SA firms fined R3.64m for unlicensed software

South African companies last year paid a total of R3.64 million in fines for using unlicensed software.

This is according to a report from BSA – The Software Alliance, a non-profit, global trade association created to advance the goals of the software industry and its hardware partners.

This figure includes fine settlements (R1.66 million) and the cost of acquiring new software to become compliant (R1.98 million), notes the report.

In 2016, BSA says it received around 230 tip-off reports in SA, alleging the use of unlicensed software products of BSA member companies. Most of these reports came via BSA’s No Piracy portal from current or former employees, detailing the amount of software installed without the appropriate licence coverage.

“Software piracy negatively impacts software publishers and creates unfair competition for legitimate companies. But, more than that, it exposes organisations to legal, financial and reputational damage through security breaches and data loss, not to mention the negative economic impacts through job losses and lost tax revenue,” says Darren Olivier, partner at Adams & Adams, legal counsel for BSA.

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According to BSA, in one case, an architecture firm was found using unlicensed software of BSA members and is set to pay over R100 000 in damages. In another case, a telecommunications firm operating out of Midrand paid nearly R80 000 in damages for copyright infringement. Ultimately, both companies paid more to use unlicensed software than they would have paid if they had initially used legitimate licences.

“Often, IT departments are not even aware that staff have installed unlicensed software on their networks. This makes the business more vulnerable to cyber attack because unlicensed software is not patched with the latest security updates, which increases the likelihood of malware entering the network. Should that malware expose sensitive company and client information, the reputational damage could be massive and it will take a long time before the business can rebuild that trust with customers, if at all,” adds Olivier.

Mervin Miemoukanda, senior research analyst for software at research firm IDC, says BSA’sresearch findings are much in line with the scale of the use of illegal software products in the country.

“The scale of the use of illegal software products in SA is not that bad as compared to most countries on the continent. Counterfeit software products in SA are mainly used by consumers and small businesses and start-ups for financial reasons, as some of them cannot afford licence fees and maintenance support services. With the increased cyber attacks these past years, organisations using unlicensed software could also be victims of malware-induced cyber attacks,” explains Miemoukanda.

In terms of the regulatory compliance bodies, Miemoukanda adds, the Intellectual Property Bureau and the SAPS are the ones to enforce intellectual property laws in the country.

“The fines are determined by a court of law,” he points out.

Last year, the alliance reported 33% of installed software was not properly licensed in SA, representing a value of $274 million. Although a slight decrease from previous surveys, there is still “a need for increased awareness on the risks of installing and using pirated software”, says BSA.

“However, SA’s 33% figure still means the country is performing well compared to the rest of the Middle East and Africa region. The rate of unlicensed software use in the region is 57%,” the survey revealed.

To encourage compliance, the BSA Web site offers a reward of up to R100 000 to those who report piracy if the information provided results in a settlement.

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