Piracy on the PCs

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 Defense Department 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


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


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, Va., and formerly

a member of the government contracts section for Winston & Strawn, Washington,



* Microsoft Corp. v. Harmony Computers&Electronics Inc., 846 F. Supp. 208 (E.D.N.Y. 1994)

* 28 U.S.C. 1498, "Patent and Copyright Cases"

* Executive Order 13103, "Computer Software Privacy" (Sept. 30, 1998)

* Department of Defense Office of the Inspector General Audit Report No. 93-056 (Feb. 19, 1993)

See also:

* Federal CIO Council, "Guidelines for Implementing the Executive Order 13103 on ComputerSoftware Piracy" (August 1999)

* Business Software Alliance World Wide Web site

BY Carl Peckinpaugh
Mar. 20, 2000

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