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Call for reform as unlicensed software use rises

'Couldn't care less' attitude needs to change

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There was a 25 per cent increase in the number of companies settling for unlicensed software use in the UK last year, according to the Business Software Alliance. But the sums paid go some way to showing how UK law provides little deterrent to such piracy.

The Business Software Alliance (BSA) figures were published on Monday. It opened 420 investigations in 2005 into UK businesses reported to be using software illegally, an increase of 24 per cent on 2004. According to the BSA, the strength of the economy was a key contributor to the rise: as businesses enjoy rapid growth, managers often overlook their software licensing. It put 80 per cent of the settlement cases down to negligence.

The largest settlement was for £31,000 and eight settlements exceeded £20,000. But these sums are not wildly different from what each company would have paid had it been properly licensed in the first place because copyright law does not set out to punish for simple infringement.

OUT-LAW spoke to Graham Arthur, a senior associate with law firm Covington & Burling, who acts as BSA's UK counsel and author of many threatening letters sent on behalf of BSA members like Microsoft and Adobe. And he hopes legal reform will give his letters more bite.

He explained that when a copyright owner has his rights infringed – such as the use of a computer program with no licence – the law seeks to put that copyright holder back in the position it would have been in had no infringement taken place. When the infringement is a matter for the police – selling illegal copies of Windows XP at the local market, for instance – significant fines and even imprisonment may follow.

But licence creep – such as 150 installations of Windows XP in a company that has bought the right to 25 – is a matter for the civil courts. Here, damages are available but are generally pegged to the licence fee for the unlicensed copies. It is difficult to deter piracy if the unlicensed user only runs a risk of paying a sum that he should have paid sooner. So, at least for now, a bit of creativity is required when assessing the loss.

Other countries allow for punitive damages in intellectual property lawsuits – perhaps a licence fee in addition to a lump of cash that sends a strong warning to others. But in the UK it's harder. "The problem is that companies may refrain from buying a licence until they're caught – then pay for a licence and argue that because they've paid, there is no loss," said Arthur.

Additional damages and The Sun

Section 97(2) of the Copyright, Designs and Patents Act of 1988 offers some hope for creative industries: "The court may in an action for infringement of copyright having regard to all the circumstances, and in particular to – (a) the flagrancy of the infringement, and (b) any benefit accruing to the defendant by reason of the infringement, award such additional damages as the justice of the case may require."

It sounds like an opportunity for punitive damages and in a way it is; but there are few examples of its application in court. Arthur points to a rare example: The Sun newspaper ran a story under the headline: "Double killer pops out for a McDonald's – Outrage over jaunt for psycho". A picture of the convicted killer appeared next to the story. But the picture was originally taken for his medical records when he was detained at a hospital. It was used by The Sun without authorisation.

Nottinghamshire Healthcare NHS Trust sued for infringement. That bit of its case was easy. But since the NHS Trust would never have licensed the photograph for publication, arguably it suffered little or no loss. So it sought to rely on section 97(2) damages. Mr Justice Pumfrey considered these "additional damages" at length.

Justice Pumfrey concluded: "…careless infringement sufficiently serious to amount to an attitude of 'couldn't care less' is in my judgment capable of aggravating infringement and of founding an award of damages under section 97(2)."

He awarded basic infringement damages of £450 – the sum he felt that a willing copyright owner would be paid for a picture of similar size, interest and prominence being used by The Sun. But he brought that figure up to £10,000 using the powers in section 97(2).

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