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Lecture Notes

  • Intro: Bingo Software (Johnson, Scenario 4.2). 
    • Bingo Software, employing 15-20 people, spends 3 yrs. developing an OS for networked µcomputers, invests $2M. 
    • Bingo successfully markets system for 1 yr. 
    • After the 1st year, sales decrease. 
      • Pirate Pete's Software starts to sell a system very similar to Bingo's, but w/addnl. features. 
        • Seems that they have examined Bingo's & copied it, w/improvmenets. 
      • Copying of Bingo's system is rampant. 
        • Small businesses appear to be buying 1 copy and making multiple copies for int'l. use. 
        • They may be giving away copies to other businesses as well. 
    • Bingo is unable to recover the full costs of development, and goes into bankruptcy.
  • Software piracy: the extent. 
    • Software industry estimates that $8.1B of software was stolen in 1994. 
      • In 1990, $2.4B was stolen; sales were only $5.7B. 
    • Software Publishers Assn. says that piracy appears to be declining. 
    • Overseas, situation is even worse. 
      • Business Software Alliance claims-- 
      • In Germany, a recent survey disclosed that there are fewer programs purchased than computers. 
        • [This data is a couple of yrs. old, I think.] 
        • In US, 1.5 legitimate software packages sold for every personal computer--BSA. 
        • 0.82 in Australia. 
        • 0.65 in France. 
        • 0.4 in Italy. 
      • But at least rate of piracy is falling. 
        • Between 1993 & 1994, Spain's dropped to est. 73% from 88%, due to tough new law. 
        • In Finland, rate fell to 43% from 67%, after jail sentences were imposed for illegal copying. 
      • Worst area is E. Europe. 
        • In former Soviet Republics & in Turkey, est. 97% of software is stolen; 95% in Bulgaria & Romania. 
      • Sued Justice Dept. for software piracy. 
      • In 1982, Inslaw landed a $10M contract w/Justice Dept. to instal PROMIS case-tracking software in 20 offices.
      • Then they allegedly spent $8M enhanc ing PROMIS on the assumption that they could renegotiate contract to recoup expenses. 
      • But after Justice Dept. got the source code, they terminated contract and pirated code. 
      • By 1985, Inslaw was forced into bankruptcy. 
      • Owners kept fighting, & case ended up in U.S. Bankruptcy Ct. for DC. 
        • In Feb. '88, Inslaw was awarded $6.8M damages, plus legal fees. 
      • The only way Inslaw was able to sue the feds was because they were in the middle of bankruptcy proceedings. 
      • Then in 1991, Danny Casolaro, an investigative journalist researching for a poss. book on the case was found dead in a WV mote 
      • In 1992, House Judiciary Cmte. voted to hold an investigation into the case. 
        • Hadron, Inc., owned by a friend of Atty. Gen. Edwin Meese, was attempting a hostile takeover of Inslaw. 
  • Software piracy: the methods. 
    • How does one get pirated software? 
      • Counterfeit packaging. 
        • In 1991, Microsoft unveiled MS-DOS 5. 
          • The package contained two holograms that Microsoft said were "virtually impossible" to reproduce. 
            • "... raise the counterfeiting barrier to a level previously unattempted in the sfotware industry." 
          • Within 2 wks., a Taiwanese counterfeiter commissioned a holographer in China to copy & produce the holograms. 
          • In October '91, a salesman calling on a software store in Taipei saw a package that "didn't look quite right." 
            • One of specialists said, "We were in shock. No one could believe it happened." 
          • An NYT article in 1992 said that the Chinese gov't. hadn't decided whether to turn over the molds that produce nearly exact fak 
        • First CD-ROM prosecution in 1993. 
          • NYT, 12/13/93 
          • Federal govt. indicted Clare Waioi Sham of San Jose on charges of importing 900 counterfeit CD-ROM disks from Hong Kong. 
            • Along w/18K counterfeit user manuals. 
        BBSs 
        • June 1992: FBI raided a BBS known as Davey Jones's Locker: 200 comercial programs that could be downloaded. 
          • Finally, in Mar.1995, Richard D. Kenadek, operator of the BBS, was sentenced to 6 months' home confinement & 24 mos. probation. 
            • He charged $99/yr. for access, let users download 200 programs. 
          • Was first software copyright prosecution under criminal law. 
          David LaMacchia, and a Brown student were indicted in April '94. 
        • LaMacchia case was thrown out last Dec. 29.--> 
          • Was not wire fraud--who was defrauded? 
          • Was not copyright violation--he didn't do it for financial gain. 
          • Was not theft--legitimate users weren't deprived of anything. 
        • Brown student Daniel Goldwater didn't collect fees either. 
    • BSA says that the most common way piracy happens is when management encourages it. 
    • E.g. Cerebrus Sound & Vision (New Scientist, 2/18/95). 
      • You buy a "player" with a digital key. 
      • You buy music & it is sent to you over Internet. 
      • It is compatible w/your player (only). 
  • Software Publishers Association asks the following policy. 
    • Appoint a software mgr. repsonsible for keeping records on purchases and software use. 
    • Develop a software code of ethics, and make sure employees read it. 
    • Keep a software log, including records of when a program is purchased, who is to use it, and on which machine it is to reside.
  • If not dealt with, problem will escalate. 
    • Macintosh Quicktime software makes it easy for personal computer users to add snippets of digital video to their programs. 
    • Beverly Sills visited China & Japan & saw hundreds of her CDs in covers she had never seen before. 
  • Software piracy law. 
    • The law. 
      • Passed by Congress in October 1992.
      • Illegally copying software for private or commercial gain is now a felony. 
      • Penalties: 5 years in prison, or fine up to $250K. 
        • If made more than 10 copies of software, 
        • carrying a retail value of > $2500. 
      • To receive max. penalty, the retail value of pirated software would have to exceed $80M. 
    • How are violators caught? A disgruntled employee will turn you in. 
      • Report from Datamation, May 1995. 
      • "Company with above-average honesty quotient and a zealous microcomputer support manager" spent months negotiating with SPA. 
      • A terminated employee had called their 800 number. 
Index of Topic -  Study Guide - Discussion Questions