The Consequences and Penalties Of Software Piracy

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As technology keeps developing, more and more emphasis is placed on intellectual property as a source of significant revenue. In short, IP is a non-tangible good that lawfully belongs to a company or person. Computer programs also fall into this category and are protected by the applicable legislation. This is why software piracy penalties can be severe and costly.

Software Piracy Definition

When you’re buying a piece of software, it’s important to realize you’re not buying the software itself. What you’re getting is a license, a digital key of sorts that grants you access to that software. It can be an antivirus, a video game, a photo-editing program etc. No matter what it is, you’re buying the right to use it.

Since you’re not legally its new owner, you don’t have the right of copying or distributing it in any way. By simply copying the files on a USB stick and giving it to a friend or a family member, you’d effectively become a software pirate. License keys are made strictly for one device, for one user. You are however allowed (under standard EULAs) to make copies of a software program strictly for use as a backup, in case your device becomes corrupted or unusable. Most modern software is tied to an online account though, so re-downloading and installing it is very easy and straightforward.

If you find all of this kind of confusing, don’t worry! We have a whole article on what software piracy is. Give it a thorough read and come back to this one after you have a better understanding of the topic. If you’d rather press on right now though, keep a few things in mind:

  • Software piracy is the use of computer programs (applicable to mobile apps and console games too) in a way that’s not intended by its creator, or forbidden by the agreement between you (the user) and the company that made the software.
  • Willful infringement of an EULA is very costly, because you’re basically stealing an IP by copying or distributing it via cracking, torrenting, etc
  • Software piracy is punishable under applicable law (in the U.S.A.) in 3 main ways (covered below)

Why Is Software Piracy a Crime?

Computer programs are part of huge industries. They help generate (or are directly generating) billions of dollars. Thanks to their importance for revenue and profit purposes, it makes sense that they aren’t public property. Without them having a legal owner, they couldn’t serve any type of financial gain.

If there’s no benefit from creating or innovating computer programs, then innovation will stop altogether. After all, there can’t be any type of personal drive behind a course of action which you know for sure won’t provide any financial sustainability or other type of gain.

When you’re pirating software, you’re actively stealing a person’s or a group of people’s work. Sure, not in the common sense. They still have access to it and can sell it to others under their well defined terms and conditions. It’s not like you’re taking away a mason’s tools and that’s it, they can’t do their job anymore. At the same time, the comparison can be way more accurate than you’d think.

If software is available for free to a wide audience, the reason for spending hard earned money on it lessens dramatically. If piracy becomes even more widespread, and potentially a socially acceptable practice, companies would be placed at the end user’s “mercy”. There’d be absolutely no guarantee of sales and constant revenue, as free versions would be available all over the place.

Virus considerations

Some “pirates” will share software online “as is”, without any other modifications to its source code (other than those needed for it to work without a lawfully purchased license). Others though will include malware, bloatware, keyloggers, phishing attempts and other sorts of headaches hidden within the files.

Such attempts are detectable by your antivirus or other means, but it’s never a 100% guarantee. Depending on the hacker’s skill level and knowledge, viruses can be carefully hidden into your computer game executables or other parts of the pirated software. These are more severe crimes, with heftier fines and potential prison time, but part of software piracy nonetheless.

Which Software Piracy Methods Are Punishable?

All of them, no exception. This also includes unwilling or unknowing piracy. How is that possible, you ask? It’s very easy actually. If someone installs software on your company computers, but it’s not licensed, you’re committing piracy even if you didn’t know it at the time. If you have one Microsoft Office license key (for one computer), but you’re using it for all of your computers, you’re committing piracy.

Then, there’s willful infringement of course. This refers to someone consciously engaging in the copying, distribution, or other unauthorized use of a copyright protected software. There are 7 main methods of willful software piracy. You can read all about them in our guide about understanding software piracy, but here’s a general rundown:

  • Softlifting: using a piece of software/one license on multiple machines
  • Counterfeiting: duplicating official software and selling it without authorization
  • HDD/SSD loading: selling a storage device (like a hard-drive) that has unlicensed software installed or copied on it
  • Client-server overuse: most commonly done through a LAN connection shared between multiple users, granting access to the software usage via one license key, that’s only present on one of the devices
  • Online piracy: the most widespread method of recent memory, online piracy involves a huge interconnected web of computers that are sending and receiving bits of data to and from one another (usually through P2P networks)
  • OEM unbundling: this is when a manufacturer or seller will give you a piece of software only as part of a bundle, but you’re then taking it out of that bundle and giving it away (or selling it) on its own
  • “Legitimate” product keys: some reseller sites out there will provide you “legal” keys for a variety of software, which are always cheaper than from the main vendor; there are times when these are in fact pirated

Software Piracy Penalties

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Like we’ve described above, the U.S. federal copyright law states that an end user can only create copies of a piece of software for archival backup purposes. Any other type of copying requires the explicit permission of that copyright’s holder. If you forego this step, any copying or redistribution that you do of that software program will be considered theft.

Under the applicable law, the fine for software piracy can go to up to $150,000. If you decide to go to court and contest it though and you successfully prove that the infringement was unwilling (like explained above), the fine is up to $200.

The fine can seem strict, but think of it this day. The computer programs industry places an inherent trust in its users. EULAs are there to be a legal safety net, but other than some skillful coding like DRMs or license keys, there’s nothing actively stopping someone from copying and sharing a program. These are very expensive programs we’re talking about, which can take years and years of R&D to perfect and present to consumers. And just like that, it can be copied and shared online for free with any basic, entry-level computer; without any degradation or subpar quality as with pirated media (movies, songs etc).

If you’re looking at it from a bird’s eye view, piracy is still theft. It takes away a revenue source for which others are working tirelessly over long periods of time. The law just punishes it like you would any other crime. The problem is that it can easily get muddled when big corporations are involved, where you need lots of licenses, maintenance and control over your IT systems.

Types of Piracy Penalties

Offenders who engage in software piracy, if caught, can be charged with:

Damages caused to the copyright holder

When piracy happens, it can be in one instance, or multiple. To make that clearer, it means how many times that software was installed or shared. For example, if a company is sued and found guilty of pirating a piece of software, they’ll be held accountable for the IP holder’s loss of profits for every pirating instance. If the software is on 1 machine, it’s one instance. If it’s on 10 machines, it’s ten instances etc. The copying and distribution of the software to other parties means further damages to its creator, so every loss in profit caused by this is also to be paid by the offender.

In this case, a federal fine isn’t issued, as the exact number of infringements can be determined.

Federal penalties

Sometimes, it can be very difficult or virtually impossible for a company to determine how many copies of their software were distributed by a software pirate. In order to protect the copyright holder’s interests, the U.S.’s system has a standardized federal statutory damage sum of up to $150,000. This is applicable if the accuser can prove that willful infringement of their EULA was done by the accused.

Criminal penalties

All types of software piracy are illegal, but simple copying and free redistribution is treated with softer punishments by courts. In cases where a pirated software was sold to other users, the offender will receive a criminal penalty. The fine can be up to $250,000, and the offender can also be sent to prison for up to 5 years. A permanent felony is added to the offender’s record too.

Penalty for torrenting/cracked software

Torrenting has become a common practice, with the U.S.A. holding the #1 place for piracy website visits in 2018 (17.38B). Video games, music, movies, books, you name it. Whether it’s a piece of software or a type of media, torrenting websites will likely hold the file and transfer it to a user’s device via a P2P network. This is of course illegal, but it’s prosecuted as a civil case, not a criminal one. Both uploading and downloading torrents can get you sued and fined, but there will be no jail time involved.

How To Avoid Software Piracy Penalties

Staying clear of hefty fines and more serious consequences involves some work on your part, no way around it. As an end user, you must agree with an EULA in order to even install the software you’re using. There’s no way of claiming you didn’t know you weren’t supposed to copy it after the fact, as you technically signed the agreement by clicking the button. Of course, most of us just scroll to the bottom and click “I agree” to move on to the next step without reading.

All in all though, there are only a few basic rules you should stick by to avoid software piracy fines:

  • Always buy original software from the manufacturer
  • Do not use torreting or other P2P connection websites (for either downloading or uploading)
  • Do not use one license key for more than one device, and do not share your access to a piece of software with friends or family (there are exceptions to this rule; for example, video game distribution platforms like Steam allow you to share access to a game with a friend, but you can’t play it at the same time)
  • Do not allow other people to install software on your device, unless you know for sure it is genuine

If you want a complete guide on software piracy prevention for companies, we’ve got one for you right here. Make sure you give it a thorough read: The Ultimate Guide For Preventing Software Piracy In Companies (2021). We also covered how to avoid having your own software pirated!

In Need Of Brand Protection?

At Toltec, we’re experts at identifying and stopping signal piracy (TV shows, movies), among other things. We’ve been in the branch for over 20 years, and have protected entities such as Netflix, Amazon, HULU, the Motion Picture Association, Warner Brothers; you name them, we probably worked together at some point!

The fine for willful software piracy can go to up to $150,000.


If you think your own cable, satellite, or streaming media content is at risk, give us a call at (727) 403-1129. We’ll get to the root of the issue and safeguard your profit margin.