Software licensing and piracy
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Software licensing and piracy

Introduction In 1993 worldwide illegal copying of domestic and international software cost $12.5 billion to the software industry, with a loss of $2.2 billion in the United States alone. Estimates show that over 40 percent of U.S. software company revenues are generated overseas, yet nearly 85 percent of the software industry’s piracy losses occurred outside of the United States borders.



The Software Publishers Association indicated that approximately 35 percent of the business software in the United States was obtained illegally, which 30 percent of the piracy occurs in corporate settings. In a corporate setting or business, every computer must have its own set of original software and the appropriate number of manuals. It is illegal for a corporation or business to purchase a single set of original software and then load that software onto more than one computer, or lend, copy or distribute software for any reason without the prior written consent of the software manufacturer. Information can qualify to be property in two ways; patent law and copyright laws which are creations of federal statutes, pursuant to Constitutional grant of legislative authority. In order for the government to prosecute the unauthorized copying of computerized information as theft, it must first rely on other theories of information-as-property. Trade secret laws are created by state law, and most jurisdictions have laws that criminalize the violations of a trade-secret holder’s rights in the secret. The definition of a trade secret varies somewhat from state to state, but commonly have the same elements. Federal appellate courts in the U.S. have determined that operating systems, object code and software cotained in ROMs are protected by copyright, and some lower federal courts have also determined that microcode (the instructions set on microprocessor chips), and the look and feel of computer screens is subject to copyright protection. Which leads to the problems of the widespread development of multimedia applications that has brought out major problems in clearing copyright for small elements of text, images, video and sound.

The Software Publishers Association (SPA) funds a educational program to inform individuals and corporations about software use and the law. This program provides all PC users with the tools needed to comply with copyright law and become software legal. The SPA also publishes brochures free of charge about the legal use of software for individuals and businesses. It helps corporations to understand the copyright law is a 12-minute videotape, which is composed of the most commonly asked questions and answers to them. The video tape is available in French and Spanish and all together over 35,000 copies of the tape had been sold. SPA has also compiled a free Self-Audit Kit with which organizations can examine their software use practices. Included in the kit, is a software inventory management program designed to help an organization track their commercial software programs that are on all hard disks. The program searches PC hard disks for more than 1300 of the most common programs used in business. Concurrent use licenses authorized a specified number of users to access and execute licensed software at any time. Site licenses authorize use at a single site, but are slowly being phased out and replaced by enterprise licenses. Enterprise licenses cover all sites within a corporation because of more virtual computing environments. Node licenses are also slowly being phased out because they are mainly used in a client/server environment, since the licensed software may be used only on a specified workstation in which a user must log on to in order to access and execute the software application. Currently the trend in a network system is to use measurement software, which allows vendors to be more flexible in licensing arrangements. This management software monitors and restricts the number of users or clients who may access and execute the application software at any one time. This is significant because a user pays only for needed use and a vendor can monitor such use to protect intellectual property. A new type of license that is emerging is known as a, ‘currency-based license’. This type of license work on the basis that it provides to the end user a specified dollar amount of software licenses. For example, licenses for different business application software, so long as the total value in use at a given time is less than dollars. Another type of license emerging is known as a ‘platform-independent’ licensing, which one license permits software to be used on a variety of different computer systems within a business, instead of buying a different license for each version of the same software used by different systems. The most common type of licensing is known as ‘Shrink-wrap’, the concept behind this that the licenses terms are deemed accepted once the end user breaks a shrink-wrap seal or opens a sealed envelope containing the software. A reason for these new types of licensing emerging is that when software licensing was first introduced, the software development firms assumed that most businesses would use the software for a 8 to 10 hour period. Yet, did not take into consideration that with the advancement of technology, more businesses would want a ‘floating license’ across the world for 24 hours – thus it was not cost effective for the software development firm. A floating
license is a license that is made available to anyone on a network. The licenses are not ‘locked’ to particular workstations, instead they Afloat to modes on the network.

Shareware, freeware and public domain are different type of software available to the end user, and are distinguished by different rules about how programs may be distributed, copied, used and modified. The term ‘shareware’ refers to software that is distributed at a low cost, but which requires usually a payment after a certain time period and registration for full use. Copies of this software are offered on a trial basis, the end user is free to try a scaled down version of the program. If the end user wants the shareware program, included in the program is information specifying how to register the program and what fee is required. Once registered the end user will typically receive a printed manual, an updated copy of the software (often with additional features), and the legal right to use the program in their home or business. The advantage that shareware has is that it lets the end user thoroughly test a program to see if it=s useful before making a purchase. The authors of shareware programs retain their copyright on the contents, and as other copyrighted software should not be pirated. Freeware is also distributed at a very low cost and like shareware is found mainly on the Internet. The authors of the freeware program do not expect payment for their software. Typically, freeware programs are small utilities or incomplete programs that are released by authors for the potential benefit to others, but the drawback to this is that there is no technical support. Public domain software is generally found on the Internet and is released without any condition upon its use. It may be copied, modified and distributed as the end user wishes to do. A license manager is a system utility-like application that controls or monitors the use of another end-user application. It is generally implemented to protect intellectual property (meaning to stop illegal copying) and/or to become more competitive by offering new ways in which to evaluate, purchase and pay for software. Since the license manager controls the number of application users, there is not a need to control the number of application copies. This process lets the end user run one or more applications between machines, without violating the terms of the license agreement.

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