Software Copyright & Protection Framework
Multiple Layers of Protection: Software can be protected under copyright (code as literary work), trade secret (confidential algorithms and methods), contract (license agreements), and the DMCA (anti-circumvention). Effective enforcement often combines multiple theories.
Legal Framework for Software Protection
| Protection Type | Legal Basis | What It Covers |
|---|---|---|
| Copyright | 17 U.S.C. 101-122 | Source code, object code, screen displays, documentation (expression, not ideas) |
| Trade Secret | DTSA (18 U.S.C. 1836), State UTSA | Algorithms, methods, architectures, customer data, business logic |
| DMCA Anti-Circumvention | 17 U.S.C. 1201 | Copy protection, license keys, DRM, access controls |
| Contract/License | EULA, ToS, License Agreements | Usage restrictions, seat limits, distribution limits |
| CFAA | 18 U.S.C. 1030 | Unauthorized access to computer systems (SaaS piracy) |
Types of Software Piracy
| Piracy Type | Description | Primary Legal Claims |
|---|---|---|
| Source Code Theft | Copying proprietary source code (employee theft, hacking) | Copyright, Trade Secret, CFAA |
| Software Counterfeiting | Producing/distributing unauthorized copies | Copyright, Trademark (if branded) |
| License Violation | Exceeding license terms (seats, scope, duration) | Copyright, Breach of Contract |
| Cracking/Keygen | Bypassing copy protection, generating fake keys | DMCA 1201, Copyright |
| SaaS Piracy | Unauthorized access, credential sharing, scraping | CFAA, Breach of ToS, Copyright |
| Open Source Violation | Violating GPL/LGPL/Apache license terms | Copyright (license termination) |
Trade Secret Requirements: To claim trade secret protection, you must show: (1) the information derives economic value from secrecy, and (2) you took reasonable measures to keep it secret (NDAs, access controls, encryption, "confidential" markings). Publicly released software generally cannot be a trade secret.
DMCA Anti-Circumvention (Section 1201)
Prohibited Acts:
- Circumventing access controls (1201(a)(1))
- Trafficking in circumvention tools (1201(a)(2))
- Trafficking in tools to bypass copy protection (1201(b))
Penalties:
- Civil: $200-$2,500 per violation (statutory)
- Criminal: Up to $500K fine, 5 years prison
- Repeat offenders: $1M fine, 10 years
Damages & Remedies
Copyright Damages for Software
| Damage Type | Amount | Requirements |
|---|---|---|
| Actual Damages | Lost license fees + lost profits | Prove causal connection to infringement |
| Disgorgement | Infringer's profits attributable to infringement | Owner proves gross revenue; infringer proves deductions |
| Statutory Damages | $750 - $30,000 per work | Registration before infringement or within 3 months |
| Willful Statutory | Up to $150,000 per work | Prove defendant knew conduct was infringing |
| Attorney Fees | As court deems appropriate | Registration before infringement |
Trade Secret Damages (DTSA)
- Actual Loss: Damages caused by misappropriation
- Unjust Enrichment: Benefit to misappropriator not captured by actual loss
- Reasonable Royalty: Alternative measure in lieu of actual damages
- Exemplary Damages: Up to 2x damages for willful and malicious misappropriation
- Attorney Fees: Available for willful misappropriation or bad faith claims
- Injunctive Relief: Including ex parte seizure in extraordinary circumstances
Calculating Software Damages: For commercial software, damages often equal (number of unauthorized copies) x (retail license price). For enterprise software, consider lost maintenance fees, support revenue, and competitive harm. Expert testimony on damages calculation is often essential.
Sample Demand Letters
Sample 1: Source Code Theft Demand (Former Employee)
CEASE AND DESIST - TRADE SECRET MISAPPROPRIATION & COPYRIGHT INFRINGEMENT
[COMPANY NAME / LAW FIRM]
[Address]
[Email / Phone]
[Date]
VIA CERTIFIED MAIL, EMAIL, AND HAND DELIVERY
[Former Employee Name]
[Address]
[New Employer Name]
[Address]
Attn: General Counsel
Re: Misappropriation of Trade Secrets and Copyright Infringement
Demand for Immediate Preservation and Cease and Desist
Dear [Former Employee] and [New Employer]:
This firm represents [Company], a software company specializing in [description]. [Former Employee] was employed by [Company] as [Title] from [Start Date] until [Termination Date].
CONFIDENTIALITY OBLIGATIONS
During employment, [Former Employee] had access to [Company]'s proprietary source code, algorithms, customer data, and technical documentation. [Former Employee] signed an Employment Agreement and Confidentiality Agreement dated [Date], copies of which are enclosed, acknowledging that all work product belongs to [Company] and agreeing not to disclose or use confidential information after employment ends.
TRADE SECRET MISAPPROPRIATION
We have evidence that [Former Employee] copied [Company]'s proprietary source code and related materials prior to departure and has used or disclosed this information to [New Employer]. Specifically:
1. Access logs show [Former Employee] downloaded [X] GB of source code on [Date], days before resignation
2. [Former Employee] accessed repositories not related to assigned duties
3. [Company]'s [specific technology/feature] has appeared in [New Employer]'s recently released [Product]
4. [Additional evidence if available]
This conduct constitutes misappropriation under the Defend Trade Secrets Act (18 U.S.C. 1836) and [State] trade secret law.
COPYRIGHT INFRINGEMENT
[Company]'s source code is protected by copyright and registered with the U.S. Copyright Office (Registration No. [TX________]). Unauthorized copying, use, and creation of derivative works infringes [Company]'s exclusive rights under 17 U.S.C. 106.
LEGAL EXPOSURE
[Former Employee] and [New Employer] face exposure to:
- Trade secret damages including actual loss, unjust enrichment, and exemplary damages up to 2x for willful misappropriation (DTSA)
- Copyright statutory damages up to $150,000 per work for willful infringement
- Injunctive relief including product recalls and development cessation
- Attorney fees under both DTSA and Copyright Act
- Potential criminal prosecution under DTSA (up to 10 years imprisonment)
IMMEDIATE DEMANDS
Within seven (7) days of this letter:
1. PRESERVATION: Preserve all evidence including [Former Employee]'s devices, accounts, emails, and any materials containing [Company] information. Litigation hold notice is hereby given.
2. CEASE ALL USE: Immediately cease all use of [Company]'s proprietary information in any products, services, or development activities.
3. RETURN/DESTRUCTION: Return all [Company] materials in [Former Employee]'s possession and certify destruction of any copies.
4. FORENSIC EXAMINATION: Allow a neutral forensic examiner to image [Former Employee]'s devices and accounts to determine the scope of misappropriation.
5. CONTACT COUNSEL: Contact the undersigned to discuss resolution before we are compelled to seek emergency injunctive relief.
Failure to comply will result in immediate filing of a federal lawsuit seeking TRO, preliminary injunction, and expedited discovery.
Very truly yours,
[Attorney Name]
Counsel for [Company]
cc: [Company]
Enclosures: Employment Agreement, Confidentiality AgreementSample 2: Software License Violation Demand
LICENSE COMPLIANCE DEMAND - SOFTWARE AUDIT
[SOFTWARE COMPANY]
[Address]
[Email / Phone]
[Date]
[Company Name]
[Address]
Attn: IT Director / CTO / General Counsel
Re: License Compliance - [Software Product Name]
License Agreement dated [Date]
Account/Customer ID: [Number]
Dear [Recipient]:
[Software Company] has identified a potential license compliance issue regarding [Company]'s use of [Product Name].
YOUR LICENSE
According to our records, [Company] holds the following license(s):
- Product: [Product Name] [Version]
- License Type: [Perpetual/Subscription/Enterprise]
- Licensed Users/Seats: [Number]
- Licensed Locations: [Locations if applicable]
- License Term: [Dates]
- Annual Maintenance: [Status]
COMPLIANCE CONCERN
Our monitoring systems and/or audit of publicly available information indicates that [Company] may be:
[ ] Using the software on more devices than licensed ([X] detected vs. [Y] licensed)
[ ] Exceeding licensed user count ([X] active users vs. [Y] licensed)
[ ] Using the software at unlicensed locations
[ ] Continuing use after license expiration
[ ] Using features not included in the licensed edition
[ ] Distributing or sublicensing without authorization
Under Section [X] of your License Agreement, [Company] agreed to [specific license restriction]. Our information suggests this limitation may not be observed.
AUDIT RIGHTS
Section [X] of the License Agreement grants [Software Company] the right to audit [Company]'s use of the software upon reasonable notice. We hereby provide notice of our intent to conduct a license compliance audit.
RESOLUTION OPTIONS
To resolve this matter efficiently, we offer the following options:
Option A - Self-Audit:
Complete the enclosed License Compliance Certification within 30 days. If over-deployment is confirmed, purchase additional licenses at standard pricing plus [X]% compliance fee.
Option B - Independent Audit:
Allow an independent auditor to verify deployment. If compliant, [Software Company] bears audit cost. If non-compliant, [Company] bears audit cost plus license true-up.
Option C - Enterprise License Upgrade:
Upgrade to an Enterprise License Agreement covering all current and anticipated use at a negotiated rate, resolving compliance concerns prospectively.
FAILURE TO COOPERATE
If [Company] does not respond within 30 days or refuses to cooperate with audit, [Software Company] will:
1. Terminate [Company]'s license rights under Section [X]
2. Pursue copyright infringement claims with statutory damages up to $150,000 per work
3. Seek injunctive relief prohibiting continued software use
4. Pursue breach of contract damages
We prefer to resolve this matter cooperatively. Please contact [Name] at [Phone/Email] to discuss compliance options.
Sincerely,
[Name]
[Title]
License Compliance Department
Enclosure: License Compliance Certification FormSample 3: DMCA Anti-Circumvention Demand
DMCA SECTION 1201 VIOLATION - CEASE AND DESIST
[SOFTWARE COMPANY / LAW FIRM]
[Address]
[Email / Phone]
[Date]
VIA EMAIL AND CERTIFIED MAIL
[Defendant Name/Company]
[Address]
Re: Violation of Digital Millennium Copyright Act Section 1201
Distribution of Circumvention Tools for [Software Name]
Dear [Recipient]:
We represent [Software Company], developer and copyright owner of [Software Name], enterprise software used by [description of use/industry].
DMCA SECTION 1201 VIOLATIONS
It has come to our attention that you are distributing tools designed to circumvent the technological protection measures protecting [Software Name]. Specifically:
- Website: [URL]
- Product: "[Crack/Keygen Name]"
- Description: [How advertised - "generates valid license keys," "bypasses activation," etc.]
[Software Name] employs technological measures including [describe protection - license key validation, online activation, hardware fingerprinting, encryption] to control access to the copyrighted software and prevent unauthorized copying.
Your distribution of circumvention tools violates multiple provisions of the DMCA:
17 U.S.C. 1201(a)(2): Trafficking in technology primarily designed to circumvent access controls
17 U.S.C. 1201(b)(1): Trafficking in technology primarily designed to circumvent copy protection
LEGAL CONSEQUENCES
DMCA violations carry severe civil and criminal penalties:
CIVIL (17 U.S.C. 1203):
- Statutory damages: $200 to $2,500 per act of circumvention
- Actual damages and profits
- Injunctive relief
- Impoundment and destruction of circumvention tools
- Attorney fees and costs
CRIMINAL (17 U.S.C. 1204):
- First offense: Up to $500,000 fine and 5 years imprisonment
- Subsequent offense: Up to $1,000,000 fine and 10 years imprisonment
Additionally, you may be liable for contributory copyright infringement for the infringing copies made using your tools.
DEMAND
Within five (5) days of this letter:
1. REMOVE all circumvention tools, keygens, cracks, patches, and related materials for [Software Name] from your website and any other distribution channels
2. DISABLE any download links and delete all copies in your possession
3. PRESERVE records of downloads, sales, and distribution for potential litigation
4. PROVIDE a written statement confirming compliance and identifying any third parties to whom you distributed the tools
5. CEASE all development, distribution, and promotion of circumvention tools targeting [Software Company]'s products
ONGOING MONITORING
We actively monitor for circumvention tools targeting our products. Any continued or resumed distribution will result in immediate legal action without further notice.
This matter has been referred to our outside litigation counsel with authorization to file suit if compliance is not confirmed by [Deadline Date].
Regards,
[Name]
[Title/Counsel]Frequently Asked Questions
Yes, copyright protection attaches automatically when software is created and fixed in tangible form. Registration is not required for copyright to exist. However, registration with the U.S. Copyright Office is required before you can file an infringement lawsuit (for U.S. works), and registration before infringement occurs (or within 3 months of publication) is required to recover statutory damages and attorney fees. We strongly recommend registering all commercially significant software.
Copyright protects the expression of code (the specific way you wrote it) but not the underlying ideas, algorithms, or functionality. Anyone can independently create software with the same functionality if they don't copy your code. Trade secret protects valuable confidential information - including algorithms, methods, and architectures that copyright doesn't cover - but requires that you keep the information secret. Publicly distributed software loses trade secret protection but retains copyright. Many companies use both: copyright for distributed software, trade secrets for server-side code and internal systems.
It depends on how your license is structured. If the license grants a limited permission to use the software (a "bare license"), exceeding the license terms means the user has no license and thus commits copyright infringement. If the license is a contract with the right to use as consideration, exceeding terms is breach of contract but may not be infringement. Courts analyze the specific license language. Either way, you have legal remedies - copyright claims allow statutory damages, while contract claims may be limited to actual damages. Many software licenses are drafted to preserve copyright claims.
SaaS piracy can be addressed through multiple legal theories: (1) Breach of Terms of Service (contract claim), (2) Computer Fraud and Abuse Act violations for unauthorized access, (3) Copyright infringement if protected content is copied, (4) Tortious interference if competitors facilitate customer violations, (5) Unjust enrichment. Technical measures like rate limiting, device fingerprinting, and anomaly detection help identify abuse. Your ToS should clearly prohibit credential sharing and provide for termination and damages.
Open source licenses like GPL, LGPL, and Apache are still copyright licenses - violating their terms terminates the license, making continued use copyright infringement. For GPL violations (failure to provide source code, failure to include license notices), you can demand compliance and pursue copyright claims. Many open source projects prefer "compliance first" approaches: notify the violator, give opportunity to cure, and only litigate if they refuse. Organizations like the Software Freedom Conservancy can help enforce open source licenses.
Key evidence includes: (1) Proof of ownership - copyright registration, development records, employment/contractor agreements; (2) Proof of copying - access plus substantial similarity, or direct evidence like identical code, same bugs, same comments, metadata; (3) Proof of distribution/use - purchase of pirated copy, screenshots, website archives, log files; (4) Damages evidence - lost sales, defendant's profits, standard license fees. For trade secrets, you also need evidence that you maintained secrecy. Forensic analysis of code can establish copying even if variable names are changed.
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Use this interactive calculator to estimate potential damages in your case. Enter your information below to get an estimate of recoverable damages.
📈 Estimated Damages Breakdown
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Disclaimer: This calculator provides rough estimates for educational purposes only and does not constitute legal advice. Actual damages vary significantly based on specific facts, evidence strength, and many other factors. Consult with a qualified California attorney for an accurate case evaluation.