Beware the legal risks

A look at why it pays to comply with the new laws governing intellectual property rights and why firms should retain e-mail for at least six years.

On July 20, 2005, officers from the Enforcement Division of Malaysia's Ministry of Domestic Trade and Consumer Affairs (MDTCA) raided a company based in Kuala Lumpur for using suspected pirated and/or unlicensed software in the course of conducting their business.

If this was your company, should you be worried? As companies rely more on technology to operate, senior managers need to stay abreast of the changes in the new business environment and understand the legal issues relating to electronic communications. Here are two areas that small and medium-sized businesses should be aware of.

1. License right to avoid the courts

In Malaysia, it is an offence under the Copyright Act of 1987 to infringe the intellectual property of copyright owners. If found guilty in a court of law, the directors could face jail terms of up to five years, on top of a fine of between RM2,000 (US$530.66) and RM20,000 (US$5,306.63) for each infringing copy of software.

Like Malaysia, Singapore has toughened its laws. Singapore's Copyright Act was amended in January this year to render it a criminal offense for businesses to willfully infringe copyright for commercial gain, whether through under-licensing or the use of unauthorized or pirated software.

According to Sheena Jacob, a partner and head of intellectual property at ATMD, under the new law, the copyright owner may claim against an infringer under a civil case. An infringer could be required to pay up to S$10,000 (US$5,981.15) for each work infringed or up to S$200,000 (US$119,622.90) in aggregate. A higher amount of damages may be awarded if the copyright owner can prove he has suffered greater loss.

"Your best bet to get out of criminal liability is to show you did your best to put procedures in place... Saying 'I did not know' will not cut it."
--Sheena Jacob
a partner and head of intellectual property, ATMD

Jacob advises small and medium-sized businesses to set up a team that looks at software licensing issues.

"It's not just an MIS issue, it's a business issue," she noted.

She said feigning ignorance is no longer a defense in court. "Your best bet to get out of criminal liability is to show you did your best to put procedures in place," she said. "Saying 'I did not know' will not cut it."

Likewise in Hong Kong, businesses are also advised to minimize their exposure to legal risks, as well as potential damage to their corporate image, by understanding software licensing issues and legal liabilities arising from the usage.

According to Hong Kong's laws, the use of an infringing copy of a computer software program in any type of business will constitute a criminal offence. Those found guilty can face up to four years' imprisonment and a fine of up to HK$50,000 (US$6,434.66) for each infringing copy of software.

Visit Business Software Alliance's Web site to find out how to avoid inadvertent software infringement.

2. Retain e-mail, too
In some countries, new regulations now require companies to keep their e-mail for at least seven years.

In Singapore, the Income Tax Act requires, for tax purposes, companies to keep records for seven years. Such records may be in the form of e-mail, and if so, they will have to be kept for seven years, too.

There is also another reason for retaining e-mail. Under the Limitation Act in Singapore, legal actions cannot be brought after six years from the date the cause of action accrued. Therefore, as a matter of prudence, e-mail should be kept for at least six years.

However, six years may not be long enough. According to Yew Woon Chooi, a partner at law firm Rodyk & Davidson in Singapore, in certain cases, the cause of action arises much later after the time the e-mail is created, so even keeping e-mail for six years only may not be sufficient.