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By Rebecca Rohan  |  Posted 2005-01-10 Print this article Print

Most resellers are handling multiple software titles and may not know where every package from every developer came from. An underhanded wholesaler could make an honest reseller look tainted, and the consequences could be harsh.

According to the Business Software Alliance, the copyright owner can choose between actual damages, plus profits attributable to the loss and statutory damages, of up to $150,000 for each program copied. Additional criminal prosecution for copyright infringement can cost up to $250,000, jail for up to five years, or both.
But the MBC case is about counterfeiting, which is more serious than copyright infringement, Smith pointed out. Civil suits for counterfeiting can run into hundreds of thousands of dollars, and criminal counterfeiting cases mean jail time, Smith said.

"Unfortunately, counterfeiters have gotten better," Smith said. "Resellers have to figure out how to discern the difference. Sometimes its not easy to tell. The easy thing to say is, buy from an authorized distributor, but there is a lot of authorized merchandise that moves in unauthorized channels. As best you can, [you should] buy from authorized distributors."

Microsoft has actually provided "Red Flags" of counterfeit software, plus photos of counterfeit and genuine products. But, that doesnt mean its easy to tell the difference.

Chris Sloan, an associate at the law firm of Boult, Cummings, Conners & Berry PLC in Nashville, Tenn., said tainted software "is a very difficult issue for resellers because its an area of law where, even if they take all reasonable precautions, they can still find themselves liable. In most cases, it wont be cost effective to take all the steps they would need to take to be 100 percent certain they arent distributing pirated software.

"That said, there are some steps that a reseller can take to at least minimize the risk and minimize the potential liability. Generally, the number one priority is to take all steps necessary to eliminate any claims that the infringement was willful or intentional, since those types of claims carry much higher damages," Sloan said.

Sloan recommended taking the following steps:

1. Ask the provider of the software for non-infringement warranties backed up with an indemnification clause. "While it may or may not allow the reseller to recover damages if the software is pirated, it will at least provide a paper trail that shows some level of diligence by the reseller," Sloan said.

2. If theres reason to believe that software may be suspect, ask questions. "You cant play ostrich. If the provider doesnt pass the smell test (e.g., prices well below market, packaging looks suspect, the goods appear to be "gray market," etc.), or you have some other reason to suspect that the software might be pirated, dont ignore those warning signs. Follow up (and keep a written log) in order to alleviate those concerns."

3. Have a detailed, written, publicly posted policy on how infringement claims are handled, and adhere to it strictly.

My experience with resellers is mostly in the online world with content aggregators, who typically resell thousands of applications. In those cases, the risk is spread out pretty widely, and so the potential liability in any one instance usually very small," Sloan said.

"Its important to recognize that, in situations where a reseller is only going to be reselling one or a small number of applications, the risk is much higher, so a little bit more due diligence (Internet and periodical searches, making an inquiry to the source of the software if known to be a third party, etc.) would be in order in those cases."

Jim Denison, president of Seattle Micro, a reseller and system builder, said he doesnt have any sympathy for whiners.

"Resellers can cry all they want, but everybody knows where the real distributors are. Its pretty plain to me where to do it right. I think people make a conscious decision about where theyre buying their product. And we fight the battle with our customers—no one wants to pay for software. Theres this sense of entitlement—everyone thinks theyre being ripped off. That mentality allows people to justify doing things that are, in my mind, questionable."

Check out eWEEK.coms for the latest news, views and analysis for IT distributors and resellers.


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