Attorney Steve® Software Audit Defense - We have heard about Copyright Trolls and Patent Trolls, but what about Software Trolls?
Our firm has dealt with many intellectual property law firms and trade associations for the software vendors (such as the BSA, SIIA, and Software Compliance Group). These companies can be “barracudas” when it comes to sorting our your corporate license ownership position and assessing monetary penalties for what they will undoubtedly argue is “software piracy” even if it is just a matter of not being able to locate receipts after growing your business year after year with a series of mergers and acquisitions. This can be very frustrating for small, medium, and even larger businesses to deal with. This blog discusses when legitimate “true up” compliance efforts cross the line and go into “troll mode” in my opinion.
What is a "copyright troll?"
According to one Court:
"Copyright law strikes a practical balance between the intellectual-property rights of authors and the public interest in preserving the free flow of ideas and information and encouraging creative expression, all in furtherance of the constitutional purpose to “promote the Progress of Science and useful Arts.” U.S. CONST. art. 1, § 8, cl. 8; see generally Google LLC v. Oracle Am., Inc., 141 S. Ct. 1183, 1195, ––– L.Ed.2d –––– (2021).
Copyright trolls— opportunistic holders of registered copyrights whose business models center on litigation rather than creative expression—disrupt this balance by inhibiting future creativity with negligible societal benefit.
“Like the proverbial troll under the bridge, these firms try to extract rents from market participants who must choose between the cost of settlement and the costs and risks of litigation.” Design Basics, LLC v. Lexington Homes, Inc., 858 F.3d 1093, 1097 (7th Cir. 2017). Plaintiff Design Basics, LLC, is a copyright troll. Id. at 1096–97. The firm holds registered copyrights in thousands of floor plans for suburban, single-family tract homes, and its employees trawl the Internet in search of targets for strategic infringement suits of questionable merit. The goal is to secure “prompt settlements with defendants who would prefer to pay modest or nuisance settlements rather than be tied up in expensive litigation.” Id. at 1097
See Plan Pros and Prime Designs, Inc. vs, Dultmeir Homes (a case involving architectural infringement)
While we are not making any allegations that any company is a copyright troll (they are in fact seeking to enforce their intellectual property rights), it is when it becomes overly abusive, over-the-top monetary demands (which we have seen so many times),
Top 5 signs that may illustrate you are working with a “software troll” who wants to extract as much monetary damages and inflict as much pain on your company as possible during the software audit process.
- The software company or its representatives will “bully' you (treat you like a criminal);
- They will act rude and condescending even though you can prove you have purchased their software (ex. Microsoft Office, Windows, SQL server, CAL licenses,Visio, etc.)
- If you are missing receipts (ex. because the software you purchased like over 10 or 20 years ago), their representatives will bully you with 3x multipliers and threaten to sue you in Court if the case cannot be settled
- You challenge the terms of an END USER license agreement (which for example may not expressly prohibit commercial use of the software) and the representatives, for lets say, the business software alliance, will inform you that they do not want to discuss the licensing terms, they just want you to pay per their demand (notwithstanding the well known legal principle in the United States that ambiguities in the licensing terms are construed against the DRAFTER OF THE DOCUMENT (i.e. Microsoft, Autodesk, Siemens, Vero Software, Oracle, IBM, Quest, or other software publisher you are dealing with)
- Reasonable offers to settle are scoffed at, and followed by a demand to delete all infringing software (even if its just a case of “lost receipts” and settle the case with us at our fees, and go buy replacement software in the marketplace. This means, you get to pay not only the penalty they are demanding (at risk of a federal copyright lawsuit), and also then go buy new software once that's done, and in many cases to them provide them with proofs of everything you purchased within a short time frame. If not, you have breached their settlement agreement (which I was informed by one copyright counsel “BSA has sued for breach of these agreements before).
So the language is not always friendly, and the negotiations and the process is not always fair. But when the auditing turns to pushing, shoving, bullying, and ignoring requests to talk about the legal issues, this is when you may find yourself dealing with a Software Troll.
NOTE: In the context of illegal movie download cases () the same thing can happen with companies like LHF Productions and Malibu Media, for example, where you can end up paying $200-$50 or more for each movie downloaded on a Bittorent website. Sometimes these companies will show “no mercy” on people. No mercy, to me, is being a bully or a troll.
Ambiguities in licensing agreements are to be construed against the EULA drafter – DUH!
Here are a couple of cases that discuss EULA interpretation:
1. Meridian Project Sys., Inc. v. Hardin Const. Co., LLC, 426 F. Supp. 2d 1101, 1109 (E.D. Cal. 2006)
Finally, defendant contends that summary judgment is inappropriate because the terms of the EULA are ambiguous. Under California law, interpretation of a contract is an issue of law if “(a) the contract is not ambiguous; or (b) the contract is ambiguous but no parole evidence is admitted or the parole evidence is not in conflict. Whether a contract provision is ambiguous is a question of law. When two equally plausible interpretations of the language of a contract may be made parole evidence is admissible to aid in interpreting the agreement.” Further, a party may present extrinsic evidence to show that a facially unambiguous contract is susceptible of another interpretation. If a contract provision is ambiguous, summary judgment is generally improper “because differing views of the intent of parties will raise genuine issues of material fact.” 2. Saks Inc. v. Attachmate Corp., No. 14 CIV. 4902 CM (S.D.N.Y. Apr. 17, 2015):
“Several provisions of the EULA are relevant to this dispute and to the motions pending before the court. Section 2, entitled “ License Grant,” warns the user in bolded text, “You may not exercise any of the rights granted by this License Agreement until you obtain an applicable Licensed Unit(s) Certificate which permits you to use and install up to the number of authorized SOFTWARE units printed therein in accordance with this License Agreement.” Section 2(b) of the EULA provides that a customer may install and use the software on as many Client Devices as the number stated on the Licensed Unit(s) Certificate. However, the licensee is permitted to install a single copy of the software on a “network server,” provided that the user has acquired licenses for each device that “ha[s] the ability to access and use, directly or indirectly, the SOFTWARE from such network server.” The net effect of these two provisions is to require a separate license for each separate device that uses (deploys) the EMSE software. In the event that the user elects to install the software on devices directly, it has to obtain a license for each computer on which the software was installed. And if the user chooses to install the software on a network server, it has to purchase a license for each separate computer that “ha[s] the ability to access and use” the software from the server over the network. The phrase “ability to access and use” is not otherwise defined; under settled principles of contract construction, to the extent that it is ambiguous (and it is), it must be construed against Attachmate, which drafted the EULA without any input from Saks or any other customer.
See Westchester Resco Co., L.P. v. New England Reinsurance Corp., 818 F.2d 2, 3 (2d Cir.1987); Guy Stickney, Inc. v. Underwood, 410 P.2d 7, 9 (Wash.1966). As you can see, whether or not a software licensing term contained in a EULA is ambiguous or not can often be a tough question of fact. We can help review any licensing terms that you believe protect your legal interests.
Listen to Attorney Steve define what a “software troll” is in this episode of ‘Vondran Legal Hour'
PODCAST: Click on the picture above to hear the podcast.
How to make a software troll go into a fit – say you cannot locate al your receipts from 20 years ago
PODCAST: Click on the picture above to hear the podcast.
Contact a Software Licensing Compliance Law Firm
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