Leslie Walker

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Leslie Walker's .com Live
Software Piracy

Thursday, April 12, 2001; 1 p.m. EDT

Robert M. Kruger (Courtesy BSA)

Software piracy is costing American software companies more than $12 billion in lost revenue annually and becoming more visible with the rise of Internet auction sites. Joining us this Thursday to talk about recent antipiracy crackdowns by Microsoft Corp. and online auction sites is the industry’s top enforcer, former federal prosecutor and White House lawyer Robert M. Kruger.

Kruger currently serves as vice president for enforcement at the Business Software Alliance, an industry trade group. Kruger says that as many as one in four software programs used in the United States are unlicensed. While international software counterfeiting rings claim a lot of media attention these days, Kruger says the worst offenders are ordinary companies. “In our view, the copying of software in the workplace is the most underreported business scandal of the last decade,” he says. “It’s terribly pervasive.”

Kruger will join “.com Live” host Leslie Walker from 1 p.m. to 2 p.m. ET on Thursday, April 12, to talk about software piracy. And don't miss Leslie's .com column, published weekly on Washtech.com.

Submit your questions and comments before or during Thursday's discussion.

Editor's Note: Washingtonpost.com moderators retain editorial control over Live Online discussions and choose the most relevant questions for guests and hosts; guests and hosts can decline to answer questions.

To read the most recent responses, click "Get New Text" or select "Automatically Update Page."

Leslie Walker: Welcome to everyone, especially Bob Kruger. He's one of the nation's top software piracy fighters, leading enforcement for the industry's main software watchdog group.

Please send us your questions; we'll start in a few minutes.

Leslie Walker: Give us the scope of the software piracy problem. It's worse abroad, right? And how bad is it at online auction sites?

Robert Kruger: Business Software Alliance estimates that software publishers lose over $13 billion a year from piracy in all of its forms. In the U.S., BSA estimates that lost sales exceed $3 billion and that approximately one out of every four programs is pirated. Overseas piracy rates are much higher -- in some countries, in southeast Asia for example -- they exceed 90%. Internet piracy, including piracy on auction sites, is a growing percentage of these losses.

Leslie Walker: Tell us about software counterfeiting rings and how they operate. Who are these groups, anyway, and do they have big factories like music CD pirates do?

Robert Kruger: It shouldn't surprise anyone that organized crime rings are attracted to software piracy. There's a lot of money to be made selling unauthorized copies of other people's software programs -- since you don't pay for the R&D or pay the rights holders a royalty. Most of these rings are involved in the mass production and distribution of counterfeit programs -- programs that appear to consumers as if they are genuine. Many of these rings operate overseas (Asia, Eastern Europe) and export their goods elsewhere.

Alexandria, Va.: Are regular consumers more likely to pirate software, or businesses?

Robert Kruger: Surprisingly, the greatest losses to the industry comes from businesses and organizations making more copies of software programs on office computers than they have licenses to support. Often, we're talking about reputable companies, schools, even government offices. BSA receives many calls everyday from current or former employees who want to report what was going on where they work or used to work.

Baltimore : What's the penalty for illegally copying software these days? I'm talking about consumers who "burn" a copy of a game or other program and give it to friends.

Robert Kruger: Committing copyright infringement is not a traffic ticket. Under U.S. law, wilfull infringers can be made to pay up to $150,000 for each work infringed. There is even the potential for criminal prosecution in certain circumstances. As a practical matter, someone distributing one copy is not likely to become the target of an enforcement action but it's still breaking the law. And a lot of small acts of infringement add up to some very big dollar losses for the industry.

Manhattan: Why don't the big software companies just put anticopying programming tricks on the CDs so people don't copy them? I'm amazed at how many software disks are easy to copy.

Robert Kruger: Back in the 1980s, many software publishers did lock up their products and make them difficult to copy. Unfortunately, in addition to thwarting some piracy, most of those copy-protection schemes also imposed a cost or burden on honest users. The market place rebelled and copy protection became a thing of the past. IP owners are still working on technological solutions (e.g., CSS for DVDs) but everyone recognizes that there is no foolproof technical answer to what is, at bottom, an ethical problem.

Baltimore: How do the people selling illegal software on eBay and other auction sites get their software. Do they buy one legit copy and then burn the others on CD roms? Any idea just how widespread this is.

Robert Kruger: At one point, BSA estimated that 90% of the software being offered on Internet auction sites was pirated or otherwise unauthorized for sale. There are at least two strains of pirate auction site vendors -- individuals and organized operations. BSA filed a suit against 13 auction site vendors in November. Most of them proved to be people operating out of their homes, obtaining the software off of pirate Internet sites and burning the copies they sold.

Manhattan: Who prosecutes companies that illegally copy software inhouse and install unlicensed copies. Is that a state or federal offense, civil or criminal?

Robert Kruger: BSA brings civil actions on behalf of its members. Many businesses are surprised to learn that under the copyright act, BSA can apply for a court order which, if granted, allows its auditors to go to a company unannounced and in the presence of federal marshals and conduct a surprise inspection of the software installed on their computers. As for criminal cases, those are generally brought by the Department of Justice. Copyright is a federal law and preempts most state actions.

Leslie Walker: It seems inevitable that software makers will face what the music industry did with Napster--direct software swapping via peer-to-peer online connections. In a way, eBay's pirated software auctions may be a harbinger of what's to come.

As broadband connections increase, how can the software industry maintain control of programs that are so easily copied and swapped online?

Robert Kruger: We are already seeing the exchange of pirated software programs on peer-to-peer systems. Napster has popularized the exchange of soundrecordings but software programs are available too. This systems present unique challenges for rights holders and will require multi-faceted solutions, including education, enforcement, strong laws, technological measures and the cooperation of ISPs and other third parties. For example, today BSA uses provisions of the Digital Millenium Copyright Act to enlist the assitance of ISPs in shutting down pirate sites and stopping infringing activity.

Alexandria, VA: My wife and I recently bought some Mac Office software off of E-bay. We got all the books etc. from the person we bought it from. Did we (or the seller) violate any law? In other words, if I own a copy of Microsoft Office, can I sell that copy to someone?

Robert Kruger: If I wanted to be absolutely sure the software I was buying was legitimate, I don't think I'd go to an Internet auction site. BSA makes a lot of purchases from these vendors and the great majority of it proves to be pirated. Usually, there are plenty of clear signs -- no documentation, no original disks, a price that too good to be true. In an individual case, if you're not sure, you should contact the publisher or even call the BSA. Don't rely on seller ratings -- in this area, they can be deceptive.

Fairfax, VA: You said that software piracy is, "at bottom" and "ethical" issue. How does the industry get consumers and businesses to accept the ethical approach? It seems like heavy-handed enforcement will just fuel more piracy -- much like the government's failing drug war.

Robert Kruger: Getting the public to understand that copying software is not just illegal but that it is ethically wrong and harmful is a challenge. The same person who would never go into a store, take a box of software off the shelf and walk out with it under their coat doesn't always see that downloading that program from a pirate web site is essentially the same thing. Enforcement is useful only insofar as it assists the educational process -- by communicating that piracy can have serious consequences.

Leslie Walker: I think what the reader from Alexandria was asking is whether people can legitimately sell their used software programs, or if that's prohibited under most software licenses.

Robert Kruger: The "rules" on what you can do with a particular software program are set out in the license agreement that should have accompanied the program when you acquired it. Those agreements vary. Some licenses are non-transferrable. In most cases, though, you can transfer the program so long as you do so completely -- the disks, documentation, etc. If you have a question, contact the publisher.

Washington DC: What are eBay and other auction sites doing to verify the legitimacy of software sold online?

Robert Kruger: In December, BSA issued a set of Model Business Practices for Internet Auction sites which lists the standards we believe sites should follow to protect against the sale of pirated products. Those practices appear on our web site: www.bsa.org. Amazon.com has endorsed the practices. We are working with other sites. Generally, we are asking them to take some responsibility for software auctions -- by educating sellers, screening mechanisms, policing their sites, responding to notices from rights holders and identifying and banning repeat offenders.

Arlington, VA: What enforcement actions are you taking now that are important bellwethers?

Robert Kruger: BSA continues to devote the lion's share of its enforcement efforts to the organizational end-user piracy problem. Counterfeiting operations and other forms of retail piracy remain a major area of concern. But increasingly, we find ourselves focusing on Internet piracy. In the past few years we have filed major actions against individuals trafficing in pirated software in IRC channels and auctions sites. Watch for law enforcement authorities to increase their own activity in this area. We see a lot of high-tech crime units being formed and addressing themselves to cybercrime.

Leslie Walker: Tell us more about workplace privacy. How many companies have been subjected to software searches during your eight-year tenure at the Business Software Alliance--and what do you typically find?

Robert Kruger: The majority of our enforcement actions against businesses copying software in the workplace never make it to litigation. We contact most of these companies through our outside counsel and offer them the opporuntity to cooperate in our investigation. I can't say how many "raids" we've done but we have applied for and received court orders in California, Arizona, Texas, Colorado, New Mexico, Florida, New York, New Jersey, Massachusetts, Kentucky and a number of other states. We take care to proceed only on the basis of reliable information so we aren't surprised by what we find -- often dozens and dozens of copies of unlicensed software installed or in use. The reasons for this situation vary but usually companies believe that they simply won't get caught.

Alexandria, VA: Can you elaborate on the computation of
losses due to software copying? It seems
rather optimistic to presume that every copy
of software is a lost sale; presumably some
significant percentage of copied software
would simply otherwise just not be used. How
do you figure this into your computation?

Robert Kruger: It's true that not every pirated copy represents a lost sale and our methodology reflects that fact. In general, we work with software in use or installed in the workplace. The details of how we arrive at the piracy rates and losses are available on our website at www.bsa.org.

Leslie Walker: We are almost out of time for today, folks.

Falls Church, Virginia: So if BSA is representing the industry's view on piracy, who is speaking for the "other" side, or is there even an organized "other" side to this? Are consumer groups siding with BSA?

Robert Kruger: I don't know of any organized pirate groups. Check that, there are such groups but they typically operate underground. For example, the Department of Justice is prosecuting members of the "Pirates with Attitude" ring, a notorious group of Internet pirates who are responsible for the unauthorized distribution of thousands and thousands of copyrighted software programs. We do share common ground with many consumer groups -- after all they constitute the marketplace for our members' products.

K Street: Who are the software industry's friends in Congress? Opponents?

Robert Kruger: In addition to its anti-piracy enforcement efforts, BSA is active in the U.S. -- and in 65 countries around the world -- in seeking to ensure strong legal protection for IP rights. We have a very active policy shop that represents not only software publishers but companies with affiliated interests, like Dell and Compaq. You may want to check our website for information on particular legislative issues we are pursuing and where those issues stand on the Hill: www.bsa.org.

Robert Kruger: Thanks for all of the good questions and for reading my responses. Now, go out there and enjoy the benefits of using legal software. Tell your friends too!

If you have any questions that didn't get answered or just want information about the BSA (or if you want to report piracy) please visit our website at www.bsa. org or call our hotline at 888-no-piracy.

Thanks Leslie.

Leslie Walker: That's it for today. Thanks to everyone who submitted questions. And a big thanks to Bob Kruger for answering them. Hope to see you all again next week.

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