Smart Answers

Rules Regarding Copyrighted Software


I'm an unemployed college admissions counselor interested in starting my own online college application support service. Are there any legal ramifications in my using a copyrighted software system that's commonly used by the state college admissions department? —L.C., Los Angeles Unless you're talking about open-source software that permits free copying, you'd likely be infringing the software copyright if you use it without a license. "The general rule is that you may not use any copyrighted software unless you have a license to use the software. Not only is it illegal to use pirated software, it's also not an ethical practice," says Jay A. Zweig, an attorney with Bryan Cave in Phoenix. "There are many examples of software that do not charge a licensing fee, but most specialty software developers are in the business of selling licenses to recoup their expenses," he says. If you kept a copy of the software from your prior job, you may also be breaching the terms of your employment agreement by maintaining a copy of company-licensed software for personal use. "If your former employer licensed the copy for use in connection with its business, then the continued use [for your business] may not be covered by the license and would be infringement," says David Donahue, an attorney with Fross Zelnick Lehrman & Zissu in New York. Of course, there's no telling whether the company that owns the software would come after you for infringement if you don't get a license. "If they are admissions consultants themselves, or they license the software to admissions consultants, they would be more likely to pursue copyright claims, or unfair competition claims" under state law, says Stephanie Rahlfs, an attorney and editor for FindLaw.com. Potential PenaltiesIf you were found to be infringing on the company's copyright, potential penalties might include an injunction against your further use of the software, a requirement that you pay the copyright owner's actual damages, and a requirement that you give up all company profits attributable to the infringement. "If copyright in the software were registered with the U.S. Copyright Office before the infringement commenced, then you could be required to pay statutory damages of up to $150,000, as an alternative to actual damages and profits, as well as the copyright owner's attorneys' fees," Donahue says. Given the seriousness of the penalties, the smart bet for you is to contact the software company or an authorized vendor now and ask how you can obtain a license. Be sure you understand the terms of the "end user license agreement" that governs use of the software, Donahue says. "Software companies often charge one rate for personal use and another, higher rate for commercial use. Make sure that the proper license is obtained." There are two other points Zweig suggests you investigate as you start out in business. First, check with an attorney about forming a business entity, such as a limited liability company, to keep your personal assets separate from business assets. That way, your personal assets will not be put at risk if a student whose application did not get submitted in time sues you—or you encounter other legal or financial problems. Second, talk to an independent insurance broker to see if you need a modest business insurance policy. Good luck!
Karen_klein
Klein is a Los Angeles-based writer who covers entrepreneurship and small-business issues.

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