News Analysis

Software piracy has long-term effects on UK economy

Warwick Ashford

Tough economic times are driving software piracy in the UK as some small computer shops look to boost sales and cut costs. But what is good for some is not good for all.

Even for suppliers of illegal software, it can only be a short-term solution because it is often only a matter of time before customers turn on them when things go wrong.

Because the software is not genuine, suppliers are unable to replace or fix faulty products, and pirated software typically includes malicious code that causes problems.

Consumers and businesses tricked into paying for software they think is legitimate can also find themselves victims of identity theft through hidden spyware.

It is mainly such disaffected customers who blow the whistle on traders by reporting them to the big software producers whose products are being sold illegally.

Company directors who knowingly use illegal software not only risk hefty fines and possible imprisonment, but also expose their company to potential loss of reputation, says software piracy watchdog FAST IiS.

Legitimate traders are also hit by these illegal activities because software piracy erodes trust in UK's smaller computer shops.

Many of them are also finding it harder to survive because they are losing business to traders supplying pirated software.

Undercut legitimate traders

Loading copies of a single piece of software on several computer hard disks enables pirates to undercut legitimate traders.

Legitimate traders are also often responsible for reporting illegal traders to software producers.

Honest traders are being put under extreme pressure and even forced out of business, says Michala Wardell (pictured above), head of anti-piracy at Microsoft UK.

This is especially true in the UK piracy hotspots of London, Huddersfield, Warrington, Manchester and Bristol.

The normal rules of supply and demand apply, says Wardell. In areas where there is a high demand for low-cost software, such as university towns, software piracy is high.

Competition among sellers, demand for low-cost software, and the number of small computer shops are also typically higher in these inner-city areas, boosting the number of cases.

"In these areas, honest resellers are feeling the cumulative effect of being outpriced by a number of local illegal traders," says Wardell.

Acting on tip-offs mainly from customers and affected traders, Microsoft's anti-piracy team has caught 25 UK computer shops selling illegal software in the past six months.

Most of those netted in the operation either claimed the illegal activities were carried out by rogue employees or that they were not aware that what they were doing was illegal, says Wardell.

Infringe copyright laws

FAST IiS says it has become commonplace for businesses often to unintentionally infringe copyright laws by not paying attention to software licence management.

This typically results in unlicensed software being installed, or software licensed for only one computer being installed on several.

All organisations should include an IT policy as part of their conditions of employment and ensure all users are aware of the policy, including what steps will be taken against those who do not comply, says FAST IiS.

Microsoft and other big software suppliers try to deal with most offenders themselves, and have support personnel and information resources to help on how best to source and sell software, but where sellers persist in illegal activities, the matter is referred to UK Trading Standards officers. According to section 107A of the UK Copyright, Designs and Patents Act 1988, Trading Standards has the duty and power to enforce copyright offences, which could mean inspecting UK workplaces to check compliance after a whistleblower complaint or suspicion of an offence.

However, a large part of the solution to the problem lies with the businesses and consumers who buy software from computer shops.

Many consumers are unaware of the risks and tend to put their trust in local computer suppliers, but business users should know better.

Regardless of how fast the flow of information is and the general speed of business, employers must be aware they have to use properly licensed software and/or services, says John Lovelock, chief executive of FAST IiS.

Ignorance no excuse

Ignorance is not a legitimate excuse, he says, with e-bulletins going out to more than 3,000 organisations almost every month explaining what they should do to manage their software and IT estates.

"I very much doubt there are many people in business today who do not know what they should do, where to get assistance, and many of the risks they face by ignoring software licensing. It is a matter of business priority and return on investment which drives complacency in business today."

Business has a role to play in stamping out illegal software in two main areas, Lovelock adds.

The first is the IT department, which controls access to the IT facilities and can protect company IP by laying down policies for the use of IT, ensuring that information is less able to be moved freely outside the company, and policing compliance with policies.

The second is employees and contractors. Protection can be secured through a combination of contractual obligations, internal codes of practice and training on what is acceptable regarding company information.

"It is for management to lay down the conditions under which the IT department and employees can operate," says Lovelock.

Employees also have a role to play in combating any illegal behaviour be reporting it to organisations such as FAST IiS.

This can be done under the protection of the Public Interest Disclosure Act 1998, also known as the Whistleblower Act, says Lovelock.

"We hope that by raising awareness of the laws protecting employees, the number willing to blow the whistle will increase," he adds.

While there seems little excuse for business ignorance about software piracy, companies can be part of the solution and need to be aware that cutting corners when it comes to licensing is a risky business.


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