No doubt some of these inequities can be easily addressed by courts that could, whilst granting the order to raid premises and collect evidence, ensure that the business of the raided party is not drastically impacted and that such party is not put to undue losses.
We plan to run a future post synthesizing some of the more recent court orders in this regard to ask if the orders draw an optimal balance between the need to protect IP owners against infringement, whilst at the same time safeguarding the interests of a raided party.
In the meantime, we bring you an interesting perspective on software raids from the Business Software Alliance (BSA), a nonprofit trade association created to advance the goals of the software industry. It is headquartered in Washington, DC and counts all the big IT majors amongst its members including Microsoft, IBM, Adobe, Autodesk etc. Having been at the forefront of some of the leading software piracy actions in India, the BSA has considerable experience in this area.
Placing Software Raids in Perspective
By BSA India
We, Business Software Alliance (BSA) India, as a non-profit international trade association and voice of the commercial software industry, respond to a post on SpicyIP to ensure that a balanced and holistic picture is represented on behalf of the software industry as a whole, which grapples with serious challenges of piracy at all levels and fights for protection of software intellectual property (IP).
Independent studies conducted by internationally reputable research organizations have found unequivocally that PC software piracy results in significant damage to the domestic economy through negative impact on a nation’s GDP, jobs and tax revenues to the government. It is in this regard that we wish to present a broader and more balanced perspective to the discussion chain below.
Interestingly, while the author of the blog has openly painted all actions of the software industry with one brush, in fact one stroke, and has used a title (“court extortion”) demeaning to the courts, the author has chosen to remain anonymous, calling into question the motivation of the author. This practice of anonymity should be discouraged in issues of academics and research.
At the very outset, we need to establish that engaging in the use of unlicensed software is a criminal offence and is also subject to potentially severe civil consequences under the Copyright Act, 1957. Managers of businesses large and small have a choice. They can abide by the law and use licensed software or ignore the rule of law and seek a commercial advantage by using illegal software. Regrettably, we find that many managers knowingly choose to flout the law, which speaks volumes about business ethics and disregard for IP rights. What is astonishing is the knee jerk reaction, as the one raised by the anonymous author, of what happens when one gets caught. Knowingly breaking the criminal and/or civil laws of a country is a serious matter with potentially unpalatable consequences. To spin the consequences of one’s own illegal acts and point the finger at the software industry and the courts is approaching the very limits of credulity.
The fact is, the software industry in India is one of the leading lights in the economy and has benefited from protection of software, including in international markets. It has brought an untold number of jobs and improved the livelihood of millions. But maintaining the reputation and growth of this sector of the economy is a very delicate exercise. Acts such as the blatant disregard for the IP of others such as in the indiscriminate use of unlicensed software in the workplace causes untold harm to the reputation of India and also to the potential new investments into the software industry. With software piracy levels hovering at 69% in India software related revenue, jobs and government taxes are stunted.
A copyright violation under Section 63 B of the Copyright Act, 1957 (the Act), is a cognizable criminal offence where, upon complaint, police can raid and arrest officials of an infringing company and seize all evidence. In view of the unequivocal provisions contained under Section 69 of the Act, all persons responsible for the conduct of affairs of the company concerned, are liable for imprisonment and fine. While this strong legal remedy is available in India, as is in most other countries, in India, software companies more typically take select action against end-user piracy through milder civil actions. At the same time, the software industry engages in educational campaigns to promote the use of software asset management (SAM) within organizations.
Coming to the issue of Civil Search and Seizure process adopted by the court, we have no hesitation in saying that Indian courts have been pro-active in attacking piracy of all kinds, not just software, while being cautious of the remedies granted to the plaintiffs. In the past few years, Courts have themselves built-in safe guards to protect the interest of the defendants at the ex-parte stage itself, such as data back-up, and security cost in appropriate cases. Out of 100s of cases filed over the last 10-15 years, there has not been a single software anti-piracy case where an incident of abuse of the court order has been brought to courts attention and courts have held the plaintiffs liable.
1. The visits of the Local Commissioner to the premises of the Defendants are ‘unannounced’ because the Court Order recognizes the fact that an element of surprise is imperative in such cases and if prior notice were to be issued, the very purpose of conducting a software audit to determine unlicensed software usage, would obviously be defeated. The digital nature of software allows itself to be removed, deleted, uninstalled, stored and transferred with ease and speed. It is for this reason that the Defendants are denied the courtesy of prior notice. It is pertinent to note that a Division Bench of the Delhi High Court which laid down detailed guidelines on the issue of appointment of Local Commissioners in software cases, highlighted the importance of an element of surprise in gathering evidence relating to pirated/unlicensed software usage and held that unless an element of surprise is not preserved, the suit filed by the Plaintiff itself would stand frustrated.
2. The Court Orders which envisage backup of data, clearly stipulate that the backup of data could only be permitted in cases of data created through licensed software of the Plaintiff or through use of third party software. In stark contrast with what is alleged, this is not a distinction that is made by the Plaintiff’s lawyers. An impression is sought to be created that the Plaintiff’s lawyers overreach the Orders of the Court and read in conditions that are non-existent. It is extremely regretful that the writer of the blog has not read or has chosen to ignore what is clearly stipulated in the Order, for purposes of backup. We would like to stress that the industry always errs on the side of caution and a case in point is where over 500 unlicensed/pirated installations were found and yet no seizure was effected since there was no time left for the Defendants to make backups of their data, as directed by the Court. At the request of the Defendants, the systems were not seized and were left in an unsealed condition.
3. A Division Bench of the Delhi High Court, while laying down guidelines for appointment of Court Commissioners in software piracy cases, underscored the objective of appointment of Court Commissioners by holding that the purpose of appointing Court Commissioners is not to collect evidence but to preserve infringing evidence. Suits instituted by copyright owners for software piracy are also inter alia, for damages. In the absence of the media containing infringing software being taken into custody, it would be impossible for the Plaintiff to establish that the Defendant concerned actually illegally used the software as opposed to merely installing the same on its computer systems.
4. The audit of the Defendant’s computer systems are always done in the presence of the defendant’s IT personnel and once an inventory of the software contained on the systems is made, the defendants are called upon by the Local Commissioner, to furnish corresponding licenses. Contrary to the claims of the writer of the blog, the Local Commissioner, an officer of the court, arrives at an objective determination of what software is licensed and what is not, based on the licenses, if any, produced by the defendants themselves and not on the basis of the Plaintiff’s lawyers’ claims. In fact, a copy of all licenses produced by the Defendants is annexed with the Report filed in Court in terms directed by the Court. It is pertinent to note that in case any additional licenses are subsequently found by the Defendants, the defendants may move an application in Court seeking de-sealment of their computer systems.
5. It is not unusual for defendants to insist that settlement discussions commence immediately after the local commission proceedings have been concluded. There is obviously an urgency to enter into an out-of-court settlement and the fact that the Plaintiff’s lawyers agree to discuss a possible settlement, after several hours of hard work, can by no stretch of imagination be considered being unreasonable. On almost all occasions, the Plaintiffs have shown objectivity in optimizing the actual usage of the defendants and have accepted post-inspection usage requirements, which is substantially lower then what was actually found to be in actual use. It is curious that, on the one hand, the blog writer claims that the Plaintiff does everything in its power to delay the matter and in the same breath, claims that the Plaintiff’s lawyers are in a hurry to forge an out-of-court settlement. In any legal dispute, an out-of-court settlement is always the preferred option as it enables parties to move on after settling their disputes rather being involved in a long drawn litigation for years. Finally, all out-of-court settlement terms are reviewed by the Judge concerned and only upon satisfaction of the legality of the same does the Court pass a decree in terms of the settlement.
6. Contrary to the claims of the blog writer, there has not been a single case of any adverse publicity being given of any end-use court matter involving a company or an organization involved in usage of pirated/illegal software. Although the press is free to cover court proceedings and peruse court records, software publishers have always been alive and sensitive to these issues and have actively respected the privacy of these proceedings for all concerned.
7. It must also be emphasized that most software companies follow a series of escalatory steps prior to initiating legal proceedings in the form of a civil suit. Initiation of an action is most often preceded by a series of letters/personal visits of company representatives, appealing to the end-user concerned to refrain from using unlicensed software and engage in a Software Asset Management exercise so as to identify shortfalls in licenses. It is pertinent to note that such audits are offered free of cost by most software companies. In other words, a legal proceeding is initiated most often as a matter of last resort when companies brazenly continue to use unlicensed software without paying heed to the legitimate demands of the software company concerned.
8. Lastly, the Court, while granting Orders for appointment of Local Commissioners, is doing so on account of being prima facie satisfied of the case of the Plaintiff. It is pertinent to note that the investigation enquiries are articulated in the form of a sworn statement and if the falsity of the contents of the statement is subsequently established, the consequences would obviously follow.
We hope the above observations give an objective, non-personalized analysis of the situation to the readers. We regret that the tenor of the blog writer seems to suggest that all equities must favour an entity that is deliberately and brazenly engaging in pirated software usage, with complete disregard to the legal rights of software companies, which are critical for the survival and sustainability of these companies. It is also important to point out here that respect for these legal rights will not only protect existing software companies but also provide a secure space for nascent IP owners in India at the threshold of marketing their new product and benefiting from their innovations.