In response to a lawsuit accusing the US Navy of pirating more than 558,000 copies of virtual reality software, the Navy conceded Monday that it had installed the software on "hundreds of thousands of computers within its network" without paying the German software maker for it. But the Navy says it did so with the consent of the software producer.

Bitmanagement Software, in a federal lawsuit, claims the government pilfered its 3D virtual reality software on a "massive scale" beginning in 2013. The company says it agreed to license BS Contact Geo on just 38 machines "for the purposes of testing, trial runs, and integration into Navy systems." The suit, in which Bitmanagement conceded that it removed the "control mechanism that tracked and limited the use of the software," seeks hundreds of millions of dollars in damages.

Those damages could grow into billions. The US Copyright Act allows up to $150,000 in damages per infringement.

According to the government's response (PDF) Monday to the July lawsuit by Bitmanagement Software:

Defendant admits that the Navy installed BS Contact Geo onto hundreds of thousands of computers within its network starting on or about August 2013. Defendant denies that BS Contact Geo was installed on the Navy's networked computers without Bitmanagement’s knowledge or authorization. Defendant further avers that Bitmanagement modified BS Contact Geo for the purpose of allowing such installation and that Bitmanagement received multiple updates regarding the status of this installation. Defendant denies that Bitmanagement did not license or consent to such installation and use of its software.

In short, the Navy says that it could use the software on hundreds of thousands of computers with licenses for 38 machines. The Navy denied that a procurement official "acknowledged that additional licenses were necessary for it to distribute BS Contact Geo to its users." The government admitted that it had purchased 38 licenses, but "denies that the software licenses were 'limited,' as alleged by Plaintiff."

The software maker, which said it was under the impression that the Navy would pay hundreds of thousands of licenses, said its program enables interactive collaboration with "high-quality" graphics that, for example, allows its users to visualize a "virtual military base."