Siemens Product Lifecycle Management Software Piracy Lawsuit

Software Developers now tracking the USE of pirated software

There is a new problem that I am encountering where software developers are writing code in order to catch downloaders – not in the download of the software, but in the illegal USE of that software.  These software developers – with knowledge of the accused IP address of the so-called “pirates” are hiring attorneys to send out DMCA settlement demand letters, often requesting a hefty settlement for the piracy or use of that software without authorization.

Unlike the bittorrent cases that we have seen over the past six years — where an internet user would be caught downloading movies, music, or “scenes” using bittorrent or Popcorntime software (where the connection to other bittorrent users in a “bittorrent swarm” would reveal the IP address of the downloaders) — software developers are increasingly building in to their new software the capability to “phone home” to the developer. When the software “phones home,” it reports certain information to the software developer, including the IP address of users who are actively using the pirated software at that moment.

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When a downloader accesses a “pirate” site (e.g., The Pirate Bay), and downloads a piece of software with a “crack,” that crack alters the software code, to allow it to be used in a “registered state” (e.g., cracked software will allow a user to enter a serial code to register the software whereas in an “uncracked” state, that serial code would be rejected.  Thus, the user sees a message such as “your serial code has been accepted.  Thank you for registering your software.) This “registered” state allows the downloader to actively use the software; however, it does not stop the software from phoning home.

Very often included in the cracked software package will be what is known as “a .NFO file,” (which is a text file, and “NFO” sounds like “info”) where the hacker, a.k.a. the “cracker,” will instruct the user to block the software from connecting to outside networks (often advising that the downloader use a software firewall, such as Comodo Firewall). Conventionally, the purpose of this instruction to the downloader is to avoid the common scenario where the software developer automatically updates the software to work around and invalidate any cracks which it discovers in the wild. As a result, the downloader would find that his once-registered software is no longer registered.

Some software developers who have become savvy to this trend will create a pop-up screen which alerts the downloader that his IP address has been flagged and gives him an opportunity to purchase the software at a discounted rate.  By using this method, the software developer attempts to turn a pirate into a paying customer in a manner that is both ethically and morally sound.  However, and pardon my jaded view of the matter, but people get greedy, and software developers get frustrated with the piracy of their software, and thus they often turn from good business judgment to using the law as a prickly weapon to sting those caught downloading their software.

And with this greed, here is the trend for which I wrote this article.  I am now seeing a trend that the software developers are contacting attorneys and asking those attorneys to use the Digital Millennium Copyright Act (“DMCA”) rules to force the ISPs to send settlement demand letters to the internet users who are suspected of illegally using that software without a license.  However, instead of trying to turn that downloader into a paying customer, the software developer decides instead to gouge the internet downloaders into paying a bloated fee for a software license. In this scenario, this internet user receives a letter demanding that the user purchase the pirated software for an amazingly high amount of money, for example, $5,000-$20,000. If that internet user does not purchase the software as the letter demands, the threat of a copyright infringement lawsuit looms.

Now the first company you might think of when reading this article is the Siemens Product Lifecycle Management Software Inc. company, who is currently suing John Doe Defendants for the download and unlicensed use of the Siemens NX software.  However, in defense of their lawyers, the Siemens attorneys are simply trying to stop engineers and companies who are using their software in a commercial manner from profiting from the use of their software without a license.  They are not gouging (so far as I know), and my personal experience with their attorneys have been (so far) positive.

Thus, the focus of this article is on other software developers and copyright holders who have begun to mimic the Siemens model of suing (or here, sending DMCA settlement letters through the ISPs and threatening to sue) users, and attempting to force them to purchase an enterprise-level, multi-thousand-dollar software license or face a copyright infringement lawsuit in a Federal court, even if they have absolutely no legitimate use or benefit from “owning” that software.

To the internet user who receives such a letter requesting a settlement:  It is important to know that following the instructions of the software developer and purchasing a license (even an expensive one (e.g., a $5,000 license where the software itself costs only $150) does not protect you from being sued. Rather, your compliance may simply operate as an admission of guilt. Instead of simply following the instructions of the settlement demand letter, here is why it is advisable to STOP, THINK, RESEARCH THE TOPIC, and hire an attorney (me, or any other attorney competent in both copyright litigation and software licensing) to resolve the claim or claims against you.

First, the attorney that you hire will provide a legal “buffer” between you and the copyright holder’s attorney. Your attorney will be able to speak on your behalf without admitting guilt, whereas an accused defendant speaking alone to the copyright holder’s attorney might accidentally claim that they were only using the software to test the software (an act which according to the law would be copyright infringement, and would subject the internet user to statutory damages of $150,000 or more if there are multiple instances of infringement). Thus, an attorney can stop the copyright holder’s attorney from contacting you directly by putting them “on notice” (a legal term) that the attorney is representing you and, thus, all communications must go through the attorney.

Additionally, the attorney that you hire (knowledgeable in both copyright law and in software licensing) would be able to negotiate a settlement to allow you to purchase a license at a steep discount from the “gouging” amount that the copyright holder’s attorney was initially asking for in the settlement demand letter. Moreover, your attorney could obtain a release of liability, releasing you from all liability surrounding the unlicensed use and the unlicensed copying of the pirated software – something you would not be in a position to negotiate if you were handling the matter.

Similarly, [or in the alternative,] your attorney might negotiate a software license to allow you to pay for your “experimental” use of their software.

If you are a student, then it may be a good strategy to have your attorney negotiate in the settlement agreement to allow you to purchase that product at a student discount at your local college as your “settlement payment.”

 The above are all options that an experienced copyright/software development attorney (me, or anyone else) would be able and knowledgeable to negotiate on your behalf.  Your attorney would be able to oversee the payment of the licensing fee or the purchase of the actual software [for your own future legitimate use] and to obtain for you a written release of liability from the software copyright holder’s attorney, which means that following the conclusion of the settlement or the signing of the software license, you would never be sued for copyright infringement or any sort of piracy in a Federal court.

These are the benefits of hiring an attorney for your settlement demand letter issue rather than simply going out and paying whatever fine is requested of you.  Remember: Following the copyright holders instructions to pay them a fee or to purchase a piece of software after-the-fact (after the unlicensed activity or infringement occurred) will not provide you any protection.  Paying a settlement fee alone will not provide you with a settlement agreement or a release of liability.  Without a release of liability, you could still be sued in a federal court for copyright infringement, piracy, or any other relevant law relating to the unlicensed use, piracy, and possibly the cracking of software.

OTHER ARTICLES ON THE SIEMENS PLM SOFTWARE CASES:

How an attorney should handle a Siemens PLM Software, Inc. lawsuit, on 1/11/2017.

Siemens PLM NX-based lawsuits – converting accused engineers into loyal customers, on 1/9/2017.

Software Developers are now tracking piracy through the USE of downloaded software, on 9/9/2016.

Siemens Software Case IS a Bittorrent Case, on 6/20/2016.

What to do about the Siemens Product Lifecycle Management Software Inc. v. Does case (TX), on 1/16/2016.


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