August 30, 1999 2:15 PM PDT

Software pirates doing brisk trade on auction sites

Click on the graphics and multimedia link in the software section of online auctioneer eBay and more than 1,500 software titles come up for sale, most at a fraction of the retail price.

But according to new research, this buyers' paradise has a dark side: a large share of the titles are pirated copies. The new survey, conducted by the Software & Information Industry Association (SIIA), is likely to intensify the debate over whether auction sites should be required to actively hunt down pirates who operate on their sites. Furthermore, it raises the question of whether e-commerce companies are legally obligated to do so under new legislation.

According to the SIIA, a powerful lobbying group for the software industry, 60 percent of the more popular software titles sold on eBay and two other sites is pirated. The report tracked eBay, Excite Auctions, and ZDNet Auctions for sales of software made by four companies between August 15 and August 20.

Piracy has plagued the industry since software was first copied, very slowly, onto 5.25-inch single-sided disks. But two relatively new developments--CD recorders and Internet-based auction sites--have made piracy a booming industry.

In the SIIA report, software is considered pirated if it is stored on a recordable CD or if it is a copy distributed for academic purposes. The group said its methodology is designed to err on the side of undercounting illegitimate sales.

The study found that 60 percent of auctions offering software made by Macromedia, FileMaker, Visio, and Adobe involved pirated goods. Although the survey focused on those publishers, the SIIA believes the results are representative of software piracy as a whole.

For years, software makers and other content providers have argued that Internet sites should be held liable when their services are used to infringe copyrights. Online services respond that the burden of monitoring every user or item for sale would bring e-commerce transactions to a halt.

The SIIA has focused its attention on eBay because the trade group believes the vast majority of pirated software is sold on its site. Like eBay, Excite Auctions and ZDNet Auctions said they do not permit their customers to sell illegal goods. ZDNet added that it also has been in discussions with software makers to help eliminate pirate auctions.

The SIIA credits the San Jose, California-based auctioneer for working diligently with software companies to stop sales of pilfered titles. For example, eBay has agreed to post notices when users submit a final bid that warns of the penalties and risks of selling and buying pirated goods. eBay has also scored points for promptly shutting down auctions of illegal material when they are brought to the attention of eBay management.

But the software group, which represents about 1,100 software and information companies, said eBay and others must take more proactive measures to curb piracy.

"They have done certain things that are good to see, but we would hope more could be done so that auctions that are blatantly selling pirated software would stop," said Keith Kupferschmid, counsel for intellectual property at the SIIA. He added that he has not ruled out suing eBay if the two sides cannot reach an agreement.

Keeping an eye on sales
eBay representatives say monitoring all auctions would be impossible because approximately 2.5 million items are for sale at any given time. Even if it could monitor the auctions, eBay maintains that the Digital Millennium Copyright Act of 1998 protects it from any responsibility for pirated sales on its site. The DMCA addresses the responsibility ISPs and others have when their systems are used to send software, movies, and other copyrighted content. Recognizing that an ISP cannot be expected to monitor the staggering amount of data that passes through its networks each day, the DMCA exempts ISPs from actively policing their traffic.

eBay claims it is an ISP under the DMCA, which has taken the SIIA and some academics by surprise since they assumed the statute was never designed to insulate e-commerce companies.

"It's our position that we are covered" by the DMCA, says Jay Monahan, eBay's senior intellectual property counsel. "We're going to proceed following the wisdom of that statute."

But the SIIA's Kupferschmid argued the law in no way is meant to apply to eBay.

Trotter Hardy, a professor specializing in copyright and Internet law at the College of William and Mary, agreed. "Congress was not thinking of a company that uses the Internet to run a business but was thinking of a company that provides Internet service, like MindSpring or America Online," he said.

Other Internet legal experts disagree.

"The DMCA definition is clearly broad enough to cover anyone [online] as long as they're not in the business of altering the communication," said Ed Cavazos, a copyright attorney and senior vice president of legal and business affairs at Interliant, a company that hosts Web pages.

Meanwhile, eBay is developing a search feature that will better allow software makers and other intellectual property holders to track illegal sales of their goods, Monahan said. He could not provide an estimate when the service would be ready.

In the meantime, deciding what Congress meant when it drafted the DMCA will remain an open question.

"Anytime Congress enacts a new statute and tries to be comprehensive, it's going to take a few years for people to figure out what it means in the real world," said William and Mary's Hardy.

 

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