CONSUMER SOFTWARE PIRACY

The unauthorized use, possession, downloading, duplication, distribution, or sale of copyrighted computer software.

COPYRIGHT infringement is a serious prob-
lem for the computer software industry. Pro-
grams can be copied easily on a personal
computer, thus making detecting and prosecut-
ing 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 fur-
ther 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 com-
puter industry targeted corporations, individu-
als, 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 soft-
ware 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 dis-
tribute 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 dam-
ages 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
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 sixmonth
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 anticopying
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.
FURTHER READINGS
Business Software Alliance. February 26, 2003. “Press
Release: BSA Applauds House Subcommittee for Attention
to P2P Piracy Problem.” Business Software Alliance.
Available online at (accessed November
20, 2003).
“Congress at 45 RPM.” 2001. The Palm Beach Post. (April
10): 14A.
Legard, David. February 13, 2003. “IIPA estimates U.S.
Global Piracy Losses at $9.2 Billion in 2002.” IDG News
Service. www.nwfusion.com/news/2003/0214iipaestim
.html.
Steinberg, Gene. 2002. “Internet File Sharing without Spyware.”
Gannett News Service (August 19).
“Timeline of Events in Napster Case.” 2001 Associated Press
(February 12).
Warren, Mackenzie. 2002. “Online music swapping still
rocks on campus: Students Zero in on Peer-to-Peer Sites
for Freebies.” Gannett News Service (July 15).
CROSS-REFERENCES
Computer Crime; Copyright; Intellectual Property.

Software Publisher’s Association

The Software Publisher’s Association (SPA) is an
1,100-member trade group representing the legal
interests of U.S. software companies. Founded in
1988, SPA fights COPYRIGHT infringement from its
offices in Washington, D.C., and Paris. SPA is a division
of the Software & Information Industry Association
(SIIA), which offers rewards of up to $50,000 to
individuals who report verifiable corporate end-user
PIRACY to SIIA through the SIIA hotline or through the
SIIA Corporate End-User Piracy Internet Report
Form. Its chief goal is to eliminate the unauthorized
duplication of computer programs.

On December 16, 1997, President BILL CLINTON
signed into law the No Electronic Theft (NET) Act of
1997, Pub. L. No. 105-147, 111 Stat.2678. The act was
passed to address a loophole in copyright law, which
was successfully exploited by a 21-year-old MIT student,
David LaMacchia, who escaped federal prosecution
for distributing free copyrighted software on
the Web. The NET Act punishes software pirates who
willfully copy, distribute, and traffic in protected software
on the Web whether or not they enjoy a financial
gain. David LaMacchia set up a bulletin board on
the Internet which he named “Cynosure.” LaMacchia
then solicited bulletin board correspondents to
upload popular software applications such as Excel,
WordPerfect, and various computer games such as
Sim City. He then transferred the uploaded software
to a second encrypted address, named “Cynosure
II.” Users who had access to the Cynosure password
could then download the software. The worldwide
traffic generated by the offer of free software
attracted the notice of university and federal authorities.
During the brief six-week life of Cynosure, software
copyright holders claim to have lost one million
dollars as a result of the free trafficking of their products.
Even though a federal GRAND JURY returned a
one-count indictment charging LaMacchia with conspiring
with unknown persons to violate the wirefraud
statute, the government could not prosecute
under the criminal copyright statute because there
was no evidence that LaMacchia made any profit.
SPA efforts are targeted primarily at the U.S. market,
where the industry generates approximately 60
percent of its revenues and where, SPA estimates,
nearly 85 percent of losses to software piracy occur.
Successes in cracking down on infringement have
made SPA a major player in copyright law. The organization’s
enforcement actions netted $14 million in
recoveries between 1988 and 1995. Among these
were a half-million-dollar settlement against a corporation,
resulting from an audit, and a $350,000 settlement
in May 1991 from a successful lawsuit against
Parametrix, an environmental engineering firm. In
2002, in a case originating from SIIA, Yaroslav Suris,
27, of Brooklyn, New York, was convicted of one
felony count of Criminal Infringement of a Copyright,
in violation of 17 U.S.C. 506(a)(1) and 18 U.S.C.
2319(b)(1). Suris was sentenced to two months incarceration,
followed by 14 months of home detention.
He was also ordered to pay $290,556 in restitution for
computer piracy.

In the area of LOBBYING, SPA has asked Congress
for tougher legislation designed to stop copyright
infringement over computer networks,
especially the Internet. SPA anti-piracy department
conducts public education campaigns and distributes
auditing software that allows businesses and
organizations to ensure that they are following the
law.

According to SPA, Web framing can be a form of
piracy when a viewing window is created for all or a
portion of a Web page or a particular piece of content
residing on a Web page. Problems with framing typically
arise when the manner in which the Web site is
framed removes, obscures, or alters navigation tools,
links, indicators of source, TRADEMARKS, logos, or
advertising located on the Website that is framed.
Framing of third-party content into another Web page
raises many legal issues, including passing off content
as one’s own, UNFAIR COMPETITION, trademark
infringement, trademark dilution, misappropriation,
and perhaps copyright infringement.

FURTHER READINGS
Albert, G. Peter. 1999. Intellectual Property Law in Cyberspace. Edison, NJ: BNA Books.

Zoellick, Bill. 2001. CyberRegs: A Business Guide to Web Property, Privacy, and Patents. Boston, MA: Addison-Wesley Longman.

CONSUMER SOFTWARE PIRACY