By Ted Miracco
Software piracy is a $53 billion epidemic that not only impacts a software company’s bottom line, but also undermines all of its paying customers, the efforts of employees and shareholders. But software piracy isn’t going away and pirates will continue to find new ways to steal software. By gathering actionable intelligence on the illegal software users, ISVs can begin to take back some control of software piracy.
It’s a classic startup story. Two engineers frustrated with an inability to do their jobs create a software solution, realize others are having the same problem and start a company.
But it ran into just as classic of a problem—after four years of growing their engineering software business, Todd Reade and his partner discovered their $15,000 TransMagic CAD interoperability software could be bought on the internet for $99. Pirates had cracked the software and were selling it to unsuspecting users for dirt cheap.
Eventually, the company defeated the pirates and recovered $1.2 million.
Founded in 2001 by two CAD/CAM engineers with a combined 44 years of industry experience and an idea, TransMagic develops multi-CAD interoperability software applications that offer 3D CAD file translation, 3D model comparison, geometry repair, collaboration, and viewing technologies to alleviate the CAD incompatibility and product data exchange challenges facing the manufacturing industry.
While on vacation in 2005, Todd Reade, TransMagic CEO, got the call no software developer wants to hear. His partner was calling to say he had just discovered a cracked version of TransMagic’s $15,000 software selling on dozens of sites for $99.
This issue had a major impact on the company’s sales and launched the company on a five-year search for a solution.
By 2008, the pirates were cracking its software in less than a day after a new release despite the company having changed its licensing several times. In 2009, the comapny installed an expensive IP protection software with Department of Defense-level encryption—but Russian pirates were able to access the TransMagic server and put a Trojan virus into the system, which enabled them pull out all of the company’s encryption key information and build a license key generator that offered the software free to anyone in the world who subscribes to pirated software.
The company changed its license keys several times, but the pirates continued to crack the product within weeks of each new release. These crack license keys opened 90 percent of its software capability.
Reade and his partner were frustrated and didn’t know what to do. The alternative to letting the pirates continue to steal was to go after them legally. But that would risk further targeting by the pirates and would require expensive legal expertise. For years, the company tried to better protect their software from pirates, but they made no progress until they tried a brand new approach – forget the pirates and go after the people and businesses using the stolen software.
Saving the Software
After five years of unsuccessfully stopping the pirates, TransMagic found a third-party company who had developed technology to detect the use of unlicensed software and provided information on usage. Armed with actionable information, through this alliance, TransMagic was able to enforce compliance and recover lost revenue directly from the illegal software users.
The engineering software firm opted to work with the piracy victims to collect license fees, but had the data to take the pirated software users to court if needed.
With third party technology in place, the company has discovered that since 2010, 4,123 machines have been detected using a cracked version of its software and 1,347 computers within 879 organizations have been identified. The TransMagic team has engaged with 466 companies and collected $1.2 million in otherwise lost revenue with additional ongoing investigations totaling an estimated $6 million in infringements.
Not only does the approach of going after the illegal software users—rather than the pirates—help recover lost revenue from pirated software, it also provides the company with new customers as an alternative to a punitive approach. In fact, about 20 percent of lost revenues has been recovered to date and TransMagic has gained 97 new customers, some of which buy more seats and continue to pay annual maintenance.
Taking Control of Software Piracy
Software piracy is a $53 billion epidemic that not only impacts a software company’s bottom line, but also undermines all of its paying customers, the efforts of employees and shareholders. But software piracy isn’t going away and pirates will continue to find new ways to steal software. By gathering actionable intelligence on the illegal software users, companies like TransMagic can begin to take back some control of software piracy. SW
Ted Miracco is CEO at SmartFlow Compliance Solutions (SCS), a leading software anti-piracy and cyber security company. Previously, Miracco was co-founder and EVP of AWR (now National Instruments), where he developed the company’s methodology for identifying, reporting, and tracking unauthorized use of AWR software and established methods and procedures for combating software piracy domestically and internationally.
Aug2016, Software Magazine