Freeze! This Is A Software Raid

These days, even unwitting pirates are subject to big fines

Robert L. Goldsmith couldn't have been more shocked. One day last June, U.S. marshals appeared at the door of CeraMem Corp. in Waltham, Mass., and announced that the $1 million environmental-research firm was under suspicion of pirating software. Armed with a court order, investigators from the Washington trade group Business Software Alliance kicked employees off their computers. Then, with U.S. marshals at their sides, they rummaged through the machines in search of stolen goods, using a program that compiles information on installed software. "The BSA marched in here with storm troopers," CeraMem President Goldsmith indignantly says of the group, whose sole mission is enforcing copyright law for major business-software producers.

It's unlikely software cops will kick down your door anytime soon. Over the past year, the BSA's U.S. enforcement actions have numbered just 550, and less than 10% of those involved actual raids. Most often, suspects get letters urging voluntary compliance. But casual software pirates of the everybody-does-it school may want to think twice. First, there are real benefits to going legal. And second, whatever the risks, the consequences of getting caught are, to say the least, unpleasant.

What can happen to captured pirates? Under federal law, if you distribute copies to your colleagues of, say, Microsoft Word, you can face civil fines of up to $100,000. Settlements of BSA lawsuits have run from $40,000 to $500,000. In addition, illegal software must be destroyed and replaced at current retail prices, which can be a huge expense. And you'll have to endure humiliating publicity when the BSA or another Washington-based trade group, the Software Publishers Assn., makes an example out of you. "We've made front-page news in the business sections of the L.A. Times and the Chicago Tribune and the Cleveland Plain Dealer," boasts Bob Kruger, the BSA's vice-president for enforcement.

In recent months, the BSA has experimented with a new tack in its anti-piracy campaign. Billboards in key locations in Manhattan, aimed at Wall Street workers and ad agency employees, urge passersby to "Nail Your Boss" by calling a BSA hot line and anonymously reporting suspicions of illegal copying. Indeed, most BSA investigations begin with tips.

NASTY SURPRISE. "We rely heavily on the kindness of strangers here," says Kruger. That's a bit ironic given the BSA's clout. The group consists of nine members: Adobe, Apple Computer, Autodesk, Bentley Systems, Lotus Development, Microsoft, Novell, The Santa Cruz Operation, and Symantec. Together they sell 75% of the country's business software. The BSA promotes its 800 number on radio, in magazines, and on software boxes. Vendors also forward tips they solicit. Microsoft, for instance, takes reports at 1-800-RU-LEGIT and The result: 36,000 calls in four years. During the same time--while the staff grew from 4 to 30--the group took legal action against 1,500 companies and received nearly $19 million in settlements, all of it used to finance further enforcement. Suits are filed in fewer than 10% of cases. Actions usually are settled.

Today, the BSA and the SPA aren't just going after huge corporations--they're after you. "The great majority of the companies that we investigate and pursue fall into the category of small and medium-sized businesses, maybe as high as 90%," says Kruger. Their key problem, says the SPA's Peter Beruk, director of domestic antipiracy, is the failure to monitor and enforce anticopying policies.

Although the BSA paints pirates as thieves, much of the crime is unintentional. Many smaller companies don't employ software managers, and software licenses are notoriously complex, causing confusion about legality. And often, executives don't know that employees have copied software. That was the case at CeraMem, says Goldsmith.

CeraMem had no one responsible for managing software. "People would bring in and load programs they had, and we just didn't control it," Goldsmith says. A disgruntled former employee called the BSA's hot line and turned in CeraMem.

The BSA brought suit against the 12-person company and a sister manufacturing firm, CeraMem Separations Inc., also in Waltham, and got a court order for the raid. Auditors found renegade copies of Autodesk, Lotus, Microsoft, and Novell programs. Facing what Goldsmith says the BSA called "a potential million-dollar liability," CeraMem settled for $48,000 last September.

"They have a small company over a barrel," complains Goldsmith. "You can't afford to fight it." It's true no BSA lawsuit has ever gone to trial, but Kruger says that's because copyright cases are open-and-shut. "Was there infringement? There's not a lot a company can do to make that go away," he says.

FRAMED? Critics of the trade groups' tactics question their reliance on "snitches" with an ax to grind. Bob Snyders, president of Thermal Equipment Corp., a Torrance (Calif.) manufacturer that was also sued and raided by the BSA, says that an unhappy employee deliberately distributed two dozen illegal copies of programs before leaving the firm, fully intending to call in the BSA. "I find that abhorrent and totally contrary to fair dealings with people," he says.

Kruger responds that the BSA doesn't bother with frivolous cases and says targeted companies often attack the tipster's reputation. Beyond that, BSA won't discuss details of a settled case. Thermal Equipment and sister company, Baron Blakeslee Inc. in Long Beach, Calif., settled for $85,000 in November.

Both the BSA and the SPA say high fees, raids, and humiliating actions are warranted as a deterrent. Software piracy is rampant, representing 26% of all software in use in the U.S. and causing domestic losses of $2.9 billion in 1995, according to the BSA. Worldwide that year, piracy losses totaled $15.2 billion.

But executives of raided companies feel strong-arm tactics are cruel and unusual punishment. "If the BSA had come to us under its voluntary compliance program, we would have complied," says Goldsmith. "Basically, we got hammered by the BSA and it really wasn't necessary." The software police, however, want you to know that it's always possible.

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