by Gail Taylor Russell

A recent Business Software Alliance study estimates that throughout the next five years, businesses and consumers worldwide will buy more than $300 billion worth of PC software. That's the good news for software companies. But the bad news is that for every two dollars of software purchased, another dollar's worth is pirated.

In that same BSA study, software piracy rates ranged from 22 percent in North America, the lowest in the world, to 90 percent in China. The piracy rate worldwide is conservatively estimated to be 35 percent.

Piracy remains a big problem that robs software providers of legitimate revenue. The major asset of a software company is its intellectual property. Software companies invest time, money and intellectual capital to develop software that may later be stolen. BSA estimates that every one-point drop in global software piracy could yield $40 billion in revenue to the IT sector.

Microsoft Corp. recently made headlines for cracking down on and suing sellers of counterfeit Microsoft software programs. The pirated software was sold on eBay.

Many of the buyers learned that the software they purchased was counterfeit only after trying to authenticate it using an online tool provided by Microsoft. The buyers then cooperated with Microsoft to identify the sellers. Although Microsoft's actions are laudable in the fight against stolen software, more needs to be done to make a dent in software piracy.

Emerging technology companies that don't have the resources of a global giant such as Microsoft may feel overwhelmed when determining how they can prevent piracy.

Solutions include a combination of consumer education, enforcement and legal and technology solutions in the form of licensing strategies and software tools. Companies can work within the software community to continue to educate consumers and businesses about the risks of stealing software. Unauthorized use of software is copyright infringement, a violation of federal law with statutory damages that can be as high as $150,000 for every copy made. It's also a violation of federal criminal law. People or business owners who are found guilty of copyright infringement can be sentenced to large fines and jail time of up to five years.

In addition to the penalties associated with copyright infringement, companies may face Sarbanes-Oxley penalties if their computers contain pirated software because this may signal a violation of internal controls. Aside from these legal remedies, pirated software can be dangerous because thieves can modify the software to insert viruses or Trojan horses. These Trojan horses, usually undetectable by virus security programs, can be used to access computer data and transmit confidential information via the Internet. Educating software users to these downsides can help deter some software piracy.

Software companies can also help raise the level of awareness of the seriousness of pirating software by establishing and publicizing their internal software piracy policies. A separate software policy document signed by every employee is an active sign that the company is serious about enforcing its antipiracy measures.

Performing regular and visible software audits of company computers is another sign the company won't tolerate downloading of unauthorized software by its employees.

Once companies decide on their software licensing models, they can implement the models using third-party electronic licensing tools. These tools provide flexible license management to implement and update licensing terms and pricing models.

They can be used to distribute software, prevent unlicensed use and automate auditing and end-user compliance with the license terms.

Examples of electronic licensing capabilities include:

- Time-limited licenses.

- Required user registration.

- Software programs to determine that the number of servers and users are within the constraints of the license agreement.

Companies can also implement licensing strategies based on the piracy rate in a particular market. In North America, where piracy is not as great a concern, software can be subject to fewer electronic controls. In countries such as China, an integrated hardware-software-based technology may be essential to preventing theft.

Companies must continue to do business globally but, where possible, should license software to international companies that have assets in the United States or the European Union. The United States and the European Union enforce intellectual property rights more strictly. This arrangement makes international intellectual property rights and licensing agreements easier to enforce.

Although the piracy problem is a daunting one, the steps outlined above, in conjunction with government programs to strengthen the enforcement of copyright laws nationally and internationally, can help to protect the intellectual property assets of emerging technology companies and eventually stop the growth of piracy.