Economic Consequences Of Software Crime Essay Example For Students

Economic Consequences Of Software Crime Essay In 1996 worldwide illegal copying of domestic and international software cost$15.2 billion to the software industry, with a loss of $5.1 billion in theNorth America alone. Some sources put the total up-to-date losses, due tosoftware crime, as high as $4.7 trillion. On the next page is a regionalbreakdown of software piracy losses for 1994. Estimates show that over 40percent of North American software company revenues are generated overseas,yet nearly 85 percent of the software industrys piracy losses occurred outsideof North America.The Software Publishers Association (SPA) indicated thatapproximately 35 percent of the business software in the North America wasobtained illegally. In fact, 30 percent of the piracy occurs in corporatesettings.In a corporate setting or business, every computer must have itsown set of original software and the appropriate number of manuals.It isillegal for a corporation or business to purchase a single set of original s!oftware and then load that softwar e onto more than one computer, or lend, copyor distribute software for any reason without the prior written consent of thesoftware manufacturer.Many software managers are concerned with the legalcompliance, along with asset management and costs to their organizations. Manyfirms involve their legal departments and human resources in regards tosoftware distribution and licensing. Information can qualify to be property in two ways; patent law and copyrightlaws which are creations of federal statutes, which are subject toConstitutional authority.In order for the government to prosecute theunauthorized copying of computerized information as theft, it must first relyon other theories of information-as-property. Trade secret laws are created byprovincial law, and most jurisdictions have laws that criminalize theviolations of a trade-secret holders rights. The definition of a trade secretvaries somewhat from province to province, but commonly have the same elements. For example, the information must be secret, not of public knowledge or ofgeneral knowledge in the trade or business. A court will allow a trade secretto be used by someone who discovered or developed the trade secretindependently if the holder takes adequate precautions to protect the secret. In 1964, the National Copyright Office began to register software as a form ofliterary expression.The office based its decision on White-Smith Music Co. v. Apollo, where the Supreme Court determined that a piano roll used in aplayer piano did not infringe upon copyrighted music because the roll was partof a mechanical device. Since a computer program is textual, like a book, yetalso mechanical, like the piano roll in White-Smith, the Copyright Officegranted copyright protection under the rule of doubt. In 1974, the government created the Natural Commission on New TechnologicalUses (CONTU) to investigate whether the evolving computer technology fieldoutpaced the existing copyright laws and also to determine the extent ofcopyright protection for computer programs. CONTU concluded that whilecopyright protection should extend beyond the literal source code of a computerprogram, evolving case law should determine the extent of protection. Thecommission also felt copyright was the best alternative among existingintellectual property protective mechanisms. CONTU rejected trade secret andpatents as viable protective mechanisms. The CONTU report resulted in the 1980Computer Software Act, and the report acts as informal legislative history toaid the courts in interpreting the Act. In 1980, the Copyright Act was amended to explicitly include computerprograms. It now states that it is illegal to make or to distribute copies ofcopyrighted material without authorization, except for the users right tomake a single backup copy for archival purposes. Any written material(including computer programs) fixed in a tangible form (written somewhere ?i.e. printout) is considered copyrighted without any additional action on thepart of the author. Therefore, it is not necessary that a copy of the softwareprogram be deposited with the National Copyright Office for the program to beprotected as copyrighted. With that in mind a copyright is a property rightonly. In order to prevent anyone from selling your software programs, you mustask a (federal) court to stop that person by an injunction and to give youdamages for the injury they have done to you by selling the program. The Software Rental Amendments Act was approved in 1990. This Act prohibitsthe commercial rental, leasing or lending of software without the expresswritten permission of the copyright holder.Another amendment to theCopyright Act was passed in 1992. This amendment made software piracy afederal offense, and instituted criminal penalties for copyright infringementof software. The penalties can include imprisonment of up to five years, finesup to $250,000 or both for unauthorized reproduction or distribution of 10 ormore copies of software with a total retail value exceeding $2,500 or more. According to federal law duplicating software for profit, making multiplecopies for use by different users within an organization, and giving anunauthorized copy to someone else is prohibited. Under this law if anyone iscaught with the pirated software, an individual or the individuals company canbe tried under both civil and criminal law.A Civil action may beestablished for injunction, actual damages (which includes the infringersprofits) or statutory damages up to $100,000 per infringement. The criminalpenalties for copyright infringement can result in fines up to $250,000 and ajail term up to five years for the first offense and ten years for a secondoffense. When software is counterfeit or copied, the software developer losestheir revenue and the whole software industry feels the effect of piracy. Allsoftware developers spend a lot of time and money in developing software forpublic use. A portion of every dollar spent in purchasing original softwar!e is funneled back into researc h and development of new software. Software piracy can be found in three forms: software counterfeiting, which isthe illegal duplication and sale of copyrighted software in a form that isdesigned to make it appear to be a legitimate program; Hard disk loading,whereby computer dealers load unauthorized copies of software onto the harddisks of personal computers, which acts as an incentive for the end user to buythe hardware from that particular dealer; and downloading of copyrightedsoftware to users connected by modem to electronic bulletin boards and/or theInternet. When software is pirated the consumer pays for that cost by newsoftware and/or upgrade version being more expensive. Federal appellate courts have determined that operating systems, object codeand software contained in ROMs are protected by copyright. Some lower federalcourts have also determined that microcode (the instructions set onmicroprocessor chips) and the look and feel of computer screens is subject tocopyright protection. Which has created major problems for the widespreaddevelopment of multimedia applications with regards to clearing copyright forsmall elements of text, images, video and sound. The United States Government has been an active participant in protecting therights of the software industry. When the Business Software Alliance (BSA)conducts a raid, Federal Marshals or local law enforcement officialsparticipate as well. An organization known as the Software PublishersAssociation (SPA) is the principal trade association of the PC softwareindustry. SPA works closely with the FBI and has also written an enforcementmanual for the FBI to help them investigate pirate bulletin board systems andorganizations (audits). With the help of the FBI, the result of enforcementactions resulted in recoveries from anti-piracy actions totaling $16 millionsince the program started in 1990. The Software Publishers Association (SPA) funds an educational program toinform individuals and corporations about software use and the law. Thisprogram provides all PC users with the tools needed to comply with copyrightlaw and become software legal. The SPA also publishes brochures free of chargeabout the legal use of software for individuals and businesses.Alsoavailable to help corporations understand the copyright law is a 12-minutevideotape, which is composed of the most commonly asked questions and answersto them. The video tape is available in French and Spanish and all togetherover 35,000 copies of the tape had been sold. Paradise Lost Essay PaperSPA has created a program that companies can use to help discover and correctproblems before they result in legal actions, fines and also negativepublicity. The eight point program is as follows:1. Appoint a software manager to implement and monitor all aspects ofcompany software policy. 2. Implement a software codes of ethics for everyone to adhere to. Theethicsshould state that copyrighted software, except for backup and archivalpurposes, is a violation of the law. 3. Establish a procedure for acquiring and registering software. Determineyour companies software needs, evaluate software packages, and also havesupervisors approve the plans. Keep the lines of communication open. 4. Establish and maintain a software log. The log should state the date ofwhen the software was acquired, the registration of it, serial number, networkversion, location of where the software is in use, where the original is,licensing agreement and the location of the original disks. 5. Conduct periodic audits or on an as needed basis comparing the softwarelog and/or other purchase records. 6. Establish a program to educate and train your employees about everyaspect of software and its uses. 7. Maintain a library of software licenses and provide users with copies ofthe agreement. 8. Having done the above seven points, the company can benefit by havingobtained software legally, receive full documentation, technical support whenneeded and also upgrade notices. Patents do not cover specific systems, instead they cover particular techniquesthat can be used to build systems or particular features that systems canoffer. Patent grants the inventor a 17 year monopoly on its use. Once atechnique or feature is patented, it may not be used in a system without thepermission of the patent-holder even if it is implemented in a different way. Since a computer program usually uses several techniques and provides manyfeatures, it can infringe many patents at once. A computer program is builtout of ideal mathematical objects whose behavior is defined, not modeledapproximately, by abstract rules. An example of this is when BorlandInternational, Inc. complained that a federal court decision gave LotusDevelopment Corp. the benefit of patent protection to Lotus 1-2-3 menu commandsand their order, but failed to require Lotus to meet the requirements of patentlaw, including novelty, examination and contribution to the prior art.TheSupreme Court sided with the decision that one entity cannot own the userinterface to programs. This would include such components as file formats,menu structures and programming languages. Software license agreements emerged as the most popular means of protection ofproprietary rights in computer software. They coexist with other forms ofintellectual property rights as patent and copyright. Software licenseagreements serve several functions in transactions involving the transfer ofcomputer technology. One of the most important legal functions is theprotection of the proprietary rights of the licenser in the transferredsoftware. Other functions include controlling the revenue generated bylicensed software and determining the rights and responsibilities of theparties regarding the performance of the licensed technology. Issues relatedto these functions include the applicability of Article 2 of the UniformCommercial Code, including offer and disclaimer of warranties, determining theappropriate types of licenses to utilize, such as single users/CPU licenses,Site/enterprise licenses and network/concurrent licenses. Trade secret, copyright and patent law are static forms of protection in thesense that they may exist independently of any underlying business transactionsand do not necessarily require any transfer of intellectual property from oneparty to another. Whereas, the need for a license agreement usually arises asone of the contractual forms of protection when the underlying businesstransaction involves the transfer of intellectual property, such as computersoftware. Transactions involving the transfer of computer software are subjectto both federal and provincial laws. Generally, provincial law governscontractual and trade secrets aspects of the transaction, while federal lawgoverns aspects related to patent, copyright and antitrust issues. Each province has its own version of a trade secret, the common thread throughthese province-specific laws is that if you show that you are seriously treatedinformation as confidential and that the confidential information helped yourcompetitive position, you can stop others from using it if the information wasimproperly acquired by them, and even collect damages from the wrongdoers. A computer is useless without software. The two types of software typicallyfound on a computer are operating systems software and application software. Operating system software provides an interface that makes it easier to developprograms for the system by reducing the amount of code that must be written. The operating system acts as an interface between the computer hardware,application programs and the end user.Application software consists of oneor more computer programs that fulfill a specific function for the user likeword processing, bookkeeping or financial analysis. Two legal cases recently within the last few years has brought to light thecontroversy regarding the copyright protection of software elements. Until1992, most of the federal courts followed the decision in Whenlan v JaslowDental Laboratory as a precedent for similar cases. Whenlan, a small softwarecompany wrote a accounting program for Jaslow Dental Laboratory company. Jaslow rewrote the software to run on personal computers and proceeded to sellthe product. The software was identical to Whenlans in the data structures,logic, and the program structure, except for the source code. Jaslow arguedthat the duplicated elements were part by the of the idea not the expression. The court in response felt that the data structures, logic, and the programstructure comprised to make a single function of a computer program, thereforecopyright protection should be given to those elements also. In 1992, this protection was weakened by Computer Associates v. Altai, Inc. ,when Altai a software developer was accused of copying various modules of asoftware package developed by Computer Associates which controlled the runningof applications on IBM mainframes. The court rejected Whelans premise that acomputer program embodies one function because programs are made up ofsub-routines that contain their own idea. The court recognized that this wouldnarrow the scope of software copyright protection and found this in accordancewith the Governments intent of computer programs with copyright. This is whycurrently software copyright is not as broad as it once was. All the above mentioned licenses and anti-piracy precautions cost billions ofdollars each year, in both direct and opportunity costs. These costs areshared by anybody that is involved with any aspect of the software industry. As the future of approaches, more and more people are gaining experience withtechnology. That experience doesnt come without a price. That price is thepower to manipulate technology for personal gain which usually results in adetriment ?typically financial?to others. Bibliography:Brandel, William, Licensing stymies users,URL:http://www.viman.com/license/license.html#policy, Viman Software, Inc.,1994. Business Software Alliance, Software Piracy and the Law,URL:http://www.bsa.org/bsa/docs/soft_pl.html, Business Software Alliance,1995. Software Publishers Association, SPA Anti-Piracy Backgrounder,URL:http://www.spa.org/piracy/pi_back.htm, Software Publishers Association,1995. Business Software Alliance, Did You Know?,URL:http://www.bsa.org/cgi-bin-bsa.org/seconds.cgi?, Business SoftwareAlliance, 1997. The Economist, Slipping A DiskURL: http://www.economist.com/issue/27-07-96/wbsfl.gif, The Economist, 1994. Business Software Alliance, Software Piracy,URL: http://www.bsa.org/privacy/privacy.html, Business Software Alliance,1997.