Understanding the Types of Software Piracy: Intellectual Property vs. Software Licensing

Can you define software piracy? If you’re like most people, you probably think of fake copies of software sold on shady websites or in questionable shops, or of illegal copies of software that you can get access to online. You wouldn’t be wrong, but software piracy goes well beyond “bootleg” versions of popular programs.

In fact, according to the Business Software Alliance, the most common types of software piracy are actually intellectual property theft and software licensing violations.


Understanding the Types of Software Piracy: Intellectual Property vs. Software Licensing

Types of Intellectual Property Theft

Intellectual property theft is defined as illegally taking, using, or selling material that is copyrighted or trademarked, or stealing trade secrets. For example, if you are a T-shirt designer and you design and sell shirts featuring famous cartoon characters without permission from the copyright holder — that is considered intellectual property theft.

At the same time, if you were to get access to plans for a company to release a new character, and then create an identical character on your own, you could be charged with stealing trade secrets.

In the world of software piracy, intellectual property theft usually takes the form of copying content (software, music, books, etc.) and then making it available to others, either for a fee or free via one of the many black market file sharing and download sites.

This is what most people think of when they think of software piracy, and it’s costly — to the tune of more than $60 billion a year worldwide. For that reason, many developers are including intellectual property protection on their products in trying to thwart the pirates.

The theft of trade secrets is becoming an even greater concern as well. In the past, trade secret theft required actually physically accessing blueprints, files, or plans, but thanks to technology, it’s easier than ever for criminals to get access to and steal trade secrets.

In fact, research indicates that as many as 20 percent or more of cyber-attacks are aimed at stealing intellectual property, and that hackers have begun targeting smaller companies as a conduit to larger companies and agencies. Once a hacker gains access to a company’s secrets, they can sell or use those secrets to create an identical product, removing any competitive advantage that the original developer may have had.

It’s important to note that in most cases, reverse engineering or creating similar products does not generally constitute intellectual property theft. Many companies engage in reverse engineering as a form of competitive analysis, and develop similar or improved products. While there have been successful lawsuits related to reverse engineering and the development of similar products, in most cases products are just different enough to be outside of the realm of intellectual property theft.

Software Licensing

Anyone who has ever purchased a software program is familiar with the concept of licensing. Even if you download software from the Internet, chances are you will be required to enter a code or key that “unlocks” the program’s full functionality.

Most consumer software comes with one to three licenses, with the intent that the program be used on home computers only. The terms of service on most consumer software also prohibit the use of the programs for commercial purposes; in other words, you cannot buy a reduced-price version of a word-processing program intended for students and install it on several business computers.

However, licensing issues are often where businesses trip up in terms of compliance with anti-piracy laws. Technically speaking, using unlicensed, or inappropriately licensed, software on a corporate network is illegal and could trigger an audit and subsequent sanctions. Often, businesses are unaware that there are licensing violations taking place.

For example, an employee may purchase some software for personal use, and upon seeing that there is an additional license available, he installs it on his work computer, not realizing that the program isn’t authorized for business use. Or an employee may share software or an inexperienced (or unscrupulous) IT department may ignore licensing rules and install software on a virtual machine which is then accessed by dozen of employees, even though the license allows for only one machine.

Licensing violations can take many forms, but they all boil down to one thing: piracy. Even unintentional, piracy can lead to major consequences, and major costs, so it’s important for businesses to stay on top of software licenses and know exactly what programs are running where.

Software piracy is a major issue that has significant consequences for the overall economy, data integrity, privacy, security, and business operations. Educate yourself on piracy’s many forms, and avoid facing the consequences yourself.

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