By Ross Semplice, Regional Sales Manager, SmartFlow Compliance Solutions
Frequently heard terms such as “software piracy,” “cracked software,” and “counterfeit licenses” all sound very harsh and very illegal, which in fact, they are. Another form of software abuse that is talked about less often is something called “creative licensing,” which is just as illegal as counterfeit licenses. This blog discusses creative licensing strategies and how people and companies circumvent the licensing rules set out by software companies to get free copies of software without paying for it.
Creative licensing can be anything that technically grants access to licensed software outside of the terms of the signed contract or the limitations that are agreed to in the end-user license agreement (EULA). Most software companies, especially high value software such as electronic design automation (EDA), computer-aided design (CAD), enterprise resource planning (ERP), and engineering, do not legally permit creative licensing of their products. However the problem has been an ongoing challenge since the first computers were introduced and users had to start paying for licenses to access the software, as it is basic human nature to try to get more for less.
Forms of Creative Licensing
One of the most popular forms of creative licensing is to take advantage of educational or student licenses. Most software companies provide deeply discounted or free software to universities such that students can develop the skills they will need when they enter the workforce. These educational licenses typically ship with an EULA that stipulates that the software is not for commercial use. If an extraordinarily resourceful individual figures out a way to creatively install or otherwise access that educational license and uses it to perform their job, they are in violation of the agreement and placing their company at risk for a copyright infringement case or other legal action.
Rehost and upgrade methods are another interesting tactic employed to “creatively license” software. The rehosting method involves buying a new workstation, and when asked for an authorization code for the software, the user calls the software vendor and says the machine crashed and the code is needed for the new machine. Meanwhile the old workstation remains in use with the pre-existing software running on the older machine. In the upgrade method, the user buys an upgrade or receives one with a subscription renewal, from, for instance, from the 2016 release to the brand new 2019 version. However, instead of uninstalling the previous version, the user installs the upgrade on a new workstation and moves the old one to someone else. Both methods allow users to have two machines running a single license of the software simultaneously, and bypassing and disregarding the terms of the EULA.
Many people have figured out how to bypass licensing requirements through cloning their PC hardware, or sharing license login credentials, and, in some cases, duplicating or emulating hardware locks. Others who are not technical enough to clone their computer, or don’t have someone to share login credentials with, may visit online stores and cracking sites, where illegal pirated copies of software are for sale for pennies on the dollar. Not all of these sites are on the proverbial Dark Web; many are easy to find with a little research and, in some cases, the ability understand simplified Chinese or Russian.
This is why it is especially important for vendors to have a phone-home technology in all software, including educational licenses, that runs regularly, as opposed to incrementally or only when an action meets certain criteria. It’s just too easy to bypass the rules, and these tactics mean legitimate customers pay more to subsidize the users that cheat the system.
The Effect of Creative Licensing and Pirated Software
With that background in mind, let’s take a quick look at what creative licensing and pirated software does to software developers, as well as to the people and companies who go out of their way to ensure they are doing the right thing by paying for their software. With billions of dollars lost each year in stolen revenue, software developers who are the victims of piracy and under compliance struggle to invest in new developments and advanced features that could enhance their products and increase user productivity. For ethical companies who pay for their software, it is hard to remain competitive with companies who do not pay and can therefore undercut prices.
While millions of companies follow the trade laws against piracy, occasionally there is a rogue employee who doesn’t want to go through the hassle of filling out a purchase request form, cutting through red tape, and begging for that one tool that may assist them in their daily job, who will download a pirated copy. They’re the exception and not the norm. However, by illegally purchasing cracked copies of software online, these people put the entire organization at risk of being infiltrated with viruses and malware. The BSA Global Software Survey report shows that a malware attack can cost a company as much as $2.4 million and 50 days in downtime. In addition, a rogue employee caught using software illegally puts the company in an embarrassing position that could jeopardize its reputation and brand.
There are also many companies that go by the motto “buy the bare minimum so it looks like we’re legal.” They may purchase two licenses and then have 10 people working on the same software at the same time. Sometimes, someone becomes disgruntled and turns them in, or the company is purchased and the entire network is audited. Only then do these companies realize how much illegal software they actually have. The audits result in fines and the burden of paying the full cost of all the illegal licenses. They are invasive and costly, often giving the offending company a bad reputation and certainly causing friction between the vendor and the company.
How to Protect Against Piracy and Under Compliance
So how do companies avoid these problems and stop the creative licensing cycle? There are many different ways: shut down every hacking site in the world (highly unrealistic), implement usage tracking technology in the software, or move to cloud-based licensing and implement auditing practices.
Companies should perform audits on their network at least once a quarter to make sure their teams are doing the right thing by legally purchasing their software and using it in compliance with the license agreements. They should provide appropriate training for employees and teams and live by the company’s corporate values and mission statements. With these best practices in place, everyone wins and it is no longer a race to see who will win first; the software companies, the hackers, or the businesses using creative licensing.
Companies like SmartFlow Compliance Solutions provide the tools needed to detect piracy and under compliance, most notably sophisticated usage tracking technology that reports the details of all usage of the software, including pirated copies as well as copies used without proper licensing. Learn more about SmartFlow solutions at smartflowcompliance.com/products.