SOFTWARE PUBLISHERS ASSOCIATION COPYRIGHT PROTECTION FUND

Background Information
June 1993

Software Publishers Association
1730 M St, Northwest, Suite 700
Washington, D.C. 20036
202-452-1600,  Fax: 202-223-8756

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Introduction

In 1985, the Software Publishers Association (SPA) created the Copyright
Protection Fund (the Fund) to coordinate a comprehensive, industry-wide
effort to fight software piracy. The Fund has two broad charters:

* Educate personal computer users about the copyright law and provide them
with the tools necessary to comply with it.

* Execute a legal campaign to fight software piracy.

Structure 

Presently 19 companies participate in the Fund: Adobe Systems, Inc., Aldus
Corporation, Apple Computer, Autodesk, Inc., Borland International,
Brightwork Development, Central Point Software, Claris Corporation, Fifth
Generation Systems, Inc., Funk Software, IBM Corporation, Lotus
Development Corporation, Microsoft Corporation, Micrografx, Inc., Novell,
Inc., Software Publishing Corporation, Symantec Corporation, WordPerfect
Corporation and Xerox Corporation. SPA administers the Fund and serves as
its twentieth participant. Kim Cooper, Trademark and Copyright Counsel for
Apple Computer, Inc., is the Fund's Chairperson. Rebecca Ranninger,
Director of Legal Affairs for Symantec Corporation, is the
Secretary/Treasurer. The individual fund members, as well as other SPA
members, serve as plaintiffs in cases in which their products have been
pirated. Fund activities, conducted on behalf of all SPA members, are
supported by contributions to the fund by fund members and by settlement
monies received.

Piracy - The Problem Defined

Piracy is a very serious problem in the United States. Conservative
analysis by the SPA estimates revenue lost to software piracy in the U.S.
during 1991 was $1.4 billion. The federal copyright law, which governs the
use of commercial software, is very straightforward -- it is illegal to
make a copy of a piece of software for any reason other than as a back-up
without the permission from the copyright holder. Civil penalties for
companies and individuals who break the law can be as high as $100,000 for
every software copyright infringement. With the October 1992 enactment of
Public Law 102-561, commercial piracy of software is a felony offense. It
is now a felony to willfully make ten or more unauthorized copies of
software with a retail value of $2,500 or more within a 180 day period.
Penalties include prison terms of up to five years (ten years for repeat
offenders) and fines of up to $250,000.

Forms of commercial (felony) software piracy include:

* Software counterfeiting, which is the illegal duplication and sale of
copyrighted software in a form designed to make it appear to be
legitimate;

* Hard disk loading, whereby computer dealers load unauthorized copies of
software onto the hard disks of personal computers, often as an incentive
for the end user to buy the hardware from that particular dealer; and

* Downloading of copyrighted software to users connected by modem to
electronic bulletin boards.

The unauthorized copying of personal computer software for use in the
office or at home, or "sharing" of software among friends, is the most
pervasive form of piracy encountered abroad and at home and is estimated
to be responsible for more than half the total revenues lost by the
industry. Due to SPA's good efforts, commercial piracy of software is now
a felony offense. Though it is still just a misdemeanor to make fewer than
ten unauthorized copies of a program, small-scale offenders may be subject
to substantial civil penalties.

Why People Pirate Software 

Although there are many reasons why people pirate software, some of them
include greed, carelessness, lack of awareness of the law, or general
disregard for the importance of treating software as valuable intellectual
property. Managers who duplicate software to trim costs may feel that
"everyone else is doing it." Others may mistakenly believe that it is
legal to make and distribute copies so long as the copier derives no
profit from the distribution or use. Still others may truly believe that
software copying is a harmless activity that "doesn't hurt anyone" or
"isn't really stealing."

Software presents a unique theft problem for the industry because it is so
easy to duplicate and because the copy functions identically to the
original. Unlike other products such as audio and video tapes, there is no
degeneration in quality from copy to copy. And the copying process is
effortless. A program that reflects years and millions of dollars of
development takes only a few seconds to copy. The cost, too, is
negligible; a product that may cost anywhere from $20 to $20,000 can be
copied by any PC user for no more than the cost of a few blank diskettes,
and hard disk users avoid even that minimal cost.

Software Piracy Equals Higher Software Prices

Software piracy, however, harms all software companies and ultimately the
end user by leading to higher prices. Piracy is also a significant drain
on the resources of one of America's most competitive industries. Few
other industries lose as much revenue to theft. This ultimately curtails
the industry's competitiveness. If software were not stolen so frequently,
developers could recover their development costs more quickly and go on to
fund new development efforts. And the problem has a ripple effect on
everyone - from distributor to retailer and even to end user. It
translates into fewer jobs and less revenue to local economies. For the
end user, pirated software means there is no support, documentation,
warranties or updates provided by the software publisher. In the long run,
illegal software duplication costs more time and money for everyone.

Investigations 

The SPA's Anti-Piracy Department investigates cases of copyright
infringement involving corporations, educational and non-profit
institutions, commercial dealers, bulletin boards, and software rental
operations. Most investigations begin with a call to the anti-piracy
hotline (1-800-388-7478). Many of the reports come from employees,
temporary workers and consultants. In dealer cases, customers who have
received illegal copies of software on their computer hard disks may
notice the absence of documentation or they may become aware that they are
not entitled to customer support or updates and realize that receiving a
pirated copy of software is no bargain. In response to all calls, the SPA
conducts a thorough investigation before proceeding further.

SPA has six full-time staff members assigned to investigate each report and
prepare cases for legal action. Depending on the strength of the
information received and the extent of the infringement involved, SPA's
response can take one of the following forms:

* Cease and desist letters;
* Corporate audits (in lieu of litigation), or
* Litigation.

Members of the Fund convene regularly to determine the most appropriate
course of action. Since the SPA's anti-piracy activities are designed to
pursue copyright compliance on behalf of the entire PC software industry,
actions are against businesses and individuals who pirate not only
business software applications, but also consumer and educational software
products. Each member whose copyright is violated is invited to join as a
plaintiff.

Litigation 

So far the Fund has filed more than 150 lawsuits against corporations,
computer dealers, training schools, bulletin board systems and educational
institutions. The statutory penalty for willful infringement is up to
$100,000 per copyright infringed. When it is warranted, the SPA will apply
to Federal judges for permission to conduct ex parte searches of
defendants' computers. These searches are used to prevent the destruction
of evidence pending trial. Occasionally the Fund will work with a federal
law enforcement agency such as the FBI. In June 1992, for example, the
Fund cooperated with the FBI in the Bureau's first raid on a computer
bulletin board.

To date, all cases have settled out of court or are pending. Monies from
settlements go into the Fund and are used to further the educational and
anti-piracy goals of the Fund.

The Fund's first lawsuit was filed in March 1988 against a San Leandro,
California, computer dealer, "The Clone Store." The SPA's investigator
determined that The Clone Store was unlawfully loading illegal copies of
copyrighted software on the hard disks of the computer systems sold by the
store. The case settled for $10,000.

In May 1991, the SPA received its largest settlement to date in an action
against Parametrix, Inc., a Seattle-based environmental and engineering
consulting firm. The company paid $350,000 plus attorneys' fees in
settlement.

That same year the first software copyright infringement suit was brought
against a public higher education institution. In August 1991, a
settlement with the University of Oregon Continuation Center was reached;
the University agreed to pay the SPA $130,000. As part of the negotiated
settlement, the University also agreed to organize and host a national
conference in Portland, Oregon, on copyright law and software use.

While the SPA's first goal is to foster voluntary compliance with the
copyright laws through education, the SPA has become a credible threat to
people who continue to use illegal software. More suits will be filed in
the near future against PC users who unlawfully make and distribute
illegal copies of software.

Corporate Audits

Sometimes after investigating reports against a company, the SPA will
request that the company submit to a voluntary audit of its software, in
lieu of litigation. The principles of an SPA software audit are simple:

* An SPA representative observes as the directories of each PC are printed

* Directory information is compared with purchase records.

* The company agrees up front to make a penalty payment to the SPA
Copyright Protection Fund in the amount equal to the retail price of each
illegal software program found during the course of the audit.

* All unauthorized copies are destroyed, and the audited company agrees to
replace them with legitimate copies.

The SPA's audit program provides an alternative to litigation for companies
not in compliance with software copyrights or licenses. It has been the
SPA's experience that many organizations receiving an audit request are
both cooperative and appreciative of the opportunity to become legal
without having to go to court. If a company refuses to cooperate with the
voluntary audit, the SPA may sue them.

Public Awareness and Education Programs 

In an attempt to inform individuals and corporations about software use and
the law, the SPA funds a comprehensive education program which provides
all PC users with the tools needed to comply with copyright law and become
software legal. Ensuring compliance with federal copyright law is not
difficult. SPA publishes a brochure targeted toward business people
entitled, "Software Use and the Law." This brochure provides a summary of
the copyright law as well as a sample corporate policy statement. The SPA
also publishes a second brochure, "Is it Okay to Copy My Colleague's
Software?" This brochure, written in a simple question and answer format,
is an excellent guide for end users seeking to understand the legal use of
software. These brochures are available free of charge.

The SPA has compiled a free Self-Audit Kit with which organizations can
examine their software use practices. SPAudit, a software inventory
management tool which accompanies the Self-Audit Kit, is designed to help
an organization track commercial software programs that are on all hard
disks. The MS-DOS version of the program searches PC hard disks for over
750 of the most common programs used in business. To date, approximately
60,000 copies of the audit kit have been distributed free of charge.
SPAudit has been translated into French, Spanish, Swedish, German and
Italian. The recently introduced Macintosh version of SPAudit searches
Apple Macintosh hard drives for over 1,500 software programs.

The SPA also has produced a videotape to help corporations understand the
copyright law. "It's Just Not Worth the Risk" is a 12-minute dramatization
that depicts a company confronting the problem of corporate piracy,
answering some of the most commonly asked questions. The videotape clears
up basic misconceptions concerning software use. To date, over 10,000
copies of the tape have been distributed. The video is now available in
French and Spanish, with translation courtesy of Apple Computer, Inc.

The recently released SPA Software Management Guide helps companies to:
audit their current software policies, educate employees about the legal
use of software, and establish procedures to purchase, register, upgrade
and backup computing systems. The Guide provides an Internal Controls
Analysis and questionnaire, a Software Audit Guide, and the SPA Eight
Point Program for Ensuring Compliance. It also contains copies of all of
the SPA's current antipiracy materials. The items include: SPAudit (DOS
and Macintosh versions), "It's Just Not Worth the Risk" video, SPA White
Paper On Software Piracy, an InformationWeek feature article about the
SPA, and educational brochures that include suggested corporate policies,
a memorandum to employees, and information about the copyright law. The
Software Management Guide costs $80, including shipping and handling
charges.

In its first effort at reaching young people, the SPA produced a rap music
video "Don't Copy That Floppy." The 8-minute video uses rap music and
hip-hop dance to teach students in grades 4 through 8 about the legal and
ethical ramifications of stealing intellectual property. Copies of the
video and accompanying lesson plan have been distributed to more than
2,000 teachers nationwide. "Don't Copy That Floppy" is available from the
SPA for a $10 handling charge.

The SPA staff and members of the Copyright Protection Fund regularly speak
at seminars on the topic of software piracy and the copyright law.
Presentations are given to a variety of target audiences in cities across
North America.

The SPA also sponsors various public awareness projects. Last October, the
SPA produced a video news release (VNR) about The Felonization Bill. The
VNR included footage from an actual raid as well as congressional
testimony on software piracy. Sound bites from Senator Orrin Hatch
(R-Utah) and Representative William Hughes (D-NJ), co-sponsors of the
legislations, were also included. A two-part VNR entitled "Software
Pirates: No Longer Getting Off the Hook," was produced in the fall of
1991. Part one focused on the overall issue of software piracy and the
second part addresses the responsibility of the end-user to comply with
software licenses and tips on how organizations can ensure a legal
software inventory. The VNR was targeted to 800 commercial television
markets where over three and a half million viewers viewed the release.

The SPA is continuing to heighten public awareness through the publication
of feature articles, print ad placements, and billboard advertising.
Feature articles have run in a wide variety of publications over the past
few months, including general business, computer, accounting, and legal
publications. The anti-piracy awareness ad is also getting lots of
attention, appearing in magazines and journals, as well as on billboards.

To receive more information or a copy of the free brochures, video, or
SPAudit, SPA's inventory management tool please write to:

Software Publishers Association
Anti-Piracy Materials 
1730 M Street, NW, Suite 700 
Washington, DC 20036

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