The complaints we hear about managers in the U.K. are enough to make us feel fortunate that our own aren't quite as bad as we thought they were.
I can't even imagine a manager in the U.S. in a company of any size suggesting that and getting away with it.
The way you handle it depends on your own perception of risk management. If you simply follow your manager's orders, what kind and how much trouble will you be in? Versus: if you challenge him, what kind and how much trouble will you be in then?
Over here, depending on which state's laws you're subject to, you MIGHT not be prosecuted if the software vendor found out. Courts in many jurisdictons are sympathetic to workers' needs to do what they're told in order to feed their families.
So on with the confrontation option. Most impersonal, most likely to resolve the problem, most likely to make the manager steaming mad: Tell your company's legal counsel about this. Once they know about it they have no choice but to act because they will be held responsible.
Almost as bad for you but not quite as likely to solve the problem: Tell your manager's boss. He may be incompetent, he may agree with your boss, he may tell your boss, he may not appreciate people breaking the chain of command, the list of less-than-optimum outcomes is quite long.
Most bureaucratic: Write a memo to somebody. Your boss, his boss, the company president, the corporate attorney (or do you call them solicitors?), your HR (personnel) department. Say that since you're a mere peon you don't presume to be able to interpret the fine print on software shrink-wrap packages, but you're awfully worried that the company could be on the verge of a terrible mistake. Say that you'll obey your manager's orders because you trust him to do the right thing, yet this issue might be worth review by someone trained in the law. No one will really be fooled by your language, but by putting this in writing you have evidence that at least you thought about what you were doing and asked for help. It will put your boss in the uncomfortable position of knowing that your memo is on record and he won't be able to easily weasel out of an accusation. He still won't be happy with you, but in some cases this paper trail could protect you from the worst of his wrath.
The obvious: Talk to your manager. I assume you've already tried that, to no avail. Explained to him what you've explained to us. That his reasoning is faulty and that he could be subjecting you all to the possibility of a crippling fine. That you all love him but nobody loves anybody THAT much.
It might help to get a couple of other employees scared witless about this so he'd hear it from more than one person. Especially if one of them is so scared that HE would talk to the boss instead of you having to do it. ^_^
