United States: 10 Simple Steps To Ensure Software Licensing Compliance

One area where companies can easily get into trouble is having unlicensed software on company computers. Computer software is protected under the U.S. Copyright Act. The Copyright Act provides for strict liability for possessing or using unlicensed software, meaning that your company may be liable for having unlicensed software, even if management does not know about the software or intend to use it. Additional penalties for intentional infringement also exist. The Copyright Act allows for the recovery of damages between $750 and $30,000 per copy of unlicensed software (with damages that may be reduced below that range for innocent infringement and enhanced above that range in the case of willful infringement). Liability for copies of unlicensed software could add up quickly to a large amount if your company were sued when it was not in full compliance. A typical office computer will have a substantial number of computer software programs, including for example, operating system, e-mail, word processor, spreadsheet, document management, virus protection, graphics, etc. If even one program per computer is unlicensed the liability can be tremendous. Here are 10 simple steps to ensure that your software licensing is compliant and up to date:

Directing all software purchasing through a central purchasing department, or through your company’s information technology department, will simplify the tasks of controlling software purchases and installation, maintaining records of licensing and installation, and ensuring that unused or outdated software is deleted. Central purchasing has the added advantage of maintaining all of the licenses for the software at a single location and making sure that software is purchased only through proper channels.

In order to get all business units or departments to channel their software purchasing through a central department, it is helpful to implement a simple method whereby different departments may request software purchases and installation and have those requests answered quickly. By providing a mechanism for a prompt response to a software request, it is less likely that an employee will simply go out and "acquire" software outside.

Using a software reseller which is authorized by the company that produced the software ensures that the software is genuine and that the producer will recognize the license provided by the reseller. Most software companies provide lists of authorized resellers on their websites.

If your company is sued for copyright infringement or presented with a demand for a software audit by a software producer, or one of the two main software industry associations that represent software producers, the Business Software Alliance (BSA) and the Software & Information Industry Association (SIIA), having detailed records will be key to your response. These organizations, when conducting a software audit on behalf of their members, often require a detailed listing of both the number of software installations and proof of the number of licenses. It is therefore important to keep detailed records concerning all software purchases, installations and deletions, as well as the licenses for any software purchased.

There are a number of software self-audit tools available that your company can use to create a report on all copies of software presently installed on company computers. This software will allow routine checking to ensure compliance and avoid even innocent infringement. Descriptions of the tools and links to the websites of the providers of selfaudit tools are available on the BSA and SIIA websites, http://www.bsa.org and http://www.siia.net.

It is good practice to include in your employee manual a policy statement on software that: (i) states that it is the company’s policy to use only licensed software and to observe all the terms and conditions of those licenses; (ii) states that downloading or using unlicensed software may lead to civil or criminal liability and/or disciplinary action by the company; and (iii) sets forth the proper procedure for requesting the installation of any software on a company computer.

When software is upgraded, older versions may inadvertently be left on computers. As any copy of software, even of an older version, is considered an installation requiring another license, any older version of an application should be deleted at the time the new version is installed.

All software that is used by the company during a beta testing period or other timelimited period should be destroyed after the expiration of that period.

The most secure way to ensure that no employee other than a member of the information technology department can install software on a company computer is to require an administrator password to install any software.

The SIIA sponsors a course for software managers aimed at teaching the skills necessary to manage software licensing issues, which it calls the Certified Software Manager course. Information is available at http://www.siia.net.

Goodwin Procter LLP is one of the nation's leading law firms, with a team of 700 attorneys and offices in Boston, Los Angeles, New York, San Diego, San Francisco and Washington, D.C. The firm combines in-depth legal knowledge with practical business experience to deliver innovative solutions to complex legal problems. We provide litigation, corporate law and real estate services to clients ranging from start-up companies to Fortune 500 multinationals, with a focus on matters involving private equity, technology companies, real estate capital markets, financial services, intellectual property and products liability.

This article, which may be considered advertising under the ethical rules of certain jurisdictions, is provided with the understanding that it does not constitute the rendering of legal advice or other professional advice by Goodwin Procter LLP or its attorneys. © 2007 Goodwin Procter LLP. All rights reserved.