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MECHANISMS FORPROTECTION OFSOFTWARE 303the strictness of this view is tempered by market pres-
sures and the recognition by the courts that the customer
is entitled to certain basic rights. As one example, most
packaged software carries a notice on the outside of the
package saying that the purchaser indicates acceptance
of the license by the act of opening the package. However,
because the license is inside the shrink-wrapped package,
there is no way the customer can read it first in order to
decide whether or not to accept it, and so the legal en-
forceability of these “shrink-wrap” licenses is doubtful.Fair Use
One legal question that should be addressed is whether
individual copying of software for personal use might
fit within the parameters of the fair use doctrine, which
permits the duplication of copyrighted material under
some conditions. A determination of fair use must con-
sider four factors: (1) the purpose or character of the use
(whether commercial or productive); (2) the nature of the
use (whether one is primarily availing oneself of the un-
copyrightable factual content of the work or of its expres-
sion); (3) the substantiality of the use (whether the work is
copied in its entirety or only in part); and (4) the effect of
the action on the market for the work. Hornik (1994) ar-
gues persuasively that softlifting fails to meet the criteria
for fair use. (1) Although the software is not being copied
for sale, and even though it may be used in ways that ben-
efit the rest of society (the main aim of fair use), it is also
likely to be used indirectly for financial gain. (2) What the
softlifter is primarily interested in is the “expression” of
the software, that is, its embodiment in code. (3) In soft-
lifting, the entire work is duplicated. Finally, (4) although
some softlifters would choose not to buy the software if
the choice were to pay or to do without, the practice prob-
ably decreases sales at least to some extent. Hence, a fair
use defense of softlifting as it is typically practiced would
probably not stand up in court.Software Patents
In many cases, protection of the source code by copyright
is insufficient to protect the innovations embodied in the
software. These innovations, although representing con-
siderable investment in research and development effort,
are often quite easy to reproduce, or “clone.” Court cases
have upheld the use of copyright protection in some cases
in which the “look and feel” of a software product was
copied. However, copyright cannot protect against copy-
ing of the fundamental ideas and algorithms used in its
design. Software makers have therefore turned to patents
for this type of protection. Initially, the U.S. Patent Office
was reluctant to issue patents for computer software, but
a series of court decisions in the 1980s clarified the situa-
tion, so that in the 1990s there was a surge in the granting
of software patents (Hunt, 2001).Enforcement Efforts
One area in which the software industry has had some
success in improving compliance with licensing and copy-
right laws has been in pressing its case against corporate
softloaders. On behalf of its member companies, SIIA has
undertaken a program of voluntary audits of large firms,inspecting their computers to determine whether soft-
ware has been loaded onto them in violation of license
agreements. When SIIA receives a reliable report (usually
from an employee of the firm) that softloading is occur-
ring, the firm is sent a letter giving it a choice of permit-
ting the audit or being sued for infringement. Most firms
choose the audit in order to avoid the adverse publicity
that a lawsuit would entail. They may also have favorable
software licensing arrangements that would be at risk if
they fail to cooperate. If the audit turns up violations, the
firm must destroy the infringing software, purchase re-
placements for it, and pay a fine. In return, SIIA releases
the firm from all further legal claims for prior acts of in-
fringement.
Internet piracy presents greater obstacles to legal en-
forcement. Suppose someone downloads a software pack-
age that has been illicitly placed on a Web site. If the soft-
ware producer wishes to bring suit to redress this action,
it faces a number of practical difficulties (Christensen,
1997). First it must decide whom to sue: the downloader,
the intermediary (the service provider hosting the Web
site), or the person who uploaded the software in the first
place. Next it must decide where to sue: because each of
the three parties involved in the action could be located
in a different country, the choice of an appropriate venue
can be complicated. Finally, assuming the prosecution is
successful, it must attempt to recover damages.
Prosecution of an individual downloader is difficult in
all of these respects. Web sites usually do not maintain
logs of download activity for very long. Even with access
to these logs, it can be difficult to identify the downloader,
and savvy pirates can masquerade as different users. The
downloader may be located in a foreign country that may
have weaker intellectual property laws than those in the
U.S. Although suit may be brought against foreign nation-
als in a U.S. court, enforcement of the judgment can be dif-
ficult. Finally, the amount of damages that can be assessed
for a single count of softlifting may not cover the costs of
litigation, and the guilty party may not have the means to
pay it anyway. The 1997 U.S. No Electronic Theft (NET)
Act addressed this last issue by increasing the civil penal-
ties and for the first time providing for criminal penalties
for copyright infringement that is not for financial gain,
provided the value of the stolen works is at least $1000.
These measures have made it more likely that an action
against an individual softlifter could result in significant
penalties, including jail time. Recently some high-profile
actions have been brought against particularly flagrant
softlifters, in hopes of making examples of a few in or-
der to deter others. However, because of the difficulties,
as well as for reasons of public relations, software compa-
nies have historically tended to avoid legal action against
individual softlifters.
A more suitable target for legal action may be the up-
loader. A single upload can be responsible for thousands
of downloads, so the damages that can be assessed can
be quite large. Furthermore, if the uploader acted for
profit, the penalties are even greater. However, many up-
loaders post software on warez sites simply for the en-
joyment of sharing with others and thumbing their noses
at powerful software companies. Identification of the up-
loader can also be difficult, for the same reasons as with