Recent Trends in Software Licensing and Disputes
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Recent Trends in Software Licensing and Disputes Presented by Robert J. Scott Managing Partner Scott & Scott, LLP www.ScottandScottllp.com Recent Trends in Software Licensing and Disputes Agenda Transactional Issues ο Enterprise Agreements & Site Licenses ο Negotiating Favorable Licensing Terms ο Audit Provisions Post‐Dispute Issues ο Common Mistakes in Software Disputes ο Negotiating Pre‐Audit Agreements ο Investigating License Compliance ο Determining Amount in Controversy ο Settlement Agreements ο Litigation Considerations Copyright © 2012 – Scott & Scott, LLP Recent Trends in Software Licensing and Disputes Transactional Issues ο Consider negotiating software licenses at the time of purchase ο Software licenses can be complex, expensive, and onerous ο Most leverage at the beginning of relationship or renewal of the agreement ο Little or no leverage when user is already in breach Copyright © 2012 – Scott & Scott, LLP Recent Trends in Software Licensing and Disputes Enterprise Agreements and Site Licenses ο Agreements Should Be Easy to Understand and ο ο ο ο Manage Consider Soft Costs of Compliance in Addition to Hard Costs of Software Acquisition Periodic Reporting or True‐Up Requirements Resellers Often Sell the Wrong Licenses or Recommend the Wrong Agreements Verify that the Company Has the Right Kind of Agreements In Place (OEM, ASP, SPLA, etc.) Copyright © 2012 – Scott & Scott, LLP Recent Trends in Software Licensing and Disputes Negotiating Favorable Licensing Terms ο Evaluate how the software will be used ο Understand the license requirements, especially if ο ο ο ο virtual environments or clusters are present Try to identify and resolve ambiguities before agreement is signed Ensure that the license expressly grants usage rights required for architecture being used Confirm what rights are upon termination or expiration of the license If you are an ISV or VAR, consider an escrow agreement Copyright © 2012 – Scott & Scott, LLP Recent Trends in Software Licensing and Disputes Audit Provisions ο Publisher’s Rights Under the License Agreement are Usually Onerous ο Typically Provisions Contain: ο Right to Enter and Inspect business to Confirm Compliance ο Use of a Third‐Party Auditor ο Penalties, Including Back Maintenance and Interest for 2 or 3 Years ο Publishers Will Occasionally Negotiate Audit Provisions ο Easier to Negotiate Before License Purchase Completed Rather than After Dispute Arises Copyright © 2012 – Scott & Scott, LLP Recent Trends in Software Licensing and Disputes Post‐Dispute Issues ο Bases for Liability ο Breach of Contract Liability ο Copyright Infringement Liability ο Successor Liability Resulting from Mergers or Acquisitions ο Individual Liability for Officers and Directors ο Circumvention of Access Control Technology ο Escalation of audit to publisher’s legal department ο Decision to conduct audit or initiate litigation Copyright © 2012 – Scott & Scott, LLP Recent Trends in Software Licensing and Disputes Common Mistakes Made in Software Disputes ο Failure to Negotiate Audit Procedures ο Reliance on IT Staff to Deploy Discovery Tools ο Failure to Understand and Gather Proper Proof of Purchase Documentation ο Failure to Produce Audit Results as of the Effective Date ο Scrambling to Buy Software Products after Being Notified of the Dispute Copyright © 2012 – Scott & Scott, LLP Recent Trends in Software Licensing and Disputes Negotiating Pre‐Audit Agreements ο Establish Framework for Audit ο Scope ο Auditors ο Whether On‐Site Meeting Will Be Allowed ο Confidentiality and 408 Agreements ο Timeframe ο Consequences of Non‐Compliance – Buy or Uninstall Copyright © 2012 – Scott & Scott, LLP Recent Trends in Software Licensing and Disputes Investigating License Compliance ‐ Deployments ο ο ο ο ο ο ο Automated Process Designed to Identify all Software Products Installed on Corporate Computers Discovery Tool Selection is Critical to Success Discovery of All Assets is Challenging Reporting is Unreliable Validation is Difficult Make Sure all Data is Protected by Attorney Work‐Product Privilege Attorneys Experienced With Software Licensing Should Analyze the Data Copyright © 2012 – Scott & Scott, LLP Recent Trends in Software Licensing and Disputes Investigating License Compliance ‐ Entitlements ο ο ο ο ο ο Process of Gathering and Documenting Proof of Ownership of Software Licenses License Agreements, Manuals, Media, Purchase Orders, and Checks are Not Sufficient Proof Dated Proofs of Purchase are Required Valid Proof Must Show Product Name and Version The Entity Listed in the Invoice or Other Proof of Purchase Must Match the Entity Being Audited Clients Should Leverage Vendors to Help Compile Entitlement Data Copyright © 2012 – Scott & Scott, LLP Recent Trends in Software Licensing and Disputes Determining Amount in Controversy ο Process of Analyzing Gross Installation Information against Gross Invoices for each Specific Product ο License Types, Use Characterizations, and Downgrade Rights must be Considered ο Must Include Products not Included in Software Discovery Reports Such as Client Access Licenses, and Remote User Licenses Including Terminal Server, VPN and Citrix Users ο Calculate the Potential Fine Exposure for the Client Prior to Producing the Audit Results Copyright © 2012 – Scott & Scott, LLP Recent Trends in Software Licensing and Disputes Settlement Agreements ο Determine whether Signer is Required to Certify ο ο ο ο Accuracy of Audit Materials Understand that the Release is Predicated on the Accuracy of Certifications and in Many Instances Future Performance Never Allow an Agency to Conduct Future Inspections Non‐monetary Provisions Have “Costs” as Well Confidentiality is Sometimes Negotiable Copyright © 2012 – Scott & Scott, LLP Recent Trends in Software Licensing and Disputes Contact Information Robert J. Scott, Esq. Managing Partner Scott & Scott, LLP. 1256 Main Street, Suite 200 Southlake, TX 76092 Phone: (214) 999‐2902 E‐Mail: rjscott@scottandscottllp.com Copyright © 2012 – Scott & Scott, LLP
