This has resulted in audits at thousands of companies worldwide, whose computers are carefully inspected to see if the business owner has failed to pay his or her dues.
While companies are often contractually obliged to comply with such audits, BSA’s selection procedures are raising eyebrows.
Since a few years the industry group has been actively soliciting tips from the public about potentially infringing companies. Promising hard cash rewards, it asks “whistleblowers” to expose any wrongdoing.
BSA generally follows up these tips with a threatening letter to the business owner in which it requests an audit, something they are contractually obliged to agree to.
If unlicensed software is found during an audit, the group generally follows up with a demand for damages, which can run into hundreds of thousands of dollars for some companies.
To find out more about the process TorrentFreak spoke with Robert J. Scott, managing partner at Scott & Scott, LLP., who has represented hundreds of defendants in BSA related cases over the past couple of years.
According to Scott a typical audit request comes after “a tip by a disgruntled employee or former employee, often seeking to recover advertised reward money.”
Many of Scott’s clients liken BSA’s tactics to a form of extortion, but he prefers not to use this term. In principle he believes that software companies have the right to protect their work. However, he certainly doesn’t agree with BSA practices.
The reward money in particular is problematic as it tends to attract disgruntled people who have a history with the company. For example, a fired employee who hopes to cash in while getting back at a former boss.
“I challenge the payment of reward money to disgruntled employees,” Scott says. “I also have been opposed to the method of calculating damages in BSA cases as being contrary to law.”
The damages awards demanded in these cases are typically three times the regular licensing fee, and can easily run to hundreds of thousands of dollars depending on the number of computers that are in use.
In a recent article for TechCrunch Scott shares the story of Fuzzy’s Radiator, a Texas automotive repair company. In a threatening letter the BSA accused the company of running unlicensed Microsoft products, stating that it could owe millions of dollars for the alleged infringement.
The timing of the letter was interesting, as it came in shortly after Fuzzy’s Radiator’s in-house IT person left the company. “I think the disgruntled former employee was trying to bring down the company,” Fuzzy Radiator’s Trinda Lopez said.
Facing a potential bankruptcy, the company decided to freeze employee salaries and postpone the purchase of new equipment. Eventually, the dispute was settled for a fraction of the initial demand.
While some business owners may run unlicensed software on purpose, this is certainly not always the case. Sometimes the software is installed by relative outsiders, or IT personnel who decide to skip the licensing part on their own accord.
Intentional or not, if the BSA comes knocking it’s bound to get costly. Scott hopes that small business owners will become more aware of the potential risk and ensure that their licenses are in order.
“After handling over 250 cases by BSA, what I have learned is that small business owners can’t trust IT to manage software license compliance,” Scott tells us.
Finally, it’s worth keeping in mind that BSA uses the prospect of excessive penalties to intimidate companies and elicit fear. With a proper defense the actual settlements turn out to be much lower.
Too bad for the disgruntled employee, who gets a stake of the settlement.
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