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Andrey Belousov

Software Legalization in Ukraine

Andrey Belousov Pirated computer software and pirated databases use in Ukraine became recently a critical problem. On one side, legal manufacturers of intellectual goods push the government demanding to stop willfulness of “pirates”, on another the world community is about to achieve effective measures against distribution of pirated products in territory of Ukraine. In this view in due time the United States of America have entered economic sanctions against Ukraine.

It is really hard to fight infringing goods in the intellectual property market in rather poor countries. Ukraine has made a first step on a way to the civilized software market in summer of 2001, when parliament approved the Copyright and Allied Rights Law [1]. According to this document personal property and non-property rights on works of art, literary, scientific works, in particular, computer software are to be protected. The following stage was the adoption by the Cabinet of Ministers of concept of software legalization and of fighting with its illegal use. The State Department of the Intellectual Property is to realize this program. This institution has already carried out the inventory of software in ministries and departments, state and local governments^; has developed practical recommendations for establishment of legal computer software^; has created the Register of software developers and distributors. The Cabinet of Ministers has issued the Decree On Approval of the Order of Software Use in Enforcement Authorities, containing basic rules and practical advices on questions of software purchasing, accounting and using.

The software is protected from the illegal copying by copyright laws [2]. Copyright laws provide preservation of several exclusive rights of software developer (distributor): one of these is the right to make copies of software. Purchase of software product is buying license (right) to use it.

The software license gives the official right to use the specific software product. License conditions are determined in the End User License Agreement (EULA). According to terms of standard license agreements of Microsoft Corporation, users may not sell, rent, lease, or sublicense the software. Signing of special agreement expanding the rights of user, given by standard license agreements is also possible if purchaser of software is related to rent or lease of computers and/or software.

Use of pirated software copies is a violation of copyright and may lead to criminal proceedings. Ukrainian law provides for civil legal, administrative and criminal liabilities for infringing copyright on software products. Copyright owner may bring a suit against organization and administrative or criminal proceedings against responsible personnel of this organization may be instituted. Infringement of copyright law can negatively affect the reputation of the company.

Also viruses capable to infect separate computers and whole networks can be attached to pirate copies of the software. This may lead to irrevocable data loss, which can be potentially very serious damage to many companies. Why should we be exposed to such risk? The software manufacturers do not provide technical support for pirated copies. When technical problem occurs, slowing down functioning of the company, employees will have to cope with this problem on their own. Besides the company will not have the right to purchase updates. Pirated copies of software can be a reason of programs incompatibility which usually cooperate. Proceedings, undermined reputation, computer viruses, no technical support and software incompatibility result in losses of time ending up in money losses.

Large and medium corporations may use significant number of different software. Until recently the problem of license control for the majority of the Ukrainian enterprises did not exist. However, companies have been willy-nilly compelled to use legal software. Therefore the problem of license management for domestic companies becomes extremely topical. Experts in field of license management assert that any organization working under conditions of modern market is in great need of efficient software control as like any other asset.

The term "license management" means the complex of actions including estimation of software condition, standardization and optimization of computer workplaces, and also system of costs directed on software purchases and updates. Variety of computer facilities and used software, absence of regulations and standards of its application cause problems for systems administration. Each computer is specific, so, it needs individual adjustment. System administrators often do not have time for accounting computer facilities. Thus expensive computer equipment and software appears actually ownerless, that turns in absence of control over use of these assets, and subsequent penalties for pirated software application.

Licenses management methods are considered to save enterprises from superfluous charges and also to form own well-considered IÒ-budget. Unsystematic purchases of software can cause problems of incompatibility of file formats and consequent waste of time for routine operations. If workstations in one department work on Windows 95/98 and are connected to network of Windows NT 4 Server, and other department works with Active Directory domain on Windows Server 2003, administration of such system will demand additional efforts and means.

License management allows to determine if this software is necessary or useless for the enterprise, whether departments are in need of software purchase or update or not. In this view there is corporate license software which provides discounts for purchase and down payments for wholesale licenses purchases. Besides there are some cases when company’s license purity of is one of obligatory conditions of present-day market. For example, the enterprise cannot enter the system of international crediting if it does not guarantee observance of all current laws, including observance of intellectual property rights, etc.

A new edition of ISO 9000 standard is supposed to include requirement for using licensed software in organizations, and, thus, presence of licenses for all used software will be obligatory for certification of the enterprise.
Experts note some stages of introduction of universal license management methods at enterprises [3].
1. Collecting the initial information on IT-structure of the enterprise (number of PCs, economically responsible persons, etc.).
2. Carrying out software inventory (manually or, more preferable automated inventory).
3. Comparing quantity/types of licenses and quantity of installed software.
4. Developing strategy of software assets use, including creating internal standards for used PCs and software, introducting procedures of purchase and operation of software.
5. Forming the exact plan of lisense management.

Microsoft strongly recommends companies to draw to inventory certificated partners (MSCP), specializing in license management. According to Microsoft, situation with financial audit is similar. Enterprises while carrying out internal financial audit in order to receive exact state of affairs, invite professionals from specialized firms.

At first sight it is necessary to count only the amount of PCs, used software and to choose a suitable option of licensing. Actually it is also necessary to take into account that the majority of corporate issues of licensing assume purchasing of software at partners Microsoft, conclusion of agreements, various levels of discounts and opportunities of down payments, software updates, technical support and future growth of computer facilities number at the enterprise. All that in aggregate transforms a choice of the optimum licensing into a complicated problem.

Received in a result plan of license management is the list of actions which are carried out during the fixed term (usually 1 year) and these actions are annually corrected.
For Microsoft software inventory, its representatives recommend own freeware product - Microsoft Software Inventory Analyzer. This product is carrying out inventory of one PC in several minutes and forms the report, showing versions of installed software, service updates (Service Packs), and also keys activated by given software products.

However, Microsoft does not exclude use of other software. The market is flooded by the great number of similar programs with different interfaces. So the number of them may carry out inventory only, other may account all purchased licenses and compare with PCs at workplaces for detecting mismatches. There are also software designed to automate completely activity of IT department of the company, including reception of applications from users, their tracking and purchases management. At Microsoft website there is a catalogue of 149 inventory programs from different developers (www.microsoft.com/resources/sam/sit/default.asp).

According to Kvazar-Micro company manager Alexander Golubchenko, corporate types of licensing of Microsoft software products are the most attractive to the majority of home enterprises. It concerns three following base programs: Multi-Year Open License (MYO), Open Subscription License (OSL) and Enterprise Agreement (EA).
MYO?- the agreement on purchase of software by installments for the period of three years after which the user receives a termless license. Then he may or may not prolong action of the program on reception of new software versions (Software Assurance).
OSL?- software rent for the period of three years. Annual payments are paid for the right to use the software, size of payment depends on software type and number of PCs where it is installed. For the period of three years the user has full access to software updates. After the given term client can either break the agreement, or prolong it for the following term, or to buy out the software (thus payment is in 1,5 times higher than annual payment).
ÅÀ?- is similar to MYO and is distributed to companies with not less than 250 of PCs with Microsoft as the basic platform.

Licensing of all PCs of wide application (all personal computers, minus servers and computers used for solving only specialized tasks) is compulsory for the conclusion of the given agreement. Any software installed during action of ÅÀ, will be considered legal up to the next verification payment, when the enterprise should specify as far as the number of PCs was increased, and pay additional licenses.

As an example of license control system [4] we can consider the project at Poltava Ore Mining and Processing Enterprise. The number of computer facilities in the enterprise is about 500 PCs, it was increased within last eight years. Therefore more than half are out-of-date computers. Administration has been thinking about these old computers: whether to leave them or to discard and replace with new. And what software they should install to keep within the budget?

For the best option inventory was carried out with help of freeware Microsoft Software Inventory Analyzer. As a result of a week-long inventory they have got a full list of software installed in PCs of the enterprise. After comparing results with data in accounts department, a number of pirated installations was found out.

According to the received data there was carried out standardization of all workplaces. And since, the enterprise is buying software only under these standards. For example, accountants’ computers are equipped with Windows XP Home Edition (plus right to use previous versions of Windows) and MS Office Standard, engineers’ computers with Windows XP Pro and MS Office Professional.

At present Poltava Ore Mining and Processing Enterprise buys certain number of licenses monthly according to the authorized business-plan which has been originally designed for three years. After inventory the enterprise found out that the number of required licenses is less than it was planned, it is possible to finish all process within two years or even earlier.
The strategy of choosing the optimum scheme for licensing is defined on the basis of the following data analysis.
1 . The number of personal computers or PIB (PC Installed Base). If the company has less than 5 PCs, it is necessary to buy MS Office XP Standard Box for already existing personal computers and Windows XP OEM license. When the company purchases new personal computers, it is possible to take them with office package and OEM Windows at once. In this case saving is essential - almost 40%. If the company has more than 5 PCs then it is necessary to pay attention to corporate licensing with a number of different options, the choice of which is made on the basis of the following issues:
2. The customer would like to receive updates of used products, wouldn't he?
If yes, it is necessary to consider the schemes of licensing providing updates of versions (MYO, ÅÀ, etc.). Should we say that while purchasing a product without option to update it, customer will have to buy a new product for full price?
3. Will installments do for the customer?
On one hand, unambiguously yes, in view that there are no interest fees for actually supplied credit. From another - the state institutions frequently have no right to sign long-term contracts for a term of more than one year. This compels to offer such customers only schemes with one-time payment, i.e. open licenses (MOLP). In this case there is a problem of new versions updates.
4. How dynamic are the purchases of new and discarding of old PCs?
There are customers with annual gain of PCs making about 60% from existing, and discarding of old PCs - about 15%.
5. How to buy a new PC? Will it be with preinstalled (OEM) operating system and office package?
But there is one nuance. We can buy operating system "in addition" to already purchased computer, but we can't do this with MS Office. Using OEM license it is purchased only with PC which cost at once will increase by $350-500. It is possible to license MS Office by open license, however all this time employee will have to work with it illegally. Besides at the enterprises numbering thousand or tens thousand of PCs where, as a rule, there is no unified centralized system of purchases (divisions are autonomous), it is obviously impossible to reach exact accordance of PCs and licenses numbers.

In such cases it is expedient to use corporate schemes of licensing (MYO, EA, EAS) as maximum flexible and also solely comprehensible for customers, number of the personal computer of which exceeds 100 units. The given kinds of licensing have such advantages: opportunity of software updates^; purchase of new equipment with the cheapest operating system and the latest versions of software products^; planning of IT-budget for the nearest 3-4 years with high accuracy^; verification of PCs number with number of licenses only once per year and admission of PCs and licenses discrepancy.

[1] Ukrainian Legislation on the Intellectual Property, Kharkiv: JSC "Odissey", 2002, p. 20.
[2] U. Kazakov, Intellectual property, Moscow: Masterstvo, 2002, p. 8.
[3] V. Matvienko, License Management, Computer Review, ¹ 42, p. 53.
[4] Licenses Management Methods by the Ukrainian Center of License Software. - http://uaportal.com.ua/news/Computers/news_10570.html.

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