Intellectual Property, Copyright
[Insert
Title]
and the “Commonwealth use”
defence
PresentedPresented
by [Insertby
Speaker]
Angela
Summersby and Michael Will
Tuesday,
26 #November
2013
[Insert date
as: Day,
Month Year]
Software audits – an increasing reality
What is a software audit?
Akin to the agency right to audit contractor performance, many software licences
include rights for the software vendor to audit customer use
see, for example, SourceIT (Licence and Support)
What risks do software audits pose?
They apply to all customers (agencies, corporates, individuals)
Risks highlighted by a recent audit which revealed a breach of licence
numbers and user types. Likely consequences of a similar breach:
public administration time, adviser costs, “not the model contractor”,
damages or (if lucky) unfunded additional licence fees
Risks posed by software audits are increasing
 65% of respondents in a 2012 Gartner survey said they had been audited
by at least one software vendor during the past 12 months
Gartner's report Software Vendor Auditing Trends May 23 2012.
 Vendors reported as auditing software licence compliance most
frequently were: Adobe, Attachmate, Autodesk, IBM, Infor, Informatica,
Microsoft, Oracle, SAP, Symantec and Vmware
 Why not – just leave the audit provisions out of the software licence?




does not protect from the consequences of a licence breach
no agreed framework for conducting the audit
increases the costs of responding
most vendors will insist on the clauses
Australian Government software framework
 Type of audit that will be conducted and its risks depend on nature of the
software arrangement:
 Shrink wrap – you take what terms you get
 Click wrap – you take what terms you get
 Web-wrap – you take what terms you get
Example:
Investigations
XXX, in its sole discretion, may monitor the Services and
Materials at any time. Without limiting the foregoing, XXX shall have
the right, in its sole discretion, to remove any of Your Material for
any reason (or no reason)
Controlling the software licence terms
 Commercial Off-The-Shelf (COTS) products – the agency can influence
 Customised software - the agency can influence
Agencies are now more likely to be licensees – under the Australian
Government IP Rules, the default position is supplier ownership of IP
The IP Rules remind us that all FMA Act agencies are responsible for ensuring
that software is used, managed and protected appropriately
 Step 1 to appropriate management is to clearly define the terms of use
 Sounds easy!
 The core of a standard licence clause reveals the challenge:
Licence clause and gaps that need attention
The vendor:
(a) grants the customer a perpetual, irrevocable, world-wide, non-exclusive,
royalty-free licence to:
(i) install the Software [where?];
(ii) modify the Software so it can be used on the Customer’s System;
(iii) use and communicate each part of the Software; and
(iv) make copies of the Software for backup and security purposes; and
(b) authorises the Customer to sublicense to third parties the above rights
solely for the benefit of the Customer
But where can the Software be installed? Is the licence an enterprise-wide
licence or a user based licence? What is a user?
Filling in the gaps: critical licence clarifications
The Software should be defined to include Updates and New Releases
adopted by the Customer.
And as painstaking as it is, the attachments to the licence terms should:
 describe the Software:
Software
Version No.
No. copies
Format
 describe the Customer's Existing System (equipment or platform) on
which the Software is to be installed or used
Equipment/platform
Location
The final critical gap – how many users?
 The licence must also describe:
 Is this an enterprise-wide licence? If not,
 How many licensed users – or how many licensed “uses”
Concurrent User Band
Number of
0-1500
Concurrent
licensed users
Fee per
10,000
concurrent
user
1501- 3000
3001 - 4500
4501 – and
above
8,000
6,000
4,000
And the real licence included more explanatory provisions re fees
Once the terms of use are clear – tidy the audit rights
With one note, include nothing less than:
SourceIT based:
Audit of use
(a) The Contractor may annually, or at such other times as agreed between
the parties, audit the Customer’s use of the Software by giving the
Customer at least 28 days notice.
(b) An audit must only be conducted while a representative of the Customer
is present, unless agreed otherwise between the parties in writing.
(c) Each party must bear its own costs of any audit under clause 6.5(a).
Note: can your agency comply with this?
Supplement those audit rights
But also consider:
 A provision that says audit may only be conducted of previous year and if
audit not exercised, right to claim loss or to true up is lost
 A true up provision that says customer will pay additional licence fees, as
total compensation, if audit reveals excessive licence use.
 A provisions that says if vendor discovers, or reasonably suspects,
incorrect use, it will notify the customer promptly and will seek to
mitigate vendor losses
The best medicine is to stay well
Assuming the licence terms are clear, and the contract management is good,
there is no need to fear the audit
The final question should be: have management processes been put in place
to monitor and control:
 the number of users (and type of users)?
 the reproduction of the software so it only occurs on approved systems?
Do you have an IP/software licence register?
Do you have automated systems to assist in auditing?
But it is not possible to avoid all risk, especially if you have to accept standard
vendor terms ……
Copyright
Copyright Act 1968
 s31
 Nature of copyright in original works (1) For the purposes of this Act,
unless the contrary intention appears, copyright, in relation to a work, is
the exclusive right:
 (a) in the case of a literary, dramatic or musical work, to do all or any of the
following acts:

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(i) to reproduce the work in a material form;
(ii) to publish the work;
(iii) to perform the work in public;
(iv) to communicate the work to the public;
(vi) to make an adaptation of the work;
Copyright Act 1968
 "literary work" includes:
 (a) a table, or compilation, expressed in words, figures or symbols; and
 (b) a computer program or compilation of computer programs.
 "computer program" means a set of statements or instructions to be used
directly or indirectly in a computer in order to bring about a certain result.
Copyright Act 1968
 s36
 Infringement by doing acts comprised in the copyright
 (1) Subject to this Act, the copyright in a literary, dramatic, musical or artistic
work is infringed by a person who, not being the owner of the copyright, and
without the licence of the owner of the copyright, does in Australia, or
authorizes the doing in Australia of, any act comprised in the copyright.
Comcover Statement of Cover
 7. General Liability and Professional Indemnity
 If you are legally liable to pay compensation for
 …
 infringement of copyright, title or slogan, passing off or breach of intellectual
property rights (including moral rights), or
 …
 and
 the claim for loss was made against you during your period of cover, and
reported to Comcover during that period of cover or as soon as reasonably
practicable
 then
 we will indemnify you for all damages or judgments, and defence costs
Comcover Statement of Cover
 Exclusions
 We will not pay for
 …
 any liability arising out of your breach of contract unless liability would have
arisen in the absence of that breach
Copyright Act 1968
 s183 - Use of copyright material for the services of the Crown
 (1) The copyright in a literary, dramatic, musical or artistic work or a
published edition of such a work, or in a sound recording, cinematograph
film, television broadcast or sound broadcast, is not infringed by the
Commonwealth or a State, or by a person authorized in writing by the
Commonwealth or a State, doing any acts comprised in the copyright if
the acts are done for the services of the Commonwealth or State.
 (5) Where an act comprised in a copyright has been done under
subsection (1), the terms for the doing of the act are such terms as are,
whether before or after the act is done, agreed between the
Commonwealth or the State and the owner of the copyright or, in default
of agreement, as are fixed by the Copyright Tribunal.
Issues that might arise after an audit and in a
claim
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Use and infringement
Quantum – licence fees, back maintenance, interest
Delay
How to avoid or manage a claim
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Documentation and record keeping
Regular internal audits
Choice of suppliers
Get advice early
Questions?
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