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Software Licensing Risks For Small Businesses

Monday, 18 March 2013

In today’s digital age, the rapid growth and expansion of the IT industry has led most businesses to use a vast array of software. The widespread use of computer programmes inevitably involves copying and, to some extent, adaptation.

As a result, it is very difficult to thoroughly prevent the use of copyright material, particularly that accessed via the Internet and users can easily end up infringing copyright laws.

The Rules on Software Copyright

Long-established copyright rules apply to software which is a significant asset for many companies. Section 17(1) of the CDPA 1988 states that ‘copying of a work, even though it may be transient or incidental to some other use of the work, is nevertheless an infringement of copyright if done without authorisation’.

According to the article 5 paragraph 1 of the EU Software Directive, which has been implemented in the UK, legitimate use requires a licence from the right holder for purposes solely within the scope of that licence.

Small Businesses and Software Piracy

Despite the regulations, many businesses expose themselves to unconscious ‘software piracy’. This can result from a number of factors such as insufficient understanding of IT, bad organisation and management, lack of awareness as well as inadequate legal advice.

This is especially true for small businesses which may have less time and money to invest in software management. There can also be a general disregard for the importance of treating software as a generator and manipulator of valuable intellectual property.

Risks of Software Piracy

A laissez faire attitude to software licensing involves huge legal and financial risks. Companies may lose their data, lose confidential information, experience damage to their reputation, face exposure to viruses and fail to keep up with recent legal and licensed versions resulting in business interruption. As for the legal implications, if a company is caught with illegal software, it can expect to be vigorously prosecuted. It may face criminal sanctions including large fines and, according to the CDPA 1988, even imprisonment for up to two years.

The Federation Against Software Theft (FAST) and the Business Software Alliance (BSA) are among the most prominent organizations that protect the interests of software producers, monitor compliance with relevant copyright laws and pursue businesses that use unauthorised software.


Businesses should be aware of the risks associated with the breaching of software licences.

To avoid claims of infringement, business should acquire licences, keep track of licence use, ensure compliance by using proactive software management and educate staff to use software within the scope of licence agreements.

If you need assistance to ensure your software policies are regulation compliant, Rollingsons has experienced lawyers who can assist you. For more information please contact James Crichton via e-mail or by telephone on 0207 611 4848.