A recent article published in Computerworld discusses a court order requiring some website hosting companies to pay heavy penalties for allowing counterfeit products to be sold via sites they hosted. The article delivers a message that technology service providers - and the customers who utilize them - should listen to very carefully.
The article mentions two website hosting companies in California that were found to be hosting sites that were selling counterfeit Louis Vuitton products. The court found that the hosting companies had essentially enabled the selling of the counterfeit goods. "In awarding the damages, the jury agreed with Paris-based Louis Vuitton Malletier S.A.'s claims that the defendants knowingly allowed several Web sites they hosted to sell products that infringed Louis Vuitton's copyrights and trademarks." The website hosting companies were not found to be directly tied to the selling of the counterfeit products; it was simply determined that they were aware of their hosting customers' activities.
The result: assessed damages totaling more than $32M.
For hosting companies, this is certainly something to watch out for. For potential hosting customers, it is important to realize how your activities might impact your service provider.As an example, let's say you are working with an ASP (application service provider) who is hosting certain business applications for your company. In order for this hosting company to deliver your solution, they must have the software installed on their systems and provide access for you. Typically, an ASP will know what applications they are legally able to provide hosting for, and (most importantly) they may require that you supply proof-of-ownership for the applications to be hosted on your behalf.
There are, however, many providers in the market that will simply deliver anything - applications you may wish to have access to, but do not have valid use licensing for. There are also providers notorious for "leveraging" licensing, meaning that there may be one or more valid licenses in the system, but they are offered for use to more customers than there are actual licenses to support. In other situations, you may only have one valid license for a business application, but use that license as a basis for the provider to deliver the solution to additional users. In all of these scenarios, the service provider is at risk for not protecting the intellectual property of the software companies whose applications are being hosted.
From the Business Software Alliance website:: "Software piracy is the unauthorized copying or distribution of copyrighted software. This can be done by copying, downloading, sharing, selling, or installing multiple copies onto personal or work computers. What a lot of people don't realize or don't think about is that when you purchase software, you are actually purchasing a license to use it, not the actual software. That license is what tells you how many times you can install the software, so it's important to read it. If you make more copies of the software than the license permits, you are pirating."
License management is an important part of any managed application and hosting service and exists to protect customers, partners, and the provider. When it all flows downhill, you don't want to be the fellow left holding the bucket.