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Software Licensing

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In 1993 worldwide illegal copying of domestic and international software cost $12.5

billion to the software industry, with a loss of $2.2 billion in the United States

alone. Estimates show that over 40 percent of U.S. software company revenues are

generated overseas, yet nearly 85 percent of the software industry's piracy losses

occurred outside of the United States borders. The Software Publishers Association

indicated that approximately 35 percent of the business software in the United States

was obtained illegally, which 30 percent of the piracy occurs in corporate settings.

In a corporate setting or business, every computer must have its own set of original

software and the appropriate number of manuals. It is illegal for a corporation or

business to purchase a single set of original software and then load that software onto

more than one computer, or lend, copy or distribute software for any reason without the

prior written consent of the software manufacturer. Many software managers are

concerned with the legal compliance, along with asset management and costs at their

organizations. Many firms involve their legal departments and human resources in

regards to software distribution and licensing.

Information can qualify to be property in two ways; patent law and copyright

laws which are creations of federal statutes, pursuant to Constitutional grant of

legislative authority. In order for the government to prosecute the unauthorized

copying of computerized information as theft, it must first rely on other theories of

information-as-property. Trade secret laws are created by state law, and most

jurisdictions have laws that criminalize the violations of a trade-secret holder=s

rights in the secret. The definition of a trade secret varies somewhat from state to

state, but commonly have the same elements. For example, AThe information must be

secret, Anot of public knowledge or of general knowledge in the trade or business, a

court will allow a trade secret to be used by someone who discovered or developed the

trade secret independently or if the holder does not take adequate precautions to

protect the secret.

In 1964 the United States Copyright Office began to register software as a form

of literary expression. The office based its decision on White-Smith Music Co. v.

Apollo , where the Supreme Court determined that a piano roll used in a player piano did

not infringe upon copyrighted music because the roll was part of a mechanical device.

Since a computer program is textual, like a book, yet also mechanical, like the piano

roll in White-Smith, the Copyright Office granted copyright protection under the rule of


In 1974, Congress created the Natural Commission on New Technological Uses

(CONTU) to investigate whether the evolving computer technology field outpaced the

existing copyright laws and also to determine the extent of copyright protection for

computer programs. CONTU concluded that while copyright protection should extend beyond

the literal source code of a computer program, evolving case law should determine the

extent of protection. The commission also felt copyright was the best alternative among

existing intellectual property protective mechanisms, and CONTU rejected trade secret

and patents as viable protective mechanisms. The CONTU report resulted in the 1980

Computer Software Act, and the report acts as informal legislative history to aid the

courts in interpreting the Act.

In 1980 The Copyright Act was amended to explicitly include computer programs.

Title 17 to the United States Code states that it is illegal to make or to distribute

copies of copyrighted material without authorization, except for the user=s right to

make a single backup copy for archival purposes. Any written material (including

computer programs) fixed in a tangible form (written somewhere i.e. printout) is

considered copyrighted without any additional action on the part of the author.

Therefore, it is not necessary that a copy of the software program be deposited with the

Copyright Office in Washington, D.C. for the program to be protected as copyrighted.

With that in mind then a copyright is a property right only. In order to prevent anyone

from selling your software programs, you must ask a court (federal) to stop that person

by an injunction and to give you damages for the injury they have done to you by selling

the program.

The Software Rental Amendments Act Public Law 101-650) was approved by Congress

in 1990, this Act prohibits the commercial rental, leasing or lending of software

without the express written permission of the copyright holder. An amendment to Title




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