Does your company have a written policy in regards to its software licensing procedures and audit procedures to ensure compliance of such licensing requirements?

 

The Business Software Alliance (“BSA”) is an organization unknown to most business owners.  That is until the business owner receives an audit letter from BSA informing them that BSA on behalf of its member companies (which include, in part, Microsoft, Adobe, Symantec, McAfee and Monotype) is investigating possible instances of illegal duplication of their member companies proprietary software products.  The problem is, once the company receives the notice, there is no cure period to fix any license infractions.  Instead, BSA demands an audit and restitution as a way to avoid litigation. 

 

Unauthorized duplication of computer software products constitutes copyright infringement.  The Copyright Act (17 U.S.C. Section 101 et seq.) provides that copyright owners may recover actual damages or statutory damages. 

 

Actual damages include either the profits lost due to infringement or the value of the use of the copyrighted work to the infringer.  Polar Bear Prods. v. Timex Corp., 384 F.3d 700, 708 (9th Cir. 2004).  Presumably, where an infringer would not have purchased use of the copyrighted product, there are no actual damages.  However, courts have found, a copyright holder may pursue a lost license fee even if the infringer presents evidence it could not or would not use the unauthorized copies.  Thoroughbred Software International, Inc. v. Dice Corp., 488 F.3d 352, 359-60 (6th Cir. 2007).

 

If a copyright holder elects statutory damages, the court has wide discretion in determining the amount of damages to be awarded.  Peer Inter. Corp. v. Pausa Records, Inc., 909 F.2d 1332, 1336 (9th Cir. 1990).  Courts determine an appropriate award based on the following three policies: (1) compensation, (2) penalization, and (3) deterrence.  Jackson v. Sturkie, 255 F. Supp. 2d 1096, 1103 (N.D. Cal. 2003).  Thus, even where the judge can not compensate a copyright holder because the infringer caused no actual damages, a copyright holder can still recover damages to punish and deter the infringer.  Peer Inter. Corp., 909 F.2d at 1336.  A reviewing court will overturn an award only where it constitutes abuse of discretion.  Id.  A court abuses its discretion when it imposes a statutory damage award outside the limits imposed by 17 U.S.C. § 504. 

 

The range of damages a court can impose depends on whether the infringer acted “willfully.”  Where an infringer does not act willfully, a court can impose damages from $750 to $30,000 for each copyright infringed, no matter how many times infringed.  17 U.S.C. § 504(c)(1).  Where an infringer does act willfully, a court can impose damages from $750 to $150,000 for each copyright infringed, no matter how many times infringed.  17 U.S.C. § 504(c)(2); see also Columbia Pictures Television, Inc. v. Krypton Broadcasting,259 F.3d 1186, 1195 (9th Cir. 2001).

 

BSA is active in pursuing information from current and ex-employees of companies as sources of information to determine if a company is not in compliance with its software licensing requirements and is not required to disclose the name of the individual providing the information.  Such individuals are incentivized with the potential sharing of any monies derived from any infringement determination.

 

To avoid such a letter from BSA and the resultant headaches and penalties, it is important that your company employ a written policy to ensure each software application installed on each workstation has its own software license and that records of each license are retained in the company files.  In addition, we recommend at a minimum an annual internal audit of your computer software to ensure compliance. 

 

Should you have any questions regarding the above, please contact either Reggie Borkum, Esq., or Michael Weitz, Esq., of Blanchard, Krasner & French, A.P.C., at (858) 551-2440.