled in favor of the software manufacturers and ordered $100,000 in damages. In May 1991, the SPA received its largest public settlement to date in an action against Parametrix, Inc., a Seattle-based environmental and engineering consulting firm. The company paid $350,000 plus attorneys' fees in settlement. CORPORATE AUDITS Sometimes after investigating reports against a company, the SPA will request that the company submit to a confidential voluntary audit of its software, in lieu of litigation. The principles of an SPA software audit are simple: * Contents of each PC and file server are inventoried; * The inventory is compared with company purchase records; * The company agrees up front to make a penalty payment to the SPA Copyright Protection Fund in the amount equal to the suggested retail price of each illegal software program found during the course of the audit; * All unauthorized copies are destroyed, and the audited company agrees to purchase legitimate copies to fulfill their needs. The SPA's audit program provides a confidential, cooperative alternative to litigation for companies not in compliance with software copyrights or licenses. It has been the SPA's experience that many organizations receiving an audit request are both cooperative and appreciative of the opportunity to become legal without having to go to court. If a company refuses to cooperate with the voluntary audit, the SPA may sue them. The largest fine collected to date under this scenario was $500,000. INTERNATIONAL EFFORTS In 1995, SPA took great strides to expand its anti-piracy efforts around the world. As in the U.S., SPA believes that the two-pronged approach of education and enforcement is necessary to reduce the use of illegal software abroad. Europe SPA's affiliate office, SPA Europe, has created European versions of SPAudit, the SPA's software inventory program, and of the Software Management Guide, both of which are now available in six languages: English, Spanish, French, German, Italian, and Swedish. SPAudit is also available in Polish. SPA Europe is localizing the Certified Software Manager (CSM) course for the European market. The course is currently being given in the United Kingdom, France, and Germany. Finally, SPA Europe distributes the European version of the Model Software License Agreement, which is consistent with European Union Directives on software and consumer contracts. Supplements to the Model Software License Agreement that reflect the national law of various European countries have become available for the UK, France and Germany. Please contact SPA Europe to obtain copies of these documents. Asia/Pacific In 1995, SPA initiated five criminal cases and five civil actions in Singapore. The litigation proceedings filed this year in Singapore were highly successful. Through its local counsel, SPA recovered close to S$100,000 in damages and settlements on behalf of its membership. The> ---------------------------------------------------------------------------- Transfer interrupted!