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Is all your company’s software properly licensed? Trading Standards are now using powers to take criminal action against unlicensed software use

Unlicensed use of software, including business software, is said to cause huge losses to the creators of that software; recent estimates suggest global losses of around US$ 30 billion annually.

Although unlicensed use is rife in the third world, Europe (including the UK) is far from immune. A survey produced by the Business Software Alliance (“the BSA”) in May 2008 estimated that losses to the business software industry in the UK amounts to about £925 million annually.

Efforts to crack down on illegal use of software have, in the past, mainly been through trade associations such as FAST (Federation against Software Theft) and the BSA, although some actions have been taken by individual software companies.

The scale of the problem was recognised by the Government sponsored Gowers Review of IP, published in December 2006. One of the recommendations of the Gowers Review was to bring into force section 107A of the Copyright Designs and Patents Act 1988 which would give Trading Standards powers to make test purchases, enter premises and inspect and seize goods and documents. The section was brought into force in April 2007, but has not been used by Trading Standards until recently.

During the second half of 2008 Trading Standards in Cardiff (in conjunction with FAST and the BSA) started a campaign to educate local businesses as to the need for software licences and the possible downside of failing to have the necessary licences in place. This campaign came to a head on 10 December 2008 when Trading Standards used the powers at its disposal to inspect a Cardiff company when it carried out “a full forensic inspection of its software estate."

The result of the Trading Standards inspection have not been made public yet. However, the BSA issued a press release on 16 December 2008 reporting on a settlement it had reached with Total Repair Solutions Limited in Scotland. It was reported that Total Software Solutions will be paying £120,000 by way of settlement with the BSA “as well as legalising and acquiring software needed by the business."

It is clear from recent developments in the UK that any business using unlicensed software is now at even greater risk of both criminal and civil sanctions if the unlicensed use comes to the attention of the relevant bodies. It will come as no surprise that FAST and the BSA encourage anonymous tipping off by employees and third parties.

It is particularly important to realise that use of unlicensed software (including software downloaded by employees) may result in the company and its directors and managers being criminally liable for copyright infringement.

We recommend that all companies should regularly audit all software used in their business and that formal policies should be put in place forbidding downloading and use of software by employees unless that use is formally licensed.

If you would like to discuss further the very important issues raised in this article, please contact:
Peter Jennings on 0116 257 6181 or peter.jennings@harveyingram.com or
Pina Mazzotti on 0116 257 6166 or pina.mazzotti@harveyingram.com.

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