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The Ethics Coach on Pirating Software, Copying the Competition and More

This month we tackle thorny questions about pirates, extreme imitation and angry creditors.
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Q: I purchased a few different software packages for my electronics engineering business at the cost of $5,000 to $7,000 each--a significant expense. The vast majority of consultants and some small businesses I've met pirate at least one of those applications. We all know various justifications for downloading free software and music, but discovering how common pirating software is makes me feel like a sucker! I'm paying out of pocket for something I could easily get for free. This situation is one of many where being "moral" seems to be very expensive. Are there any shades of gray on this issue? What is the appropriate response when this comes up in conversation?

A: I ran your question by Damion Robinson, a partner at Santa Monica, Calif.-based Criterion Law Group; his expertise includes IP licensing and piracy. While some studies indicate at least half of businesses use pirated software, he says there are legal and reputational issues that can't be discounted: "Software companies have sued small businesses for the type of piracy described in the letter, and penalties for willful infringement can be as high as $150,000 per piece of software, plus attorney's fees." Beyond the legal ramifications, Robinson points out, "having unlicensed software, especially in a service-oriented business, can be seen as very unprofessional and reduces credibility."

Bottom line: The ROI for operating ethically isn't measured by money alone. There are no shades of gray in pirating: It is stealing money from the developers. If it comes up in conversation, make it clear that one of the many long-term benefits of paying for software is that your employees understand that you operate your business with integrity--a good example to set.

Identity Theft
Q: I've been trying to come up with a great website design and name for a new business. I recently found a company online that has a beautiful site, and their business name is perfect for my idea, even though my company will offer a completely different service. Is it ethical for me to use their design (with some tweaks, so as not to be identical) and name, since there won't be any competition issues?

A: Imitation may be the sincerest form of flattery, but lifting two major elements of a business's identity isn't imitation--it's stealing. Using the design without getting permission is simply not ethical. Avoid problems by running your request by the owner. It takes just a phone call to find out if the website design is original and, if so, whether you can license the template. If you tweak a copyrighted design without permission, you are vulnerable to legal action.

On the second issue, it takes time and creative focus to come up with a name that fits the brand identity you want to build. It's tempting to put someone else's effort to work, but you could find yourself fending off a trademark-infringement lawsuit. Further, on a practical level, using another company's name will make for confusing Google searches among potential customers.

While it's challenging to create a unique identity in business, the actions you take from the start define your brand and your reputation. Don't shortchange your venture by stealing somebody else's identity. Make choices that help you stand out for the right reasons.  

Past tense
Q: My business went under in 2010 and left a trail of debt in its wake, mostly through maladministration on my part. I have begun rebuilding by registering a new company and appointing a mentor to guide us through better business practices. At least a year ago, one of my disgruntled suppliers posted my picture online with a very defaming brief. What should I do about this? It's going to hurt any efforts I make toward getting the business going again.

A: Congratulations on deciding to relaunch your business with a better support system. But remember, the disgruntled supplier was caught in the "trail of debt" you described. He--and other people you worked with--may feel a sense of unfinished business and believe that it's unfair of you to move on without making things right. Based on how you closed down your old company, talk with your former supplier and, if you haven't already, apologize for the impact your poor management had on him. Listen to what he has to say and try, as much as possible, to make things right by setting up a long-term payment plan or providing referrals within your network. Consider asking a respected third party to broker the meeting. If others raise concerns about your reputation, explain what you've done to rebuild trust with the aggrieved party and make it clear that building--and sustaining--trust is one of your top priorities.