Software piracy is a growing international issue. While infringements are most prevalent in China and Russia, license misuse and piracy hotspots span the globe, causing an estimated $46 billion in lost revenue.
Unlike almost anything else relating to software, piracy doesn't require skilled coders or hackers. Anyone with computing devices can become a software pirate – knowingly or unknowingly. As software vendors, developers or copyright holders, it's therefore never been more important to understand how piracy works.
What is software piracy?
Software piracy can be defined as the use of software that is not properly licensed. That might include copying, modifying, distributing or selling the software in ways that contravene copyright laws or license terms. Piracy essentially compromises software suppliers’ ability to monetize their software and be compensated for their research and development.
Types of piracy
Piracy tends to fall into five categories covering a breadth of pirating techniques. Some are deliberate where individuals knowingly set out to pirate software, and others cover scenarios with unknowing accomplices to piracy.
License overuse can be intentional or caused by a lack of asset management protocols.
- When too many people on the same network use a single, original copy of a piece of software simultaneously
- Or the software is used outside the location or company domain
- Or the license is based on named users, but multiple users access the software
Counterfeiting is a form of piracy that occurs when software is illegally copied and distributed under the guise of authenticity. Counterfeit software programs are usually sold at a cheaper price than the real thing, which may be attractive to certain buyers.
Hard disk loading
Hard disk loading is a form of commercial software piracy which starts with purchasing software legitimately. Copies of the software are then installed onto physical hard drives, and the computers are then sold as having licensed software. For instance, PC resellers often do this to save money on the cost of software across multiple computers, and buyers are often none the wiser that the software they now have is illegal.
Also known as internet piracy, online piracy happens when illegal software is shared, sold or acquired through the internet. That usually takes place on a peer-to-peer (P2P) file sharing platform which may be advertised on online auction sites and blogs.
Softlifting involves one person buying a single version of software and then downloading it onto multiple devices despite the license stipulating that it should only be downloaded once. Typically, businesses or educational organizations may do this to try to save money on software – which is why it is the most common form of piracy.
Read the industry report:
Monetization Monitor: Software Piracy and Compliance 2023
What are the effects of software piracy?
According to the most recent BSA Global Software Study (published in June 2018), 37% of software installed on personal computers is unlicensed. While these numbers are down slightly from the 2016 Global Software Survey, they underscore the fact that the use of unlicensed software is still widespread and carries a significant economic impact for both suppliers and their customers.
Additionally, the 2018 study also highlighted the risk of malware as a huge concern:
- One-in-three chance of encountering malware when organizations install unlicensed software
- Each malware attack can cost a company an average of $2.4 million can take up to 50 days to resolve
- Can cost more than $10,000 per infected computer, and costs companies worldwide nearly $359 billion a year
- Negative impact to company’s brand and reputation and potential loss of business data
Consequences for user protection and licensing
End User License Agreements (EULAs) are applied to most types of software, forming a contract between the developer and the end user about how the software is used. License agreements may vary between products, but most EULAs explicitly prohibit sharing the software with others. Piracy is illegal and is a federal crime in most jurisdictions. In the U.S., the maximum penalty for copyright violation is $150,000 for software piracy.
Other consequences for users of pirated software include:
- Heightened risk of software failure, bugs and errors
- No access to ongoing maintenance, updates, security patches, training or customer support
- No warranty
- Increased vulnerability to cybersecurity attacks, including malware, viruses and adware
- Slower computer performance
- Further legal ramifications from copyright infringement
How to prevent software piracy
Piracy abounds and is largely impossible to prevent, but software license compliance tools can help you identify and remediate issues as part of a multi-level mitigation strategy.
Licensing and entitlement management solutions can help to proactively reduce the risk of software piracy, enabling you to offer a variety of license models, manage enforcement, and monitor compliance via usage analytics.
However, you should consider compliance and entitlement management tools within the context of a layered approach to license compliance that can help you convert piracy into profit.
Fortunately, disabling compliance analytics technology isn’t a priority for crackers, because it doesn’t interfere with their goal of getting applications to run without licensing or activation. As a result, vendors can analyze this data to build data-driven software license compliance programs that turn infringement reports into revenue pipelines.
As counterintuitive as it may sound, piracy isn’t always a bad thing, as unpaid users are high-quality leads for your sales team to follow up with. The bottom line is, a data-driven approach to piracy that is both proactive in prevention and reactive to infringement can help you grow revenue indefinitely.
Read the step-by-step guide: How to Stop Software Piracy