Make Sure You Use Only Licensed Software

You buy a piece of software to test it. You like it. You believe your employees will find it useful and will aid in their productivity. You take the software to your dealership, and you have it loaded on a dozen computers. Seems innocuous, right? Unfortunately, this simple action opens the dealership to potentially crippling liabilities. Here are some questions and answers you should consider about business software.

Q:    What could go wrong from loading software on multiple business computers?
A:    Plenty.  Unless the software developer permits use on multiple devices, software is marketed to be downloaded onto one machine.

When you buy software, its package is plastic wrapped and inside is a long, legal  list of DOs (and mostly DON’Ts) called a EULA which stands for End User License Agreement.  Most dealers and employees do not read or keep the EULA, the license key or receipt.  The EULA and related receipts explain that the dealer is purchasing only a license to use the software under the terms set by the software manufacturer and that if the licensee (dealer and its employees) violate that licensee, they can be charged with copyright infringement.

Federal law protects copyrights.  If a dealer copies the disc or uses it in a way not covered by the EULA, that can be copyright infringement.  A dealer cannot take a home edition of software and use it in business.  A dealer cannot take one disc and copy it for many other computers.  A dealer cannot use outdated software generally under expired licenses.  A dealer cannot transfer the software from a desktop to other devices without having multiple license fees paid to the licensor.  

Violations of the copyright laws can lead to penalties up to $30,000 per violation, per infringement, per device, and per software.  When a dealer makes copies on many computers and devices, the potential liability can add up quickly and heavily.  If there is an allegation of intentional and/or willful copyright infringement the penalty can be up to $150,000 per violation.  The copyright holder is entitled to legal fees and the case can be filed in federal court.  A defense to the claims can be difficult.

Q:    Who would find out?
A:    There are bounty hunting associations of software manufacturers that exist to find violators. One of those is the Business Software Alliance. The Association’s website at is instructive. The Association, like the others who exist for this purpose, encourage reports of copyright software violations.

Q:    Why would someone report software violations?
A:    For the oldest reasons in the world: revenge, money, or both. Vindictive ex-employees looking to get back at the company for being fired are a common source of reports. BSA encourages reports through a reward program explained on its website. If a person reports copyright violations and the report lends to action and a recovery, the rewards could run from $5,000 up to $1 million.

Q:    If the association choses to investigate, what will happen?
A:    The dealership will receive a letter. The letter will invite the company to do an audit and report the results of the audit to BSA. The letter will threaten that if the audit is not done, or is done inaccurately, the association will seek to file legal action for the full weight a federal court can impose. The goal is to bring the dealership to the table to negotiate an expensive settlement.

Q:    How do I prevent putting my dealership in the position to receive such a letter?
A:    Make sure software on each device is properly licensed and you have proof of that.

Q:    How do I do that?
A:    Dealers should protect against software problems.

1.     Establish a Computer Code of Ethics to avoid intentional penalties and train IT personnel.
2.     Make sure that all software is properly purchased and loaded as required, and purchase     volume licenses for multiple devices.
3.    Ensure that licenses are up to date and apply to business use.
4.    Ensure that the dealership maintains all license key numbers and receipts.
5.    When you purchase a new computer, keep the licensing documentation and the receipt.
6.    When you purchase a used computer, make sure each software license is transferable and for those that you cannot prove are transferable, buy a new license.