Software Licensing Essentials – Purchasing Tips During an Ongoing Audit!
When your company is involved in a software audit things can get pretty stressful. You are busy auditing your computer networks and seeking to locate receipts and proofs of purchases in order to prove your legal compliance, and meanwhile you need to purchase software for your growing business. Can you legally do this? Will this cause the business software alliance, Autodesk or SIIA (or whatever other entity is auditing your business) to take a more aggressive stance toward you? Will they seek to increase the penalties and fines? Or are you allowed to purchase software that you need (obviously through legal reseller channels and authorized providers approved by the software publishers). This copyright blog explores this concept and provides some general things to think about.
Does the letter from the BSA, SIIA, Microsoft or Autodesk constitute a “litigation hold letter?”
We have seen many different types of letters from many different intellectual property law firms demanding that companies engage in “voluntary” corporate audits to identify all software products being used on all company computers, networks, and servers, whether in the United States or internationally, and to prove their compliance with software piracy laws (i.e. copyright laws). These letters often demand that no new software be purchased during the auditing process. Most of the letters claim that this may “prejudice or interfere with our ability or willingness to settle the case.” The audit letter will usually also say something to the effect that “buying new software will not cure prior licensing shortages.” These statements seem like a litigation hold letter, but must you comply?
For the most part I would say these are probably true statements and good general concepts to follow. However, there are times when a company is in the middle of an audit and simply put, the company is growing and new employees are being hired and the need for additional software arises. This usually puts the IT department, COO, CFO and perhaps even the CEO in the predicament of wondering what to do. Should you purchase software, or wait until the software audit is completed and the case gets settled? Keep in mind officer and directors need to be aware of their own liability that could arise in the case where the issue is willful copyright infringement.
This is not always an easy question and the answer may differ depending upon Microsoft, Autodesk or other company you are dealing with. Adhering to the software lawyers requests may make the most sense. However, if the audit starts dragging on due to one or more issues (the average software settlement can take from 2-6 months), then purchasing software might be advisable. For example, stalls in settling a case can result from one or more of the following problems:
- Their attorneys not responding (general response lag times);
- Failure to be able to negotiate a favorable confidentiality agreement / Rule 408 agreement;
- Failure of the software company to provide the name and identity of the informant (if in fact there is one at all – for the most part they refuse to disclose who informed them of software piracy, and in some cases we question whether or not they have reliable credible evidence);
- Failure to provide our IP attorneys with what we refer to as “probable cause” evidence which would justify a total audit of all company software (which of course is time consuming, and requires deployment of valuable internal resources)
- Failure of the software companies or their attorneys to settle the case on fair and reasonable terms, using a reasonable multiplier (click here on how to calculate damages in a typical software infringement case)
- Inserting onerous settlement agreement terms that delay the settlement negotiation process.
- A third party enters the scene of an ongoing audit, and starts demanding a totally separate “license verification process” with additional “deployment” requirements.
The list goes on. But when the software company or their representatives refuse to play fair what are you supposed to do? NOT RUN YOUR BUSINESS? In these types of cases where it is clear there is no good faith in the review and settlement process, or ongoing burdens being placed on the company (where no clear indication is given as to why the company is even undergoing the audit), the need to purchase software to run your business becomes more of a MUST HAVE instead of a NICE TO HAVE. In these cases, all options should be explored with your copyright counsel.
What happens if I violate the terms of the letter from the intellectual property law firm?
There are a lot of threats that come from the software lawyers we deal with. While some are extremely fair and professional, others like to negotiate from the ivory tower and constantly threaten litigation, civil liability and $150,000 in damages for will infringement of copyrighted software. We have also been threatened with corporate RAIDS via federal court orders permitting same (we have never had this happen to any of our clients) and officer and director liability has been waived like a carrot in front of our noses. We do not let this form of intimidation and high pressure tactics interfere with our ability to help our business owners successfully navigate the settlement process.
If you violate the terms of the initial letter you receive from the IP, in most cases LIFE WILL GO ON and we will deal with it as we need to.
Buying software for growing business needs (as opposed to replacing infringing software)
When deciding they need to purchase new software (for architects and engineers usually this case arise with new employees being hired necessitating the need for additional copies of Autocad, which is probably the most frequently audited software from Autodesk and their counsel. While their letters indicate new software should not be used to replace existing software, their letters do not normally address the situation where software is being purchased during the middle of a lengthy negotiating process FOR A COMPANY'S GROWING NEEDS – as opposed to trying to hide or cover up for copyright infringement. Again, this is a good time to speak with your lawyers to make the assessment and advise you of the best option to pursue to minimize your legal exposure.
Contact a Software Audit BSA defense law firm
If you are have received a letter from the BSA, Autodesk, SIIA, Microsoft or some other software behemoth, contact one of our audit lawyers to discuss your case. You have questions and we have answers. Contact us at (877) 276-5084 or fill out the contact form below. Do not retain another firm before you allow us to discuss our services and quote you on defending your case. We will not be beat by the competition and we offer affordable flat rate legal fees whereas other software defense firms, we have heard, charge as much as $10,000 to $20,000 retainers. We provide exceptional service at a fraction of the price.