Piracy on the PCs

WASHINGTON (03/21/2000) - The use of unlicensed software is a major problem in the computer trade. According to the Business Software Alliance, software piracy cost the industry $11 billion in 1998.

The culprits are not just kids trading computer games but also companies and agencies. According to the U.S. Department of Defense inspector general, up to half of the PCs in DOD may have copyrighted software loaded on them without documentation to prove that the software was legally acquired.

By 1998, the problem had grown so significant that President Clinton issued an executive order requiring agencies to ensure that all their software had been purchased and used only in accordance with applicable copyright laws.

Using copyright laws as a primary mechanism for protecting software license rights is entirely appropriate. In the private sector, copyright laws provide software companies with many useful tools to enforce their property interests, including the possibility of injunctive relief to prevent unauthorized use.

In the public sector, copyright laws are just as important, although their application is somewhat different. The primary difference is the unavailability of injunctive relief against the federal government. According to federal statutes, a copyright owner claiming infringement by the U.S. government is limited to reasonable compensation for the government's use of the copyrighted material.

The unavailability of injunctive relief in government copyright infringement cases is a disadvantage. On the other hand, the laws provide copyright owners other significant advantages when dealing with government agencies.

In most cases, a supplier of goods or services must have "privity of contract" with an agency in order to sue it. In general, only prime contractors have privity. This is why a subcontractor typically can pursue a claim against the government only with the cooperation of the prime contractor. However, the privity issue is irrelevant when an action against the government is based on copyright laws; a copyright owner may sue anyone, including the government, who infringes on a copyright.

An illustrative case is Microsoft Corp. v. Harmony Computers & Electronics. A computer distributor sold software in violation of a distribution agreement that allowed it to sell software only when bundled with certain hardware. In the software manufacturer's copyright infringement suit against the purchaser, the purchaser argued it had acquired the software in good faith and without notice that the distributor was violating its distribution agreement. However, the court ruled in favor of the manufacturer, finding that good faith was no defense in a copyright infringement case.

Many companies sell software to government agencies. Anyone who does so should be familiar with copyright laws and should be sure that they are positioned to take full advantage of the protections afforded by those laws.

Peckinpaugh is corporate counsel for DynCorp, Reston, Virginia, and formerly a member of the government contracts section for Winston & Strawn, Washington, D.C.

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