Q&A: BSA’s informant fee hike is a money-maker, says attorney

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March 08, 2006 (Computerworld) -- The Business Software Alliance last week increased its cash reward for qualified software piracy leads from $50,000 to up to $200,000. When the BSA announced the change, its director of enforcement, Jenny Blank, said in a statement that the increase reflected BSA’s plans to escalate its fight against software piracy.

But attorney Robert Scott views it differently. Scott, who is managing director of Scott & Scott LLP, a Dallas-based law firm, believes the BSA upped the ante to line its own pockets. Computerworld’s Thomas Hoffman spoke to Scott yesterday about the BSA’s latest move and its anticipated impact on IT managers and corporate software customers.

Robert Scott, managing director of Scott & Scott LLP

Why do you think the BSA upped the ante for software piracy information? I think the basic problem is that in order to generate revenue for its own operations, BSA is driving more enforcement money.... BSA keeps all of the money it generates from enforcement. None of the money goes back to the members.

Do you expect this to result in more whistle-blowing? Yes. Basic economics suggest that when you put these types of incentives in place, a rise in legitimate and illegitimate leads will increase. For the salaries that these IT folks make, $200,000 is a lot of money.

That’s why I think there’s a huge potential for abuse. My clients tell me that the very people they thought were handling compliance for them were the same people they’re sure turned them in.

So do you expect more software piracy settlements to be reached between corporate software customers and the BSA? Unquestionably. The net effect of this is a substantial increase in audits and a corresponding increase in settlements and a corresponding increase in revenues for BSA. They’re paying [informants] a percentage of what they recover. It’s a sliding scale based on what’s recovered in the investigation. It was up to $50,000 on a sliding scale, and it’s now up to $200,000 on a sliding scale. But they’re not going to be paying $200,000 unless they discover something substantially north of that.

What does this mean for corporate IT managers? I think corporate IT managers have to embrace the fact that software compliance is a part of their jobs and they have to deal with this proactively or wait until the inevitable and be caught off guard. How they’re measured by their performance dictates what camp they fall in. No one ever got fired for taking care of the issues they were supposed to take care of.

Many corporate IT managers admit that their organizations are never in full compliance but say that it’s not the result of any willful intent to steal software. What are you finding? The cost of maintaining compliance at a 100% level in real time is so astronomical it’s like the difference today between driving an automobile and personal jet travel. We might conceivably be able to travel by personal jets, but it’s not a reality.

Most organizations can get to 70% to 80% compliance, but to get past that is so expensive that you can’t do it. The "compliance tax" is part of the equation that the BSA is ignoring. These are legitimate businesses, blue-chip clients. Even for well-meaning companies, something has to change.

What can corporate software customers do to protect themselves as best they can? No. 1, making sure they have good-quality, expert legal advice at the time they sign their software agreements, because that’s when the relationship starts. No. 2, put in processes and technology to manage compliance as part of your business.

The third thing is to choose vendors who can reduce the compliance tax by handling record-keeping and other routine compliance tasks for you, like a vendor who will give you an online portal to track all of your licenses.

How do you expect this all to play out? I think the first thing that’s likely to happen is that the SIIA [Software & Information Industry Association] is likely to follow suit, as they and BSA are competitive. BSA never offered a reward in the U.S. until months after SIIA offered one. BSA has set the bar higher and now SIIA is going to follow suit, and we’ve started the progression for the battle for reward leads. It’s a trend that’s going to be an unfortunate reality in this chapter of these disputes.

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