APPENDIX RR

SOFTWARE USE AND THE LAW

Software Publishers Association

Software Use and the Law
A Guide for Individuals, Businesses, Educational Institutions, Server Operators and User Groups United States and Canadian Edition
Everyone Benefits from a Healthy Computer Software Industry
With each passing year, evolving software technology brings us faster, more sophisticated, versatile and easy-to-use products. Business software allows companies to save time, effort and money. Educational computer programs teach basic skills and sophisticated subjects. Home software now includes a wide array of programs that enhance the user's productivity and creativity. Computer graphics have turned PCs into a veritable artist's palette; new games are increasingly inventive. The industry is thriving and users stand to benefit along with the publishers.
Along the way, however, the problem of software theft has developed, and threatens to impede the development of new software products. Romantically called "piracy," the unauthorized duplication of software is a Federal offense that affects everyone: large and small software publishers and legitimate users. Even the users of unlawful copies suffer from their own illegal actions. They receive no documentation, no customer support and no information about product updates.
When a Few People Steal Software, Everyone Loses
This guide is intended to provide a basic understanding of the issues involved in ethical software use. It will tell you what the laws are, how to follow them and why you should adhere to them.
This guide is only one component of The Software Publishers Association’s continuing effort to increase public awareness of software piracy. If you have any questions about the legal use of software, please call the SPA at (800) 388-7478 or contact us at: piracy@spa.org. We encourage you to make as many copies of this brochure as required, however, we do ask that the entire brochure be copied so that all readers receive all of this important information.
The Law in the United States
Software is automatically protected by federal copyright law from the moment of its creation. The rights granted to the owner of a copyright are clearly stated in the Copyright Act, Title 17 of the US Code. The Act gives the owner of the copyright "the exclusive rights" to "reproduce the copyrighted work" and "to distribute copies ... of the copyrighted work" (Section 106). It also states that "anyone who violates any of the exclusive rights of the copyright owner ... is an infringer of the copyright" (Section 501), and sets forth several penalties for such conduct. Those who purchase a license for a copy of software do not have the right to make additional copies without the permission of the copyright owner, except (i) copy the software onto a single computer and (ii) make "another copy for archival purposes only," which are specifically provided in the Copyright Act (Section 117). The license accompanying the product may allow additional copies to be made; be sure to review the license carefully.
Software creates unique problems for copyright owners because it is so easy to duplicate, and the copy is usually as good as the original. This fact, however, does not make it legal to violate the rights of the copyright owner. Although software is a new medium of intellectual property, its protection is grounded in the long-established copyright rules that govern other more familiar media, such as records, books, and films. The unauthorized duplication of software constitutes copyright infringement regardless of whether it is done for sale, for free distribution, or for the copier's own use. Moreover, copiers are liable for the resulting copyright infringement whether or not they knew their conduct violated federal law. Penalties include liability for damages suffered by the copyright owner plus any profits of the infringer that are attributable to the copying, or statutory damages of up to $100,000 for each work infringed. The unauthorized duplication of software is also a Federal crime if done "willfully and for purposes of commercial advantage or private financial gain (Title 18 Section 2319(b))." Criminal penalties include fines of as much as $250,000 and jail terms of up to 5 years.
The Law in Canada
Software is automatically protected by federal copyright law from the date of creation. The rights granted to the owner of a copyright are clearly stated in the Copyright Act, R.S.C 1985, c. C-42. The Act gives the copyright owner the sole right to produce, reproduce or publish the work or any substantial part thereof in any material form whatever, and to rent out the computer program (Section 3). It also states that "copyright in a work shall be deemed to be infringed by any person who, without the consent of the owner of the copyright, does anything that, by this Act, only the owner of the copyright has the right to do" (Section 27(1)), and that a copyright shall be deemed to be infringed by any person who sells or lets for hire, distributes, exhibits in public or imports for sale or hire into Canada any work that infringes copyright (Section 27(4)). Persons who purchase a copy of software have no right to make additional copies without the permission of the copyright owner, except for the right to make "a single reproduction for backup purposes" and "a single reproduction of the copy by adapting, modifying or converting the computer program or translating it into another computer language if the person proves that (i) the reproduction is essential for the compatibility of the computer program with a particular computer, (ii) the reproduction is solely for the person's own use, and (iii) the reproduction is destroyed forthwith when the person ceases to be the owner of the copy of the computer program (Section 27(2)(l) and (m)).
Software creates unique problems for copyright owners because it is easy to duplicate, and the copy is usually as good as the original. This fact, however, does not make it legal to violate the rights of the copyright owner. The unauthorized duplication of software constitutes copyright infringement regardless of whether it is done for sale, for free distribution, or for the copier's own use. Moreover, copiers are liable for the resulting copyright infringement whether or not they knew their conduct was in breach of the law. Penalties include liability for damages suffered by the copyright owner plus any profits of the infringer that are attributable to the copying (Section 35). In addition, copiers who knowingly infringe copyright may, on conviction on indictment, be fined up to $1,000,000 and imprisoned for a term of up to five years (Section 42).
Use of Software
Anyone who purchases a license for a copy of software has the right to load it onto a single computer and to make another copy "for archival purposes only." In Canada, the purchaser of a licensed piece of software has the right to load it onto a single computer and to make another copy "for backup purposes." It is illegal to load that software onto more than one computer or to make copies of that software for any other purpose unless specific permission has been obtained from the copyright owner or otherwise permitted in the license accompanying the software program. The law applies equally, for example, to a $25 game and a $750 project management program. Each product reflects a substantial investment of time and money by many individuals. Software development involves a team effort that blends the creative talents of writers, programmers and graphic artists. Piracy diminishes the value of a program and further, deprives the developers of fair compensation.
Software piracy inhibits innovation. The software industry is filled with new developers trying to break into a crowded market. They can survive only if their products are purchased. Each theft makes staying in business more difficult.
Rental of Software
It has always been illegal to rent unauthorized copies of software. However, concern over the fact that the rental of authorized or "original" software frequently resulted in the creation of pirated software led Congress to enact the Software Rental Amendments Act of 1990 (Public Law 101-650), which prohibits the rental, leasing, or lending of original copies of any software without the express permission of the copyright owner.
The same situation prevails in Canada. In 1993, Parliament amended the Copyright Act to include the rental of software as a distinct right which cannot be exercised without the express authorization of the copyright owner. These provisions came into force on January 1, 1994.
Use of Software by Schools
Public or private educational institutions are not exempt from the copyright laws. To the contrary, because of their unique position of influence, schools must remain committed to upholding the copyright laws. Just as it would be wrong to buy one textbook and photocopy it for use by other students, it is wrong for a school to duplicate software (or to allow its faculty or students to do so) without authority from the publisher.
Some people claim that software publishers should allow schools to copy programs because it is the only way some school systems can afford to provide enough software for their students. However, the acquisition of software is no different than any other product or service required by a school. Schools purchase books, audio-visual equipment and classroom furniture, and they pay a fair price for them. Newer and better software can be developed only if the software development team receives a fair price for its efforts.
Many software firms offer special sales arrangements to schools. These include discounts for additional copies of programs, reduced-priced lab packs (a quantity of programs sold together) and site license agreements (an arrangement that allows a school to make a specified number of copies for one location at a fixed price). Schools should make every effort to uphold the law, because it is by their example that students will learn to have respect for intellectual property.
User Groups
The personal computer industry owes much of its success to the proliferation of user groups. These groups provide a valuable service as forums for sharing computing experience and expertise. User groups should, however, ensure that their meetings are not used to promote illegal duplication or distribution of software.
The unauthorized duplication or distribution of software by user groups or at user group meetings places many people in a vulnerable position. The individuals who duplicate or distribute software, as well as the user group itself and the owner of the meeting place, may be held responsible as copyright violators.
A close relationship between user groups and the software publishing community is mutually beneficial. User groups should encourage ethical software use among their members. Likewise, software publishers should respond to users' needs for proper support and updates.
Business Users
In the workplace, "softlifting" is characterized by two common incidents: extra copies of software are made for employees to take home, and extra copies are made for the office. Both situations mean a greater number of computers can run more copies of the software than were originally purchased.
Unless a special arrangement has been made between the business user and the publisher, the user must follow a simple rule: one software package per computer. This means that a copy of software should be purchased for every computer on which it will be used. For example, if the business has 10 computers on which employees use spreadsheet software, it must purchase 10 copies of such software. If there are 25 secretaries using word processing software on their computers, each secretary must have a licensed copy.
Another option that has proven successful is for firms to enter into special site license or concurrent use agreements with publishers. These agreements compensate the publishers for the "lost sales" they might have made on a package-by-package basis. With a site license, the company agrees to pay a certain amount for a specific number of copies they will make and not exceed on site. A concurrent license permits a specified number of users to access the software simultaneously, but prohibits users from exceeding the number of licenses acquired by the company and as metered by the program. These types of licenses will therefore, often save the organization money. At the same time, they eliminate the possibility that copyright violations will occur. By buying the correct number of programs or the right type of license, a company removes the incentive for employees to make unauthorized copies. Adhering to these rules will pay off in the long run, because a firm that illegally duplicates software exposes itself to tremendous liability.
Many software applications are sold in "Local Area Network" (LAN) versions. If your company has a LAN, be sure to follow the publisher's guidelines for the use of software on the LAN. It is a violation of the copyright laws and most license agreements to allow a single-copy version of software on a LAN to be simultaneously accessed by more than one user.
Finally, it has been found that when companies enact a policy statement stating their intention to ensure employee compliance with copyright regulations, the risk of software piracy is reduced. A sample corporate policy statement is included on the back panel of this brochure.
Bulletin Board Operators
The exponential growth of bulletin boards, the internet, and other on-line providers has created a new concern for copyright holders. Being able to download copyrighted software for the cost of the telephone call has become a significant problem for the software industry.
Bulletin board operators can be held liable, both civilly and criminally, for infringing the copyrights of software publishers. Unauthorized copies of software on a bulletin board may bring rise to a copyright infringement lawsuit, including seizure of the equipment. SPA, in addition to federal authorities such as the FBI have investigated numerous reports of piracy on bulletin board systems.
Sysops, or bulletin board operators, must take diligent steps to actively monitor the activities of the bulletin board. This will also help in preventing viruses from affecting the system. If copyrighted software is found to exist on the board, it must be promptly removed from the system and consideration should be given to oust the person uploading the copyrighted software to the bulletin board.
SPA Materials
The SPA has a variety of materials about the legal use of software. The Self-Audit Kit describes procedures appropriate for ensuring that an organization is "software legal." The Kit includes SPAudit (for DOS) KeyAudit (for Macintosh), a software management tool, which is available for download free of charge. In addition, the SPA has a 12 minute videotape on the subject of software piracy entitled "It's Just Not Worth The Risk." The video is a useful tool for instructing business users about the legal use of software products and is available for $15. A second video entitled, "Don't Copy that Floppy" is a "rap" video designed to teach school age people the benefits of using legal software. This video is also available for $15. We also publish additional brochures and various posters on the subject of software piracy. Please call or write the SPA if you are interested in obtaining any of these materials.
Reporting Copyright Violations
The SPA has established a special toll free number for reports of copyright violations: 1-800-388-7478. Cases of piracy may also reported via email at piracy@spa.org or via our Online Piracy Intake Report. The SPA has filed hundreds of actions against individuals and companies engaged in the unauthorized duplication of PC software and will continue to do so when it becomes aware of situations that warrant such action.
Conclusion
Most people do not purposely break the law. They would never consider stealing a package of software from the shelf of a retail store. But those who copy software without authorization are also stealing intellectual property and they should understand the consequences of their actions.
If you are an individual user, don't break the law. Everyone pays for your crime. If you are part of an organization, see to it that your organization complies with the law, and that it issues an appropriate policy statement that is signed and respected by all involved.
1997, Software Publishers Association. All Rights Reserved. Used by permission.

APPENDIX SS

THE COPYRIGHT ACT AND FAIR USE

Software Publishers Association

The Copyright Act and Fair Use
The Copyright Act (17 U.S.C. 106) gives the owner of a copyrighted work the exclusive right to reproduce the work, to prepare derivative works, to distribute copies of the work, and to perform or display the work publicly. In most cases, no one can make copies of a copyrighted work without the copyright owner's permission, and anyone who does so is an infringer of the copyright and may be held liable to the full extent of the law.
The Copyright Act sets forth four factors that courts are to consider in determining whether copying of someone else's work is permitted by the doctrine of fair use:
  1. the purpose and character of the copying, including whether the use is of a commercial nature or is for non-profit educational purposes-i.e., copying for nonprofit educational uses may be more likely to qualify as fair use;
  • the nature of the work being copied-i.e., copying from works that are primarily factual in nature (science book) is tolerated more than copying from more creative works;
  • the amount and substantiality of the portion that is copied in relation to the copyrighted work as a whole-i.e., the more that is copied, or the more significant the portion that is copied (regardless of the quantity) the less likely that fair use will apply; and
  • the effect of the copying upon the potential market for or value of the copyrighted work-i.e., has an adverse impact on the market for the original work. (Copying an entire supplemental science software program, rather than buying it, would not be fair use, but piracy.)
Determining whether fair use exists depends on particular circumstances. To assist educators in evaluating whether their intended copying of copyrighted works will violate the law, the legislative history of the Copyright Act includes a set of Guidelines, "Agreement on Guidelines for Classroom Copying in Not-For-Profit Educational Institutions", that help define what constitutes "fair use" for classroom copying. However, these Guidelines only cover the reproduction of books, periodicals and musical compositions, not software.
It is difficult to know when something is "fair use." The best strategy is to contact the publisher to find out if a license is available for your specific needs. The rule of thumb is to assume that "fair use" does not apply.
The Copyright Act provides other exemptions that may apply to specific educational activities. The US Copyright Office publishes an excellent summary of Section 107 of the Guidelines. The publication entitled Circular 21 - Reproduction of Copyrighted Works by Educators and Librarians can be requested by calling the Forms Hotline at (202) 707-9100.
1997, Software Publishers Association. All Rights Reserved. Used by permission.