Licensing the unlicensed

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• S Magazine, August 2006
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Soon after John Pettifor took over as CEO of Campden Publishing, he was in for a shock. The company had been in trouble financially, but then came a call from the British Software Alliance. A former employee had reported Campden for failing to buy enough licences for its applications and fonts.

The result was a nightmare for Pettifor. An audit by the BSA revealed that the vast majority of the company’s software was unlicensed. The cost? £80,000 for the fonts alone. “[It] came as a complete shock,” he says. “The business was in real financial trouble and this issue wasn’t even on the radar.”

“Software asset management” as it’s known rarely figures on any companies’ radars. Most companies assume they have the correct licences for products, since they will generally buy them as they need them. But there are a surprising numbers of ways for organisations to lose track of how many software instances they have and how many they’re entitled to have.

Steve Atwell, head of marketing services at Sage, elaborates. “Many people may not realise it but if their company buys a business that’s gone into liquidation, the licences ‘die’ with that business and they’ll need to buy new licences. Sometimes a business partner will come into the business and use his own enable key to get a piece of software up and running and it will be forgotten about. They may only have an annual licence. Or you’ll buy a licence for 10 users at the beginning, keep adding users then forget to buy licences for additional users when you need them.”

Then, of course, there’s the possibility of employees installing copies of software without the permission of the IT department. And there’s even the risk of employees using office bandwidth to share software illegally over the Internet.

While some regard these breaches as minor matters, their economic effects are by no means small. An IDC survey reports that 27% of the software in use in UK businesses is illegal, which costs local and international software companies £1 billion; a drop in piracy rates to just 17% would generate £2.8 billion in tax revenues for the government, which equates to over 80,000 policemen or 113,000 nurses.

Equally, the law regards failure to correctly license products as a serious crime, punishable by a prison sentence of 10 years and an unlimited fine. Payment of the due licences is usually sufficient, however, and few cases ever make it to court. But, says John Lovelock, director general of the Federation Against Software Theft (FAST), an EU enforcement directive dealing with intellectual property that could change that has now been made part of UK law. “Article 13 makes it possible for software companies to apply for damages as well. Although it’s not yet been tested in court, there is that possibility.”

Lovelock says FAST, which is affiliated with the BSA, receives as many as 100 calls from whistleblowers each month and audits as many as 38,000 businesses each year. The BSA itself offers a reward of up to £10,000 to anyone who reports infringraments, although quite often informers are more altruistic – or at least less self-serving - in their actions. Research by YouGov has found that 64% of UK employees would report illegal activities to an external body if they had raised an alarm internally but their reports had been ignored; 65% would consider reporting their company if they felt their employer treated them unfairly; and 27% said large salary rises for the board or poor salary reviews for staff could spur them to act.

In general, neither the BSA nor FAST would like to think of themselves as the ‘software police’, since deliberate offenders are the minority rather than the majority. Instead, they prefer to advise and help organisations to ensure they have the right number of licences.

Campden’s Pettifor was certainly grateful that the BSA was more understanding that it might have been. “We found the BSA very constructive in their approach, as this wasn’t something we were going to be able to sort overnight. We were given not only sufficient time, but also the guidance we needed in order to put matters right.”

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