By Daniel Hunter

Research released suggests a considerable number of UK small businesses are using unlicensed software and in so doing infringing the Copyright, Designs and Patents Act 1988.

According to a study commissioned by BSA | The Software Alliance, the leading global advocate for the software industry, nearly a third (30%) of UK small businesses have admitted to installing software onto more PCs than their licence agreement allows or using the wrong kind of license for their organisation, (for example an academic licence in a commercial environment).

Cost cutting is a major incentive for infringing copyright law. Another 30% of businesses would buy the wrong kind of licence to save money. This is a false economy as unlicensed software use often leads to enforcement action. As a representative of the software industry, BSA regularly takes legal action against companies for unlicensed software use, which results in the companies paying hefty financial damages.

"It’s shocking that almost a third of small businesses are infringing the Copyright Act when it comes to managing their software," Michala Wardell, UK committee chair, BSA said.

|"And simply bewildering that many of these businesses don't change their software management practices until they face a legal challenge. Given the costs involved, you'd think the job of sorting out software licences would be a priority from the word 'go'."

The research suggests that growing businesses are particularly likely to have too few licences for their software. Well over a third (39%) of businesses surveyed often allocate additional PCs and software to employees before paying for additional licences.

Businesses going through a merger and acquisition are also susceptible to falling foul of copyright law. This is an important warning given that M&A activity still appears to be buoyant among SMEs; 86% of organisations surveyed (with 25-250 employees) have either seen the same or more M&A activity in the past five years.

For nearly half of the SMEs (49%) that have merged with another firm, a software audit was not carried out on the organisation acquired. While 37% of respondents admitted to either inheriting or possibly inheriting unlicensed software as a result of failing to follow due diligence during an acquisition.

These admissions flagged up concern among the businesses surveyed: 78% now believe that businesses need to be more educated on the risks of becoming under-licensed following M&A activity.

"The cost of an M&A can go through the roof if a business inadvertently inherits a load of unlicensed software which then needs to be legalised," Wardell said.

"We've seen a number of businesses go through an M&A and fall foul of software licensing regulations. It's time to raise awareness of the risks of software licensing issues during these critical moments in a company's history, and when the stakes are so high."

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