Computer industry toughens its surveillance of software pirates

Brad is a software pirate. ''When the sun goes down, I put on my eye patch,'' jokes the blond, blue-eyed Houstonian who is currently studying for his MBA at Stanford University.

Affable and articulate, Brad has owned an Apple II for just over a year. Neatly arranged on the shelf next to the computer in his den are three lucite boxes containing his software library. Of the 30 to 50 programs he has (he doesn't keep an exact count), less than a half-dozen were purchased.

As a casual copier of computer software, Brad represents one of the most perplexing problems facing the burgeoning microcomputer software industry.

In 1982, retail sales of software in the United States reached the $1 billion mark. Last year, they had more than doubled to $2.1 billion. But industry analysts like Future Computing estimate that for every legitimate program purchased there are between 2 and 10 illegitimate copies floating around the country. Estimates of this sort are, by their very nature, little more than educated guesses. Still, there is little doubt that personal copying of computer programs is rampant. Fully aware of the economic havoc that the cassette recorder has wreaked upon the record industry, and the motion picture industry's calculations on the impact of videotaping, software copying has become an increasingly emotional topic within computer circles.

''The major danger we face is pilferage - people making copies for friends and acquaintances. Many people don't even realize that it is wrong,'' asserts David Cole, president of Ashton-Tate, a Los Angeles software house. He is heading up a new group of companies called the Software Protection Fund, the sole purpose of which is to address this issue.

The potential economic impact of personal copying on the software industry is considerable.

Most computers come with an ability to copy floppy diskettes. This is necessary because computer users must keep several ''backup'' copies of the fragile diskettes that serve as a computer's permanent memory. Also, copying even an extremely large program takes only a matter of minutes, so it is extremely convenient. Finally, the cost of software programs is high, frequently hundreds of dollars, so there is a strong economic incentive.

To stave this off, the software industry is trying to stake out the high moral ground. What they are concerned with, they say, is the protection of ''intellectual property'' and the rights of those who have created it. Thus, casual copying is nothing more than a new form of theft. It is but the latest manifestation of a modern form of moral weakness, the so-called Xerox mentality, they argue.

Yet not all software publishers are as concerned about casual copying as Ashton-Tate. ''We're mainly worried about the commercial pirate. Many people are ignoring the fact that casual copying can actually help sell products by increasing word-of-mouth advertising,'' comments Ted Morgan, president of Human Engineered Software, a company that markets a wide range of programs for the home market.

Legally, the issue appears less straightforward than software pirate-chasers would like. In January, the United States Supreme Court muddied the waters when it determined that home videotaping of copyrighted materials for noncommercial uses was not illegal and that makers of videotape recorders were not liable for aiding and abetting copyright infringements.

''The BetaMax decision was simply lousy law,'' objects Gervaise Davis III, a lawyer from Monterey, Calif., who specializes in computer issues. Unless the 5 -to-4 decision is reversed, it will create problems for the software industry, he anticipates.

Already the Supreme Court ruling is strengthening the rationales of people like Brad. ''Why should software be any different from music or videotapes?'' he asks.

''Basically, I see three different levels. One is the case where somebody makes a copy of a piece of software, then turns around and sells it to someone else. That is definitely wrong. It is taking money out of somebody's pocket and putting it in your own. Then there is a second level, which is kind of gray. That is where you get a copy to avoid buying a piece of software. Finally, there is a third level. That is collecting copies of programs you would never buy. That is what I do, and it doesn't harm anyone. Ninety percent of the programs I have gotten are junk anyway,'' he argues.

One way in which software publishers are trying to be different, at least legally, is by licensing the right to use their product, rather than selling it. Generally, these packages are sold shrink wrapped with a prominent warning that if you break the seal you are agreeing to a licensing contract. This is a long, legalistic list of do's and don'ts: You can make backup copies; you can't give copies to friends; you can't incorporate parts of the program into another program; you can't sell the program to someone else. . . .

There are those who question the legality of the shrink-wrapped license. One such is George Pollack of United Computer. His company created quite a stir in Silicon Valley last summer by opening up some software rental stores. The ostensible purpose was to allow would-be purchasers to test drive software before buying. But several software houses considered it a blatant attempt to turn a profit by catering to unauthorized copiers. Reflecting the new militance in the industry, two of these filed suit against the company. Attempts are under way to settle the matter out of court.

Unlike the record and motion-picture industry, software companies have an option besides litigation: copy protection. This is the use of a variety of methods that limit the number of copies a software user can make. A specialized industry is springing up simply to provide this capability.

While there are a wide range of copy-protection techniques in use, the most prevalent methods hide essential pieces of code on portions of the floppy disk that computers do not normally copy. Some companies supply a second, duplicate diskette to meet users' legitimate need for backup. Others use more ingenious methods. One version of Microsoft's Multiplan, for instance, comes with a routine for making a backup copy. But, once one copy is made, the program deletes this option from the menus of both original and backup copies.

One company that has been particularly innovative in its copy-protection measures is Software Publishing. ''Ninety-five percent of the people aren't sophisticated enough to break even modest software-protection schemes,'' argues Software Publishing's Rick Magnuson. ''There are solutions. We should stop debating the matter and start using them,'' he concludes.

But there are some problems with current protection plans. All represent potential inconvenience to legitimate users. Should both copies of protected software ''crash,'' the user must request a new copy and typically pay an added popular hard disks and other new storage media.

The introduction of copy protection has spawned a number of programs designed specifically to defeat them. When Brad bought his computer, the dealer slipped him a diskette with copies of several such programs. ''I don't really know how they work, but they're pretty simple to use,'' Brad reports.

This illustrates another aspect of the situation: Computer salesmen are some of the worst offenders. Many supply computer purchasers with illicit copies of software to clinch a sale. Or they supply their customers with copies of software they have on order because the publisher takes weeks to fill its orders.

In this way ''all of us have contributed to the problem,'' acknowledges E. Ric Giardina, general counsel of MicroPro. Furthermore, the industry has yet to get its own house in order. Although some software houses have instituted policies that censure employees found with unauthorized copies of software, others, like MicroPro, have yet to do so.

Another way the industry has contributed to the problem has been by the number of exaggerated claims made for software and lack of adequate support for the end-user. The first program Brad bought, for instance, wouldn't work on his model Apple. With the dropping costs of computers, dealers can't afford to spend much time supporting their customers. Many a first-time user has purchased software and not been able to get it to work properly. When they can't get help from their dealer, they turn to other owners with the same computer. This is a prime reason for the formation of computer user groups, where considerable software swapping takes place.

This issue also divides computer manufacturers and software publishers. ''Apple has probably made money because of all the piracy: It has helped sell a lot of computers,'' acknowledges cofounder Steve Wozniak.

Computermakers could easily and quite cheaply add software readable identification numbers to their machines, he says. This would allow software companies to write programs which, when first run, store the number of that particular computer and refuse to run on any other. An individual could make as many copies as necessary for use on one machine but it would prevent the casual exchange of programs.

''We will have a problem until it is in the best interests of the computer manufacturers that software be protected. Only then will we see effective software protection,'' concludes Cynthia Ringo of Management Science America, the nation's largest software distributor.