Legal Penalties for Software Piracy

By C.D. Crowder

Software piracy includes all forms of software, including games.
i Kiyoshi Ota/Getty Images News/Getty Images

Software piracy is the unauthorized duplication, use or distribution of any copyrighted software. Illegal downloading, copying and expired licenses are all forms of software piracy. According to the Business Software Alliance and Software and Information Industry Association, approximately 40 percent of installed business software and 23 percent of software in the U.S. overall is illegally copied. Software piracy is a serious crime and can result in severe legal penalties for both individuals and businesses.

Types of Piracy

U.S. copyright laws categorize software piracy into three categories. Any infringements in these areas can result in legal action. Organized counterfeit sales involve illegally duplicating and selling copyrighted software without the permission of the copyright owner. Even purchasing the software may result in a fine.

Unlicensed use is the most common type of piracy with home users and businesses. This occurs when individuals or employees make copies of or share software without an adequate number of licenses. This also includes using restricted-use software for other purposes, such as using academic versions in a business instead.

The final type of piracy is hard disk loading. When software is loaded on a new or used computer by a third party without the copyright holder's permission, software piracy has occurred. This typically happens with shady computer retailers or repair technicians.

Damages to Copyright Holder

Anytime software piracy happens, the copyright holder loses profits for each occurrence. If found guilty, the accused is responsible for paying for any damages and lost profits. If the software has been shared with others, the accused may also be responsible for profits lost from each installed copy.

Federal Penalties

Software piracy is considered a federal crime, much like illegally downloading music and movies. Some cases may go beyond paying back the copyright holder and result in federal statutory damages. The amount varies per case, but can be as much as $150,000 per infringement.

Criminal Piracy

For people or businesses caught selling illegal software, the legal penalties are much worse. Fines can go as high as $250,000. The accused may also face up to five years in prison with a permanent felony on their record.