Company agrees to pay in software piracy lawsuit

The FSA Group, a direct marketing company based in Markham, Ont., has settled out of court on a charge of having unlicensed software installed on its computers.

The Canadian Alliance Against Software Theft (CAAST) based in Toronto and the Business Software Alliance (BSA) based in Washington – both consortium groups representing software manufacturers – announced Wednesday that The FSA Group has agreed to pay $175,000. This came after unlicensed copies of Adobe Systems Inc., Autodeck Inc., Microsoft Corp., and Symantec Corp. software programs were allegedly installed on FSA’s computers.

This case began in November 2002, when – after receiving a phone call on their piracy hotline – CAAST and the BSA along with their lawyers and police carried out an Acton Piller Order to audit for software published by the above mentioned companies.

An Anton Piller Order directs the defendant to allow the plaintiff’s solicitors to enter its premises to look for, inspect and take away any items and documents relating to the defendant’s infringing acts. This type of order is commonly used if there is a risk that the defendant may dispose of such items or documents relating to its questionable activities.

Jacquie Famulak, CAAST president, said that although she cannot go into detail about the lawsuit, CAAST is very happy with the outcome.

“[The FSA Group] decided that part of the settlement would be that they would actually make a payment to CAAST, and also make sure they have purchased a significant number of licenses for use. They have also agreed to establish some internal controls such as a software use policy for its employees,” Famulak said.

She added that software piracy occurs in part because of neglect, but more frequently because companies under-license software.

“This means that they did at one time purchase the license for software or for a number of copies of software, but because the company has grown rapidly or because a company doesn’t have the proper controls in place, piracy will just start to happen,” Famulak said. “It ends up getting out of control to the point where [a company] purchased the license for a hundred copies and now [they’ve] got 500 copies in use.”

Allister Sutherland, director of software research for IDC Canada in Toronto said that many people would not see under-licensing as piracy and that piracy is an area where there is some room for interpretation in terms of what fair use means.

“To [a person] it’s like, ‘Well, I’ve paid for the product, so why shouldn’t I be allowed to use it?'” Sutherland said.

He added that although the $175,000 is a substantial sum of money, it is more the reputation of the accused company that is really at stake.

“The FSA Group, I would think, would find this publicity very uncomfortable and it would not sit well with their clients,” Sutherland said. “Clients don’t want to think that the people they are doing business with are pirating other companies’ earnings…and that essentially is what’s happening when software is pirated or when it’s used beyond the license agreement because that is revenue that is being taken directly out of the industry.”

He added that although large companies could probably afford a $175,000 settlement, they could not afford the bad publicity.

“Senior management is very concerned about ensuring that what they do is above board, and that the companies they work for and represent are not compromised unduly by things like this which would not sit well with the board if it [came out that] the CEO or the CTO were knowingly allowing software piracy to occur within the organization,” Sutherland said.

Famulak said that it would be easy to tell companies that ignorance of Canada’s copyright laws are no excuse and peruse every reported infraction, but CAAST would rather educate people about software piracy prior to any illegal activity.

“But in a situation like this where we actually have a lawsuit filed it sort of reinforces the fact that we will go further if we have to,” Famulak said.

In a report entitled Expanding Global Economics: The Benefits of Reducing Software Piracy released by the BSA and International Data Corp. in early April, North America was shown to have the lowest software piracy rate at 26 per cent, followed by Western Europe at 37 per cent, the Middle East-Africa at 51 per cent, Asia-Pacific at 54 per cent, Latin America at 57 per cent and Eastern Europe at 67 per cent.

According to Robert Holleyman, president and CEO of the BSA, four out of 10 software programs around the world are pirated.

“Reducing that rate by 10 points to 30 per cent would have the affect of creating 1.5 million new jobs. It would create economic growth by US$400 billion, and generate US$64 billion in new taxes for U.S. government services,” Holleyman said.

According to CAAST, 38 per cent of all business software is obtained illegally and it estimates that in 2000 the industry lost $457 million in revenue in Canada alone.

Member companies of CAAST include Adobe Systems Inc., Apple Canada Inc., Autodesk Canada Inc., Avid Corp., Bentley Systems Inc., Borland Co. Ltd., CNC Software/Mastercam Inc., Internet Security Systems Inc., Macromedia Inc., Microsoft Canada Co., Network Associates Inc., and Symantec Corp.

CAAST can be found online at