Using Licensing Strategies to Deal with Piracy

Selling illegal software is a worldwide, multi-billion dollar business. For software companies, that means coming up with ways to stop piracys negative effects is an important element of survival.

With that in mind, Uniloc USA, which specializes in electronic device recognition products for software copy control, is offering up several software licensing strategies to help companies tackle piracy by embracing it and nullifying pirates distribution methods.

Tip one: Turn software pirates into resellers. Rather than have warez boards host cracked versions of software, let them host affiliate versions so every download means revenue to the warez site instead of a stolen license.

"In order for this scenario to work you must…enforce the license and provide incentive," said Casey Potenzone, chief information officer at Irvine, Calif.-based Uniloc. "What Uniloc encourages publishers to do is to create an affiliate network where end users can be rewarded for providing access to a licensed version of the product. An affiliate version is tagged with the affiliates ID and the account is credited for every activation. The affiliate only gets rewarded when a protected version is activated. Remove the protection from the software and you remove the affiliate reward system."

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Ray Wang, an analyst at Forrester Research, called the idea brilliant.

Click here to read more about cracking down on piracy.

"Spread the wealth and give a cut," he said. "I think the concern here is distribution. Access to the software vendors services should be direct over the Web. [Theres] no reason to create other gray market channels that ultimately impact branding."

The problem, he said, is in the prequalification.

"For example, you always see bums on the road with signs talking about vet will work for food," Wang said. "Imagine if you gave each of them signs to point you to the nearest Starbucks. Thatd work great so long as they did what you told them, but the odds are low on that and youd get 50 percent of them still begging for change, some showing up to work some days but not others. So its a great idea, but you need a [prequalification] process and a way for them to sign up as reseller partners in a contractual, SLA [service level agreement] way."

Still, Potenzone said it makes sense for companies to find ways to use warez sites and bit torrents to expedite viral marketing. For example, when releasing a new desktop product into an emerging market, the software publisher can set the product to allow for 25 activations per license for the first three months, he said. This license can then be distributed to user communities and groups that are encouraged to share the product.

"By allowing users free access to a product, you can establish a foothold and begin adoption and dependence," he said. "What Microsoft saw in the emerging markets of India, for example, was piracy leading to dependence. Once a community comes to rely on the functionality of a product, they will continue to adopt next versions and ultimately other products from the publisher."

Uniloc officials also recommended rewarding customers for sharing software with others, and companies should create an affiliate program that gives users an incentive to distribute a legitimate version of software.

Licensing models are a key piece of the puzzle. On Sept. 18, the Business Software Alliance announced that it had agreed to a record global settlement of more than $3.4 million with an undisclosed international media firm found to have significant shortfalls in software licenses, underscoring the problem software vendors face.

Companies can address issues such as this in part by adopting less rigid licensing models, Uniloc officials said. A flexible licensing model that eases licensing restrictions in regions where piracy is not an issue—and tighten them where piracy is rampant—can benefit the software vendor, they said.

Wang agreed rigid licensing requirements that discourage broad usage hurt both the user and the vendor long-term, and said anything a vendor can do to encourage usage increases the long-term renewal rates of maintenance and upgrade.

"One suggestion is an enterprise-wide licensing strategy that allows all users to utilize the system, but gates based on revenue or total number of employees for a fixed period of time, like three years," he said. "After that, they have to true-up. If the software is that good, a lot of users will request to keep using it and the vendor benefits."

The copy control solution implemented by Apple, of Cupertino, Calif., within iTunes is a good example of fair use and polite copy control, Potenzone said.

"The majority of the market using iTunes understands just how many computers they can install the software on and play the media from," he said. "Apple even goes as far as supporting a self-service model that allows users to decommission and install new devices. The clarity of the licensing rules and the users ability to self service provides for a very friendly and easy-to-understand licensing environment."

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