Managing Software License Disputes:
Cooperation or Litigation
Presented by Robert J. Scott
Scott & Scott, LLP
800-596-6176
www.ScottandScottllp.com
Managing Software License Disputes: Cooperation or Litigation
Publisher Enforcement on the Rise
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© 2006 Scott&Scott, LLP
BSA Audits
SIIA Audits
SAM Engagements
Big Four Audits
Publisher Enforcement Programs
Managing Software License Disputes: Cooperation or Litigation
Investigation & Evaluation
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© 2006 Scott&Scott, LLP
Inventory of Software Installed
Review and Analysis of Purchase Documentation
Analysis of License Agreements
Determination of Platforms
Review of Customer-facing Functionality
Determination of License Requirements
Reconciliation of Installations and Licenses
Anticipating the Publisher’s Strategy
Managing Software License Disputes: Cooperation or Litigation
Resolution Frameworks
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License True Ups are the least adversarial and best for
strategic relationships.
Cease and Desist Letters may be effective low cost
mechanisms to avoid a protracted dispute.
Software Audits are the most frequently used and
extremely effective.
License Termination is the publisher’s hammer and
prelude to litigation.
Mediation prior to formal legal proceedings may facilitate
communication and resolution.
Arbitration favors end users but can be extremely costly
and protracted.
Litigation is surprisingly uncommon between parties with
ongoing business dealings of any kind.
© 2006 Scott&Scott, LLP
Managing Software License Disputes: Cooperation or Litigation
Software Audit: The Most Common
Resolution Framework
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© 2006 Scott&Scott, LLP
Self Audits are the least disruptive and most
predictable.
Independent Audits involve a third party and
increase costs, but independence is favorable.
SAM Engagements are audits in disguise but may
fit certain situations.
Publisher-Staffed Audits present the highest risk
with no upside and should be avoided.
Managing Software License Disputes: Cooperation or Litigation
Mediation & Arbitration
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© 2006 Scott&Scott, LLP
Pre-litigation mediation can frequently bring the
appropriate parties to the negotiation table.
Mediation can help the parties better understand
each other’s position and perspective.
Arbitration permits the selection of a qualified
decision maker.
Arbitration may present problems of proof for
publishers.
Arbitration will not necessarily save time or money.
Managing Software License Disputes: Cooperation or Litigation
Litigation Considerations
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© 2006 Scott&Scott, LLP
Amount in Controversy may be difficult to
determine because contractual audit provisions do
not specify a formula for resolving licensing gaps.
Switching Costs may change the balance of
power especially if termination provisions are
present.
Probability of Success on the Merits of
ambiguous contractual provisions may be the most
likely scenario for litigation.
Managing Software License Disputes: Cooperation or Litigation
The Importance of Ambiguities in Software
License Agreements
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Determine whether the license in question contains a
provision indicating that ambiguities will not be
construed against the drafter.
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The Parol Evidence Rule states that the parties may
introduce extrinsic evidence to prove that their
interpretations of the contract are consistent with the
parties’ intent when entering into the contract.
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Triable issues of fact regarding software license
contracts with ambiguous provisions generally favor
the end user instead of the publisher.
© 2006 Scott&Scott, LLP
Managing Software License Disputes: Cooperation or Litigation
Combining the Best of Both Strategies
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© 2006 Scott&Scott, LLP
Software audit disputes usually evolve over a
period of months or years.
Many disputes can be avoided through improved
communication.
Clients should cooperate without jeopardizing
their legal rights.
There is a “right” resolution framework for each
situation.
Litigation is necessary in rare cases.
Managing Software License Disputes: Cooperation or Litigation
Contact Information
Robert J. Scott
Scott & Scott, LLP
2200 Ross Avenue, Suite 5350E
Dallas, Texas 75201
Phone: 214-999-0080
Fax: 214-999-0333
rjscott@scottandscottllp.com
© 2006 Scott&Scott, LLP