Software Licensing

In 1993 worldwide illegal copying of domestic and international software cost $12.5
billion to the software industry, with a loss of $2.2 billion in the United States
alone. Estimates show that over 40 percent of U.S. software company revenues are
generated overseas, yet nearly 85 percent of the software industry's piracy losses
occurred outside of the United States borders. The Software Publishers Association
indicated that approximately 35 percent of the business software in the United States
was obtained illegally, which 30 percent of the piracy occurs in corporate settings.
In a corporate setting or business, every computer must have its own set of original
software and the appropriate number of manuals. It is illegal for a corporation or
business to purchase a single set of original software and then load that software onto
more than one computer, or lend, copy or distribute software for any reason without the
prior written consent of the software manufacturer. Many software managers are
concerned with the legal compliance, along with asset management and costs at their
organizations. Many firms involve their legal departments and human resources in
regards to software distribution and licensing.
Information can qualify to be property in two ways; patent law and copyright
laws which are creations of federal statutes, pursuant to Constitutional grant of
legislative authority. In order for the government to prosecute the unauthorized
copying of computerized information as theft, it must first rely on other theories of
information-as-property. Trade secret laws are created by state law, and most
jurisdictions have laws that criminalize the violations of a trade-secret holder=s
rights in the secret. The definition of a trade secret varies somewhat from state to
state, but commonly have the same elements. For example, AThe information must be
secret, Anot of public knowledge or of general knowledge in the trade or business, a
court will allow a trade secret to be used by someone who discovered or developed the
trade secret independently or if the holder does not take adequate precautions to
protect the secret.
In 1964 the United States Copyright Office began to register software as a form
of literary expression. The office based its decision on White-Smith Music Co. v.
Apollo , where the Supreme Court determined that a piano roll used in a player piano did
not infringe upon copyrighted music because the roll was part of a mechanical device.
Since a computer program is textual, like a book, yet also mechanical, like the piano
roll in White-Smith, the Copyright Office granted copyright protection under the rule of
In 1974, Congress created the Natural Commission on New Technological Uses
(CONTU) to investigate whether the evolving computer technology field outpaced the
existing copyright laws and also to determine the extent of copyright protection for
computer programs. CONTU concluded that while copyright protection should extend beyond
the literal source code of a computer program, evolving case law should determine the
extent of protection. The commission also felt copyright was the best alternative among
existing intellectual property protective mechanisms, and CONTU rejected trade secret
and patents as viable protective mechanisms. The CONTU report resulted in the 1980
Computer Software Act, and the report acts as informal legislative history to aid the
courts in interpreting the Act.
In 1980 The Copyright Act was amended to explicitly include computer programs.
Title 17 to the United States Code states that it is illegal to make or to distribute
copies of copyrighted material without authorization, except for the user=s right to
make a single backup copy for archival purposes. Any written material (including
computer programs) fixed in a tangible form (written somewhere i.e. printout) is
considered copyrighted without any additional action on the part of the author.
Therefore, it is not necessary that a copy of the software program be deposited with the
Copyright Office in Washington, D.C. for the program to be protected as copyrighted.
With that in mind then a copyright is a property right only. In order to prevent anyone
from selling your software programs, you must ask a court (federal) to stop that person
by an injunction and to give you damages for the injury they have done to you by selling
the program.
The Software Rental Amendments Act Public Law 101-650) was approved by Congress
in 1990, this Act prohibits the