Businesses today utilize a variety of software programs in performing their day-to-day operations. Much of the software is licensed from a third party under specific terms that may include a limit on the number of authorized copies. A recent decision of the United States Court of Appeals for the Sixth Circuit highlights the importance of knowing the specific software programs that are installed on your computer network and whether the number of installed copies exceeds the scope of your organization's license.

Dice Corporation (Dice), a Michigan-based company, licensed business accounting software from Thoroughbred Software International, Inc. (Thoroughbred). Dice was allowed to install the software on computers that Dice then rented to its customers. For each installation, Dice had to obtain an authorization code from Thoroughbred. In the fall of 2005, Thoroughbred learned from a disgruntled former employee of Dice that Dice had a 'crack' or 'lock pick' program that allowed it to install the software without obtaining the authorization code. Thoroughbred conducted an audit of Dice and discovered that Dice possessed a total of 64 unauthorized installations of its software programs.

Thoroughbred filed a lawsuit against Dice in the federal district court, alleging copyright infringement under the U.S. Copyright Act. After a bench trial, the court held that Dice had exceeded the scope of its license and violated the Copyright Act. In assessing damages, the trial court found that Thoroughbred was not entitled to any damages for 47 copies of the software programs that were installed on computers but were never accessed or used by Dice customers. Thoroughbred appealed, arguing that Dice's unauthorized copying of the software was itself infringing, even if the programs were never used. The court of appeals agreed and remanded the case back to the district court to award damages to Thoroughbred for all 64 unauthorized installations.

Obviously, organizations should not engage in intentional copyright infringement or condone employees and representatives doing so. Beyond that, it is important to establish and follow procedures for the discovery and removal of any unauthorized installations of software, whether or not they are being access or used.

To review the court's decision, click here.

For more information about legislation or litigation involving technology, intellectual property protection of information technology assets or any other Information Technology law issue, contact your Miller Canfield attorney or Kathy Ossian, Leader of our Information Technology Team, or call her direct at 313.496.7644.