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Industry Group Sues Over Software Rental

February 29, 1996

PORTLAND, Ore. (AP) _ The software industry filed coast-to-coast lawsuits Wednesday against businesses that allow customers to rent computer diskettes and CD-ROMs.

The Software Publishers Association went to court against companies in Portland, Los Angeles, Fayetteville, N.C., Austin, Texas, and Virginia Beach, Va., after a 1 1/2-year investigation.

The federal lawsuits seek permanent injunctions forcing six companies to halt all software rentals, to destroy all illegally copied software and to pay legal fees and unspecified damages.

Paul Aponte, owner of Software Hogs in Virginia Beach, said the association is trying to make it harder for consumers to decide which software to buy.

``They’re determined to deny the customer the right to see the software before they buy it,″ said Aponte, who has been in business nine years. ``It’s not to protect the consumer. It’s to protect the software companies and protect their profits. It’s the only product out there that you can’t test before buying.″

Aponte’s store offers a typical rental policy: Customers put down a deposit to take the software home for a few days. If they buy it, the deposit is deducted from the sales price. If they return the software, the store keeps the deposit.

``It doesn’t matter whether the transaction is called `rental,′ `buy-back,′ `try before you buy,′ `preview,′ `evaluation’ or any similar term _ it is illegal,″ said Sandra Sellers, who is in charge of enforcement for the software group.

The Computer Software Rental Act passed by Congress in 1990 made it illegal to rent computer software. But a grandfather clause allowed businesses to keep renting some software published before the law took effect while they made the transition to selling software. However, the industry says rental companies have refused to make that switch.

The lawsuit shocked David Krenz, the owner of Software Pipeline in the Portland suburb of Gresham.

``We’ve been contacted a time or two, but usually it’s just a phone call,″ said Krenz, who has been renting software for nearly a decade. ``We were not expecting something like this after this long.″

``Taking action boils down to a question of when do the copyright owners learn about the activity, and then find the time and the ability pursue it,″ said Geoffrey Gilbert, a lawyer for the association in Chicago. ``We’re not trying to stop them from selling software. we’re trying to stop them from renting it. It’s illegal to do that and they know it.″

The problem, said association president Ken Wasch, is that there is no way to ensure the software is purged from a home computer if the original diskette or CD-ROM is returned to the rental store.

``We’re the only industry in the world that empowers each customer to become a manufacturer _ every customer has the equipment to make a perfect copy of the software,″ he said.

An industry analyst said the action was painful but overdue.

``It’s like saying you haven’t filed your tax returns for five years, so why are they asking me for them now?″ said Jeff Henning of Perseus Research, a computer marketing research firm in Needham, Mass.

Henning said the number of software rental companies left in the United States cost manufacturers only a fraction of their income. A much larger problem is pirated software from China, or businesses that illegally copy software for more than one machine without paying a multiple-user license fee.

``It’s a little absurd who they’re targeting,″ Henning said. ``They’ve got whole manufacturing plants in China where they’re pumping out pirate software.″

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