Cybersecurity

How to Fight IP Pirates

A recently released 2017 update by the Commission on the Theft of American Intellectual Property (IP) estimates the total annual cost of IP theft in the U.S. exceeds $225 billion, translating to 1.25 percent of the economy. This represents little progress in the fight against IP theft since the commission’s first report in 2013, and, in reality, this number may be as high as $600 billion when taking into account unreported/unmeasured types of IP theft.

In the past, software companies experiencing IP theft have viewed it as a forgone conclusion and largely ignored the problem. But things are changing.

New laws have been put in place that do more to protect software IP, both in the U.S. and Europe. Just a few months ago, the U.S. Supreme Court upheld a federal court decision that bans a Chinese company that stole IP from an American company from importing its products into the U.S. for 10 years.

There are legal remedies for pursuing unauthorized use of software and there are now software license compliance products that document illegal usage and provide the kind evidence needed to persuade infringers to become legal license owners or to prevail in a legal action.

Here are five tips that can help software companies protect their IP from piracy.

  1. Host your software, or some aspect of your software, in the U.S. Also, host your online manuals in the U.S. and install copy protection and/or control numbers on software. That way, if you ultimately need to pursue legal action against a foreign corporation, you may do so using U.S. jurisdiction.
  2. Always include at least a click-through license agreement with an up-front display of the Terms of Use for all avenues of software access, including trial versions. Include in your Terms of Use a form with selection and choice of law clauses, as well as a liquidated damages clause that specifies a predetermined amount of money that must be paid as damages for breach of contract. Include licensee’s recognition that your work is protected by U.S. copyright law. Make sure copyright filings are current and your agreement is for a license, not a sale. 
  3. Embed technology in your software that enables you to collect forensic evidence and cross correlate and supplement the collected data with website registration information, website account logins, trial version requests, download records of manuals and support documents, support requests, and training program attendance records. Advanced tamper detection technology can tell you that your software has been used illegally and can provide details of exactly who used it, where, how many times, for how long, and more. This is information that can be leveraged in negotiations to bring offenders into compliance or, in a worst-case scenario, for a legal proceeding.
  4. Crying wolf can also cost you credibility and money. Statutes of limitations may prevent you from recovering for unauthorized use if a few years have passed since the incident occurred, especially if you knew of the incident and did not act.  Repeated “nice” letters and/or threats with no follow-up generally don’t work. Say what you mean and mean what you say.
  5. Not all pirates are equal: Your resources and competing interests may make some pirates more attractive to pursue than others. Avoid educational organizations and focus on companies that are gaining an unfair competitive advantage against your paying customers. Look for lower risk/higher reward targets. Pursue the pirate that is a frequent user and works at a company with clear benefits to legal licenses.

Today, stronger laws combined with a new breed of software license compliance products can be leveraged to document and provide the kind evidence needed to fight back against software piracy. For there to be a meaningful reduction in IP theft, software companies can’t wait for the government to solve the problem—they need to take matters into their own hands—now.

 

Ted Miracco is CEO of SmartFlow Compliance Solutions. Ted has over 25 years of experience with software companies. He co-founded SmartFlow, a leading developer of anti-piracy and cybersecurity software, in 2014 and as CEO oversees the development and marketing of its anti-piracy and cyber-security technology. Visit the SmartFlow Compliance Solutions Resource page for a wealth of third-party resource information on how to protect your software from piracy. 

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