Lawyers leap on electronic ‘paper trail’ in hunt for firms that use pirated software

The Consumers' Association, which publishes Which?, wrote to the Solicitors Regulation Authority last month, complaining that hundreds of consumers had received "bullying" letters from a West End law firm, demanding £500 in damages for copyright infringement. Which? believes some consumers have been scared into paying compensation for something they say they did not do.

The firm that wrote the letters, Davenport Lyons, is confident it has not broken the regulator's rules. It believes that consumers who buy music, films and games must be frustrated when they see people making the same material available to download free. "The honest consumer ends up paying in the end," it adds.

How can software and entertainment providers identify illegal downloads? Anyone who logs on to a file-sharing network automatically discloses the unique address that is assigned to their computer at that time.

Armed with this so-called IP address, the rights owner can then obtain a court order requiring the relevant internet service provider to disclose the name and address of its customer. But the system is not foolproof. Disputes can arise when an unauthorised person has logged on to someone else's broadband account, which is why you should always make sure your wireless connection is password-protected.

Resolving these disputes and awarding compensation for copyright breaches are generally matters for the civil courts. But some infringements by businesses amount to criminal offences.

Section 92 of the Trade Marks Act 1994 and section 107 of the Copyright, Designs and Patents Act 1988 can be used against any person or company that violates trade marks or copyright law by using pirated software. The maximum penalty is 10 years' imprisonment and an unlimited fine.

Daniel Eilon, an intellectual property specialist at the City solicitors Lawrence Stephens, says a company with 75 staff using Microsoft Office would be well advised to check that it holds 75 licences.

He points out that trading standards officers are now under a duty to enforce section 107 of the 1988 Act. Following long-awaited amendments to the law, they have the power to make test purchases, to enter premises and to seize goods and papers. "It has taken a while, but enforcement officers have now swung into action," Eilon adds.

According to the Federation Against Software Theft, which represents manufacturers, the new powers were used for the first time last September. Police and trading-standards officers raided the home of a man in Becton, east London, who was suspected of selling unauthorised copies of high-value flight-simulation software imported from Hong Kong.

Last month, Cardiff Trading Standards raided a company in the city and inspected its office software. The department had written to 200 businesses earlier in the year warning them that they faced random inspections. "We want to help businesses meet legal requirements and remain competitive in the current economic climate," said Dave Holland, the council's trading standards manager. "However, any businesses flagrantly breaking the law will be brought to account."

Also last month, the Business Software Alliance, a leading trade association, said it had reached settlements of more than £35,000 with three British companies that had been using unlicensed or under-licensed software.

One of them was a company in central London that manages office rentals. It was said to have been using Microsoft and Symantec software on 20 of its office PCs without licences for each machine.

Companies trying to survive the recession may be tempted to break the law. But being found out is rarely good for business.