When software ‘phones home’: The risks of software copyright infringement

Software companies are increasingly using “phone home” technology to detect and report the use of unlicensed or cracked software, making it far easier to identify businesses that infringe copyright. This enforcement activity is particularly common in the CAD and engineering sectors, where high-value software licences can make illicit copies tempting but costly. Under Australian copyright law, installing and using cracked software can expose businesses to significant damages, legal costs and court action. Organisations that receive an infringement demand should act quickly, as an early and strategic response can materially reduce financial and legal risks.

Many businesses assume that using unlicensed or “cracked” software is unlikely to attract attention. That assumption is increasingly wrong and risky.

Since I first wrote on this topic back in 2023, our team has assisted a steady stream of clients who have been caught using cracked software. Cracked software is software that has been modified to operate without a valid authorisation code.

How “phone home” software detects infringement

In many recent cases, the software has a “phone home” function. This alerts the copyright owner to the use of a cracked copy of the software and provides enough information to identify the user.

That information can include:

• the version of the software being used;
• dates and times of use;
• MAC addresses of the computers on which the software is installed; and
• IP addresses.

Where the only identifying item is an IP address, software companies regularly make applications to the Federal Court for pre-trial discovery, which the court generally grants. These orders require internet service providers to identify the alleged infringer by their ISP.

In practice, this means that businesses can be identified quickly, even where the software has been installed without formal approval.

Common targets: CAD and engineering software

The software most frequently involved in these matters is a CAD package. Dassault Systèmes SolidWorks Corporation, the producer of SolidWorks, is particularly active in pursuing infringers.

SolidWorks licences are expensive, with commercial licences typically costing close to $10,000. That price point appears to drive demand for significantly cheaper cracked versions, often with serious legal consequences.

We have also assisted clients facing similar allegations involving Mastercam software (CNC Software LLC). Sometimes, the investigation is first initiated by an overseas investigator before Australian lawyers become involved.

Federal Court records show that other CAD software providers, including Siemens Digital Industries (Solid Edge) and Vertex Systems, have also actively pursued infringement claims in Australia.

Software copyright infringement under Australian law

In Australia, the Copyright Act 1968 (Cth) protects computer software as a “literary work”. The copyright owner has the exclusive right to reproduce, and authorise the reproduction of, the software.  With software, such reproduction generally occurs when:

• an infringing copy of the software is installed; and
• the infringing copy of the software is used, as reproductions of the code occur within the memory of the device running the software.

On an infringement, the copyright owner is generally entitled to either damages or an account of profits arising from the infringement. Courts also have discretion to award additional damages under section 115(4)(b), based on a range of factors including:

• the flagrancy of the infringement;
• the conduct of the infringer after the infringement was complained of; and
• the need for deterrence.

How a business responds once infringement is alleged can significantly affect the outcome.

What to do if you receive a software infringement demand

It is important not to ignore a letter of demand alleging software copyright information.

Early engagement often allows disputes to be resolved quickly and at a lower cost. Ignoring the demand raises the risk of a court awarding additional damages under section 115(4).

Software companies are not shy about going to court. Final judgments are rare, as these matters generally settle beforehand. But late settlement during the litigation process will generally cost more in both settlement money and legal costs. For example, in the 2024 case of Dassault Systems Solidworks Corporation v Platinum RP Pty Ltd, which was ultimately settled by consent orders, damages of $108,444.96 were agreed.

Key takeaways for businesses

For Australian businesses, the recent enforcement activity highlights some clear and practical lessons:

• Cracked software is not free to use. If the price seems too good to be true, it almost certainly is.
• The risk of detection is real and increasing, particularly for internet‑connected devices.
• If you receive a software infringement demand, acting quickly and strategically can save significant time and cost.

Macpherson Kelley’s IP team has experience in these sorts of matters and IP disputes in general. If you’ve received a software infringement demand, getting the right advice early can make a material difference. Get in touch with our team today.

The information contained in this article is general in nature and cannot be relied on as legal advice nor does it create an engagement. Please contact one of our lawyers listed above for advice about your specific situation.