Employee makes illegal copies, employer is responsible
Who is liable for illegal software usage in your company?
Being the manager of a company may sometimes feel like being the parent of too many children. Even if you explicitly tell them what they should or shouldn’t do, they don’t always follow the rules. Who is responsible when their actions lead to legal problems?
Recently there have been two court cases by Siemens in the Netherlands that provided an interesting insight into how this should be answered. In short:
In a country where you as a parent are responsible for your kids, even if you didn’t know what your children have done, as an employer you are equally responsible for what your employees do and that includes the illegal use of software.
Two recent Dutch court cases in the last few months confirmed this.
The first case is between Siemens and Maverick Valves Manufacturing (see ruling in Dutch):
Maverick Valves Manufacturing, a company that makes valves for refineries and shipping companies, experienced a situation with employees using illegal software. For their duties, they use Siemens software that should be up to date for the company to be compliant. One day, the fact that an illegal copy of a software program was used on a Maverick laptop, raised a red flag with Siemens. This was followed by a lawsuit where Siemens demanded Maverick to pay € 76,430 for copyright infringement. Maverick recognized that their employee made a mistake, but denied liability arguing that the company couldn’t know and couldn’t prevent employees from downloading illegal software from the Internet. Furthermore, the employee could have been downloading the copy for personal purposes, not necessarily for work. The court in Rotterdam rejected the defense because they considered the employer has a strict liability for the actions of every employee and ordered Maverick to pay € 33,000 – some compensation, some seizure and costs.
Now this might seem logical as the employee was using the company’s hardware. What should the outcome be if employees download illegal software for work on their personal smartphones and laptops (considering the “bring your own device” trend) and work with it in their spare time?
A second case, between Siemens and Altrex covered this (see ruling in Dutch):
The Overijssel court ruled that it does not matter whether the illegal download is done at home, on a private laptop or outside working hours, if it is used for business purposes. One of Altrex’s engineers downloaded a cracked newer version of a program on his private laptop, which led to a report by Siemens and a claim for damages of up to € 168,000. The employee had used the illegal software about 48 times, of which 12 times through the network of his employer and the rest from home or elsewhere. Altrex defended themselves by saying that staff was prohibited to download illegal software and the engineer was acting on his own.
This wasn’t enough for the court as they stated it made no difference that Altrex explicitly forbade its employees to illegally download software or applications. In the end, they had to pay almost € 30,000 for damages.
Although at first sight the damages these companies had to pay might not be mind-blowing compared to the findings we often see, they are very interested for jurisprudence.
These days, when most companies are using computers and Internet to do their job, it is easier to make mistakes that can cost a lot of money. Any employee that has a personal smartphone or laptop may be tempted to download and use the latest version of various software programs or applications that are easily accessible on the Internet, even if he doesn’t have a license.
Usually, software piracy is defined as the use of business products (programs and applications) for which no license fees have been paid. However, it can also be extended to illegal downloads of music, video files, pictures, digital artwork or computer games, to name only a few. Furthermore, a skilled software developer can create software programs using unlicensed copies of downloaded programs. This means that by simply providing employees with a computer, operating system and an Internet connection, an employer empowers an employee with the tools to break the law.
So, what can employers do to decrease the risk of liability?
It starts by making your employees aware this is not allowed, but clearly you must do more. Policies are needed to explain that employees’ computer use will be monitored, even when it is not your company’s property. Procedures are needed to ensure employees acknowledge this right in writing. Even better is to do this on an annual basis. But most of all, start monitoring activity.
With the right measures and control you can prevent copyright infringement and limit exposure to copyright infringement liability.
Mark co-founded B-lay in 2008 and is the company’s managing director since then. Additionally, to his managerial role, Mark is using the extensive software compliance knowledge he gathered since 1997 to help organizations worldwide get insight into the risks associated with using and managing their software licenses, as well as preventing compliance issues and save costs. This is also strongly visible in the Zyncc product line of B-lay. Prior to founding B-lay, he was responsible for all compliance activities in Europe, Middle East and Africa at Oracle. This included building the foundation for what now is the global Oracle License Management Services (LMS) team and onboarding the many acquisitions Oracle made over the years into the compliance program of Oracle.
Mark holds a bachelor’s degree in Company Economics and IT from Hogeschool Enschede in the Netherlands.