Hard rules for software copyright.

Hard Rules for Software Copyright

Don't pirate that program.

Computer technology has revolutionized nonprofit America and created a problem for software producers: illegal copying. The more available and adaptable software becomes, the more commonly it is copied. Let's examine some of the legal aspects of software copying and what to watch for when you have software developed for the association.

Is software protected under the Copyright Act of 1976 and the amendments of 1990? Yes. An association that develops and owns a software package should protect it by placing a notice--such as "copyright 1991 by ASAE, all rights reserved"--somewhere on the package or in the program itself, and by registering the program with the Copyright Office.

Are associations allowed to copy someone else's program? Generally, no. Associations purchase or lease software from those that own it, but the copyright almost always remains with the person or entity that created the software.

Example 1: The ABC Association enters into a contract to have software produced by Computer Associates, Inc. The contract says nothing about copyright ownership, and the program does not fit within any work-for-hire copyright definitions in the 1976 act. Who owns the copyright to the finished software? Computer Associates, Inc., does. If the association wishes to make copies, it must look to the terms of the agreement to see whether this is allowed. If it is not, the association must ask permission to make copies.

Isn't limited copying of computer programs allowed? Yes. Section 117 of the 1976 Copyright Act provides that copying does not infringe copyright when: (1) the computer itself cannot be used unless the program is loaded into the machine and a copy made or (2) the copy is made for archival purposes in case the computer breaks down and destroys the original program. Archival copies must be destroyed if the user is no longer the rightful possessor.

Section 117 says clearly, "Any exact copies prepared in accordance with the provisions of this section may be leased, sold, or otherwise transferred along with the copy from which such copies were prepared, only as part of the lease, sale, or other transfer of all rights in the program. Adaptations so prepared may be transferred only with the authorization of the copyright owner."

Example 2: ABC Association purchases the Superior Accounting System computer program to manage its internal accounting operation. It gives the program to the head of its accounting division, and this person makes one copy of the program for archival purposes. The program is then used to operate the association's accounting system. This copying and use is in full compliance with Section 117.

Example 3: XYZ Association has 20 offices. It purchases the Superior Accounting System to use in the internal operations of all its offices. The head of the accounting division loads the program into a central processing unit so that it can be read in any local area network in all 20 offices. Every office makes a copy. This is not a legitimate use of the program because copies are not for archival purposes.

Example 4: Paula purchases a computer magazine that has published the program for Superior Accounting. She authorizes Dan to transcribe the program to a disk. Is this an acceptable example of Section 117 use? No: It is not essential to use the program; nor is it for archival purposes.

Example 5: National Widget Association purchases the Superior Accounting System but finds it must make changes to adapt the program to its computer system. It makes the changes, then makes a copy of the adaptation for archival purposes. May it sell this adapted copy of the program to the XYZ Association? It may, but only with the authorization of the copyright owner.

Restrictions on software transfer to third parties (including members) also exist in the newly enacted Copyright Amendments Act of 1990. This act incorporates the Corporate Software Amendments Act of 1990, and these provisions become effective Dec. 1, 1991.

Under the provisions, it is copyright infringement for the owner of a particular piece of software to rent, lease, or lend the software for direct or indirect commercial advantage without the permission of the copyright owner. Many associations develop software with the assistance of an outside firm, and often the development contract specifies that the consultant will own all rights to the software.

Now it is also important that such contracts spell out the association's usage rights vis-a-vis its members.

Lending a program to a member without any commercial gain will not trigger liability, but systematic lending or renting for a fee certainly will. If the association does not own the copyright, transferring possession of the program for commercial gain is illegal.

Example 6: The National Debt Association has a computer system to handle member listings and sales figures. It buys off-the-shelf accounting software at Business Plus Computer Store. The copyright is owned by Business Plus. The association is so impressed with its new software that it agrees to lend the program to the American Surplus Association for $2,000. Can it do so? No. The National Debt Association has purchased a copy of the software; the right to lend for a fee--that is, to rent--belongs to Business Plus.

The exception to the systematic lending rule is for nonprofit libraries, which may lend software for nonprofit purposes without permission from the copyright owner. (See "Management Update," July 1991, for details.)

George D. Webster is general counsel to ASAE and a partner in Webster, Chamberlain & Bean, a Washington, D.C., law firm.