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| Copyright Infringement Legal Audits and Record Keeping The creative ideas environment - whether it be advertising agencies, Internet Web site development or more traditional software businesses, educational institutions, or publishing and communications companies - provides fertile soil for the growth of copyright infringement. These entities are usually fairly decentralized in management structure and filled with bright, impatient, electronically enabled people at the operating level - the very type of person most likely to decide that obtaining proper licenses and permissions is not the easiest or quickest way to get the job done. Their prevailing attitude generally is, if you need software, copy what you have at home or from a friend, buy it (without a proper license) on eBay or find a shareware web site or other freely accessible source on the Internet. If you need a visual image, scan one you like and morph it into one you like even better. If someone else expressed it well, take their expression, do some paraphrasing and elaboration and it becomes your own. Or does it? In a recessionary economy, downsizing puts large numbers of disgruntled employees on the street. Consultant contracts are also being terminated without cause and arguably in breach of contract terms. Such personnel changes further fuel the fairly common claims and litigations over these matters. Even the less litigious become more likely to "get back" at the former employer by reporting infringement suspected or known to have taken place in their former workplace. Indeed, the very people responsible for the infringement and who are most aware of the damning facts become only too motivated to report them now that they can no longer be held responsible for the problem by their former employer. Their complaints remain anonymous (absent litigation) yet are given full credit by the recipients. Some complain directly to software developers, such as Microsoft or Adobe. Even more complain to the industry watchdog groups such as the associations of publishers (AAP, AAUP et al.), record companies (RIAA) or software companies (BSA). Indeed, BSA is currently running a public awareness campaign aimed at luring these very people. If you glance at summer 2001 subway ads here in New York City, you are told from the four corners of the car that the "Amnesty is Over" and how to report infringement by companies who have not remediated infringing acts by taking licenses, replete with BSA contact information for the commuting employee. All creative companies would benefit from regular legal audits, whose results usually include policy statements, employee handbook rules, centralized acquisition and license record retention programs and other safeguards that such auditors recommend or put into place. How can a decentralized creative company comply with a Microsoft or BSA inquiry based on information received from former employees and consultants? The complainant is likely to know more specifics than the company, if there have been no prior periodic legal audits. Because the complainant has such damaging information, the burden not so subtlety shifts to the company to prove that there are no infringing copies. Even for the well-intentioned and well-run company, this can be difficult to impossible. For example, BSA asks not just for copies of licenses but paid invoices or other proof of purchase from an authorized vendor. Most of these licenses are of the shrink-wrap or Web click variety, not signed bilateral contracts usually found in corporate contract files. As a result, licenses, if retained at all, get separated from products in use in a way that is difficult to re-link them to the proof of purchase. Unless all acquisitions are handled centrally, the licenses will be in one set of files with the company's IT department and the invoices/reimbursements will be in another set of financial records with the company's accounting department. Matching them may take an inordinate amount of time and effort or prove not to be possible at all. With centralized acquisition, all software is purchased by IT, which will then keep copies of licenses and the associated proof of purchase, even when the software media goes to creative, and the invoice to finance. Decentralized companies are often lax or remiss in having up-to-date policies and rules about unauthorized copying or, having them, fail to implement them properly by having new employees acknowledge that they have received, read and agreed to them. Periodic updates and reminders from the employer circulated to all employees are also highly desirable but often totally missing. The purpose is to prevent unauthorized copying or reduce damages for infringement, not to defend the company, since the employer will usually be responsible in any regard for the acts of employees from which the company benefits under the doctrines of vicarious or contributory infringement, if not direct infringement. It is the rare exception where the employer can successfully escape such liability by disavowing the acts of the true "rogue employee". Why a legal audit? The employer must take the initiative to clean up the workplace and eliminate infringing copies as well as implement better practices; otherwise the residual legalrisks remain. Only an independent third party audit by someone who is not an insider running, or run by and responsible to, the company and its systems will adequately address the problem. (How many employees want to tell their boss about infringements? How many bosses want to know, or if they do know, want to take steps to cease infringing and to discipline valued creatives?). Moreover, an audit leaves a clear record of the current state of affairs and provides practical remediation steps. Without the audit there is no record of destruction of infringing copies, and anyone who has been an auditor knows that there will undoubtedly be some record of the unauthorized copying, whether in print or electronic form. In the print era, everyone made more than one copy just to be "safe" so that losses could be replaced. In the electronic era, software and files are rarely irrevocably deleted. What better record is there that the well-intentioned company implemented its intentions than the neutral professional auditor who renders a report? This makes for good evidence with which to resist a copyright claim, whether no evidence of unauthorized copying is uncovered or if "every reasonable effort" to avoid infringement is taken. With damages for willful infringement running as high as $150,000 per work if the copyright is registered (or $30,000 if the infringement is not willful but the work is still registered), a good legal audit appears to be an extremely cost effective alternative. Of course, an audit is only really valuable if the company acts on the recommendations of the auditor, but such recommendations are often easier to implement if they come from a professional who is an "outsider" to the company. Even if not implemented, legal audit reports and recommendations are privileged information if delivered to senior management and not broadly distributed within the company beyond the managers who have a need to know. Therefore, any fears that the audit will expose what the company would rather leave unsaid are unfounded. © 2001 Davis & Gilbert LLP |
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