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Summary
- Businesses can be held vicariously liable for software copyright infringement committed by employees during the course of their employment.
- Employers should have clear software usage policies in place to reduce the risk of liability and demonstrate reasonable steps were taken to prevent infringement.
- Remedies for copyright infringement can include injunctions, damages, and account of profits, which can be significant for businesses.
- This article explains software copyright infringement liability for business owners operating in New Zealand, with a focus on employer responsibilities and risk management.
- It is produced by LegalVision, a commercial law firm that specialises in advising clients on employment and intellectual property matters.
Tips for Businesses
Audit the software installed on company devices regularly. Maintain a written acceptable use policy covering licensed software. Train staff on copyright obligations and the consequences of unauthorised use. Keep records of software licences and renewals to demonstrate compliance if a dispute arises.
Employee software infringement occurs when staff use unlicensed, pirated, or improperly licensed software at work, and employers can be held legally responsible for it. Businesses that fail to monitor and control software use risk serious legal and financial exposure. This article explores employer liability for employee software infringement in New Zealand and what steps you can take to protect your business.
What is Software Infringement?
Software infringement occurs when someone uses, copies, or distributes software in violation of copyright laws or licence agreements. Common examples in the workplace include:
- installing unlicensed or pirated software on work computers;
- exceeding the number of users permitted under a software licence;
- using software for purposes not covered by the licence agreement;
- copying or distributing proprietary software without authorisation; and
- continuing to use software after a licence has expired.
The Copyright Act 1994 protects software as a literary work, meaning unauthorised use or reproduction can constitute copyright infringement.
Are Employers Liable for Employee Actions?
The short answer is yes. In New Zealand, employers face liability for software infringement committed by their employees, even if the employer had no knowledge of the infringement. This is due to the legal principle of vicarious liability.
Vicarious liability means that employers bear responsibility for wrongful acts committed by employees in the course of their employment. If an employee infringes on software copyright while performing their job duties or using company resources, the employer may be liable for that infringement.
This applies even if:
- the employer did not authorise the infringement;
- the employer was unaware of the infringement; or
- the employer had policies prohibiting such conduct.
Employers are generally not vicariously liable for employee actions that fall outside the course of employment. This includes situations where an employee uses their own personal devices and time for activities completely unrelated to their work duties, such as downloading pirated software at home for personal projects that provide no benefit to the employer.
Similarly, if an employee commits deliberate criminal acts that go well beyond their job function, such as stealing software code to sell to competitors for personal gain, such acts may sever the necessary connection to employment. The key test is whether the infringing conduct has a sufficient nexus to the employee’s role, the employer’s resources, or the employer’s business interests. Where that connection is absent, vicarious liability typically will not attach.
Legal Consequences of Software Infringement
The consequences of software infringement can be severe for businesses. Software copyright holders may take legal action seeking:
- Financial penalties: Courts can award damages based on either the actual loss suffered by the copyright holder or the profits gained from the infringement. In some cases, courts may award additional damages if the infringement was blatant.
- Injunctions: Copyright holders can seek court orders requiring your business to stop using the infringing software immediately. This can disrupt business operations, especially if the software is critical to your operations.
- Costs and legal fees: If legal action is taken against your business, you may be required to pay the copyright holder’s legal costs in addition to any damages awarded.
- Reputational damage: Being found liable for software infringement can damage your business’ reputation, particularly if the matter becomes public or involves well-known software providers.
Defences and Mitigating Factors
While vicarious liability makes it difficult to avoid responsibility entirely, there are some defences and factors that may reduce your liability:
- Policies and training: If you can demonstrate that you had robust policies prohibiting software infringement and provided regular training to employees, courts may consider this a mitigating factor when determining damages.
- Taking prompt action: If you discover software infringement and take immediate steps to rectify the situation, such as removing the infringing software and purchasing proper licences, this may reduce potential penalties.
- Reasonable monitoring: Implementing systems to monitor software usage and ensure compliance with licensing agreements can demonstrate that you took reasonable steps to prevent infringement.
However, it is important to note that these factors may reduce damages but are unlikely to eliminate liability entirely if infringement has occurred.
Protecting Your Business From Software Infringement
Given the potential consequences, it is crucial to take proactive steps to minimise the risk of software infringement in your workplace. Here are some practical measures you can implement:
1. Develop Clear Policies
Create comprehensive policies that explicitly prohibit the use of unlicensed or unauthorised software. Your policy should cover what software employees are permitted to use, how to request new software, and the consequences employees face for policy violations. Ensure all employees receive and acknowledge these policies.
2. Conduct Software Audits
Regularly audit the software installed on company devices to ensure everything is properly licensed. This includes checking that you are not exceeding user limits on multi-user licences and that all licences are current and up to date.
3. Centralise Software Management
Implement a centralised system for software procurement and installation. Restrict employees’ ability to install software without IT approval. This gives you better control over what software is used within your organisation and ensures proper licensing.
4. Provide Training and Education
Educate your employees about software licensing, copyright laws, and the importance of using only authorised software. Make sure they understand the risks and consequences of software infringement, both for themselves and the business.
5. Maintain Accurate Records
Keep detailed records of all software licences, including purchase dates, licence terms, number of permitted users, and renewal dates. This documentation is essential if you need to prove compliance or if any disputes arise.
6. Use Reputable Vendors
Purchase software only from authorised vendors and resellers. Be cautious of deals that seem too good to be true, as they may involve counterfeit or improperly licensed software.
7. Monitor and Restrict Access
Use technical controls to restrict administrative privileges on work computers, making it more difficult for employees to install unauthorised software. Implement monitoring systems that can detect unauthorised software installations.
What to Do if You Discover Software Infringement
If you discover that an employee has used unlicensed or pirated software, take immediate action. Seek legal advice to understand your potential liability and the best course of action. Advice may include:
- remove the infringing software from all company systems immediately;
- conduct a thorough investigation to determine the extent of the infringement and identify all affected systems;
- consider contacting the software copyright holder to discuss the situation and explore options for resolving the matter, such as purchasing appropriate licences;
- review your policies and procedures to identify how the infringement occurred and implement measures to prevent future incidents;
- document all actions taken to address the infringement; and
- taking swift and decisive action demonstrates good faith and may help minimise potential penalties if a party takes legal action against your business.
Key Statistics:
- Up to $150,000: maximum fine or five years’ imprisonment for criminal copyright infringement, exposing employers to significant penalties via vicarious liability.
- High risk: of civil remedies and damages awards when employees install or use unlicensed software during employment.
- Common exposure: many businesses face increased liability from unauthorised software use despite lacking direct knowledge or consent.
Sources:
- Intellectual Property Office of New Zealand (2026)
- Ministry of Business, Innovation & Employment (2025)
- Business New Zealand (2024)
Key Takeaways
The law in New Zealand holds employers liable for software infringement committed by their employees, even without knowledge or authorisation of the infringing activity. The consequences can include significant financial penalties, legal costs, and reputational damage. To protect your business, implement clear policies, conduct regular software audits, provide employee training, and maintain centralised control over software procurement and installation. If infringement occurs, take immediate action to rectify the situation and seek legal advice.
LegalVision provides ongoing legal support for all businesses through our fixed-fee legal membership. Our experienced employment lawyers help businesses manage contracts, employment law, disputes, intellectual property and more, with unlimited access to specialist lawyers for a fixed monthly fee. To learn more about LegalVision’s legal membership visit our membership page.
Frequently Asked Questions
Yes. In New Zealand, employers face liability for software infringement committed by employees during the course of their employment, even without knowledge or approval. This arises through vicarious liability, where the law holds employers responsible for employee actions connected to their role or use of company resources.
Businesses can reduce risk by implementing clear software use policies, limiting installation permissions, conducting regular software audits, and providing staff training on licensing obligations. Centralising software procurement and keeping accurate licence records also helps demonstrate reasonable steps to prevent infringement and may reduce potential penalties.
Yes. Employees who install or use unlicensed software may face personal liability under the Copyright Act 1994, separate from any employer liability.
Some cyber liability or intellectual property insurance policies may cover infringement claims, but coverage varies, review your policy carefully.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.
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