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Software Copyright Infringement

Published: Jan 02, 2014

Have you ever heard of Business Software Alliance (BSA)?

One IIAT member wishes he never had. He graciously agreed to share his $70,000 lesson with fellow IIAT members so they can avoid a similar nightmare.

BSA is a trade group established in 1988 to represent a number of the world's leading software makers. Its principal activity is fighting infringement of copyrights on software produced by its members. It is funded through membership dues and settlements against business firms that are using software purchased or acquired through unauthorized sources.

In January 2009 the agent received a letter from BSA that accused the agency of installing and using illegally-duplicated copyrighted software programs on its computers, including Microsoft Office and Adobe products. When the agent responded and inquired about the source of this information, he was informed that BSA had received a "tip" from a disgruntled ex-employee.

BSA demanded an audit of the agency's software and threatened litigation if the audit proved the copyrights had been infringed. After reporting the demand to his E&O, D&O and CGL carriers and learning that defending against or indemnifying such a demand isn't covered on any of those policies, the agent hired an attorney familiar with BSA actions to help with the compliance audit and negotiate a settlement with BSA. The audit revealed that the agency had receipts for all installed software and that all software was genuine. However, the agency had purchased the software from a vendor who did not have permission from the manufacturer to sell the software. After reviewing the audit, BSA initially demanded a cash settlement of over $30,000. After much negotiation, not to mention a few sleepless nights, the number was reduced to $20,000. Including attorney's fees, the agency spent about $70,000 for about $10,000 worth of software which it had to uninstall and destroy.

The agent passes along the following tips for other IIAT members:

  • Your IT specialist needs to be aware of and document the licensing rules for each software item used. It is easy to be out of compliance with licensing terms, as they are convoluted and can change after installation of the software. 
  • You need to track the software installations and keep receipts for each software purchase. BSA is not interested in your discs, anti-piracy labels, or even the fact that your software is completely genuine. They want to know who you bought it from and when. The only way to know for sure is to buy from vendors with Microsoft certification or similar endorsements from other software companies.
  • Licensing rules apply to the user, even if the vendor violated them.