Software Litigation Essentials - Standing to file a lawsuit as a software association
What happens if you receive an audit demand letter from the Business Software Alliance (some refer to as "software alliance") and they are demanding a ridiculous amount of money to settle. Yes, we have seen legal demands approaching a MILLION DOLLARS. Some people ask me what happens if we cannot settle our BSA software audit out-of-court? Will they sue me? Can an "association" sue me? Do they have legal "standing" and are they the "real party in interest" to sue me? This blog takes a look at a hypothetical response to these questions.
Case citation: Niantic, Inc. v. Global++ et al, 4-19-cv-03425 (CAND 2019-09-26, Order) (Jon S. Tigar)
The Court held (in denying a motion to dismiss by the Defendant) that:
"If a party is neither an individual nor a corporation, its capacity to be sued is determined “by the law of the state where the court is located.” Fed. R. Civ. P. 17(b); Mocha Mill, 2019 WL 1048252, at *4. Under California law, there must be some existing entity aimed at in a civil action, and against whom the court's judgment will operate. Meleski v. Estate of Albert Hotlen, 29 Cal. App. 5th 616, 625 (2018). “[A] nonentity is incapable of suing or being sued.” Banks.com, 2010 WL 727973, at *7 (quoting Oliver v. The Swiss Club Tell, 222 Cal. App. 2d 528, 537 (Ct. App. 1963). However, an unincorporated association, “may sue and be sued in the name it has assumed or by which it is known.” Cal. Civ. Proc. Code § 369.5. An unincorporated association is defined as
“(1) a group whose members share a common purpose,
(2) who function under a common name under circumstances where fairness requires the group be recognized as a legal entity.”
See Mocha Mill, 2019 WL 1048252, at *4 (quoting People ex rel. Totten v. Colonia Chiques, 67 Cal. Rptr. 3d 70, 75 (Ct. App. 2007)).
So, if a California company were to be sued the the Business Software Alliance ("BSA"), a trade association for the major software publishers such as Microsoft, Adobe and Autodesk, it appears possible that it could have the standing to file the federal court copyright infringement lawsuit if the audit case cannot be settled. In this event, it shows even more than ever the importance of hiring an experienced copyright litigation attorney to help you defend against the license compliance audit. If the case cannot get settled, since copyright law is federal, in most cases we can handle the litigation (subject to the federal court local rules of admission).
Responses from BSA attorneys
Keep in mind I have spoken with many BSA lawyers about what happens if the case doesn't settle. From their standpoint, they would send the case back to the publisher to figure out if they want to sue or not. For example, the BSA is investigating a claim of Autodesk software piracy (CAD, Revit and Maya are typical products at issue), and the case does not get settled (let's say the BSA wants 50k to settle while the company cannot afford more than 10k), I have been told in these situations the case would be sent back to Autodesk and they would decide if they want to file a lawsuit or not. This is not something you can rely on, but this is what I have heard from more than one of the BSA regional software license attorneys.
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Handling a BSA software audit from start to finish is not something most courts look forward to. These audits can be very time consuming taking an inventory of all computers, laptops and servers and digging up receipts sometimes from 10 years ago (yes, I know, they expect you to have these on hand if you are to get credit for having a valid license). At any rate, contact us to discuss your case. Litigation is the exception, rather than the rule, and we can help guide you to an amicable out-of-court settlement. We can be reached at (877) 276-5084.