Software Law and Reseller Agency Principles
There are many different types of agency. For example, someone can be an “actual agent” of your company. For example a real estate agent properly licensed is an agent of the brokerage where he or she hangs their license. There may also be “implied agency” where it appears from the facts and circumstances that one person is the agent for another person or company. In software law, we look at situations where a client buys software online at what they believe is a valid and authorized reseller of a software company's products. For example, a website may indicate that the seller is an “authorized Microsoft reseller” or “Autodesk approved company” or other words to that effect. These companies may be trying to affiliate with the software company so that they can give the appearance of legitimacy, and thereby induce people and companies to make software purchases through their website. Often, the software may be sold or advertised at greatly reduced rates.
Not all customers know whether or not these websites and online retailers are legitimate or not, and they may be induced to buy software (not knowing of the intricacies of software licensing agreement and passage of legal title), and yet the software companies get wind of the purchase and they want to accuse the purchaser or downloader of their software of being a software pirate or willful copyright infringer. This is where our copyright law firm gets involved, and we have to look at whether or not the website operator was an “ostensible agent” of the software publisher or not. If so, the software company alleging infringement may have had a duty to police the website operator and should be responsible for shutting them down and seeking damages from THEM and not our clients who had no reason to believe they were doing anything wrong. This is just another legal topic in the war against infringement that we fight every day.
What is an “ostensible agent”?
California Civil Jury Instructions (CACI) explains what the requirements are to show that another person or entity was the Ostensible agent of the other. Under agency principles, the principle shall be liable for the acts of the agent. Here is the definition you need to know from comes from CACI 3709. This might be alleged, for example, in a countersuit against the software company if they try to sue you for infringement simply because you purchased discounted software online.
3709. Ostensible Agent
[Name of plaintiff] claims that [name of defendant] is responsible for [name of agent]'s conduct because [he/she] was [name of defendant]'s apparent [employee/agent]. To establish this claim, [name of plaintiff] must prove all of the following:
1. That [name of defendant] intentionally or carelessly created the impression that [name of agent] was [name of defendant]'s [employee/agent];
2. That [name of plaintiff] reasonably believed that [name of agent] was [name of defendant]'s [employee/agent]; and
3. That [name of plaintiff] was harmed because [he/she] reasonably relied on [his/her] belief.
Here are some additional resources to consider.
“Whether ostensible agency exist[s] is a question of fact and may be implied from [the] circumstances.” See Yanchor v. Kagan (1971) 22 Cal.App.3d 544, 550 [99 Cal.Rptr. 367.
Cal. Civil Code section 2300 provides: “An agency is ostensible when the principal intentionally, or by want of ordinary care, causes a third person to believe another to be his agent who is not really employed by him.”
Cal. Civil Code section 2298 provides: “An agency is either actual or ostensible.”
Cal. Civil Code section 2317 provides: “Ostensible authority is such as a principal, intentionally or by want of ordinary care, causes or allows a third person to believe the agent to possess.”
As you can see by the jury instructions in California, if a software company allows another company to pretend that it is affiliated, and does nothing to dispel that notion (i.e. they could easily send them a cease and desist notice or take legal action against the online retailer if there is no affiliation), then they may be “turning a blind eye” which in many cases you could argue they do in order to send their “software infringement letters” to companies of all types. We see this all the time. Instead of blaming the company that illegally may have sold the software without authorization, they go after the company because at $150,000 per infringed work” this may be seen as a more attractive revenue generator alternative. So this is one of the defenses that should be looked at if you have received an infringement demand or audit letter from the software alliance, SIIA, Microsoft, Adobe, ANSYS, minitab, Bentley, Symantec, McAfee, etc. It should be investigated whether or not the seller was acting as ostensible agent, due to the neglect of ordinary care to police the marketplace.
Conversation with software infringement lawyer
One software lawyer we spoke with, when presented with this question, informed me: “we cannot police everything, there are too many companies selling software online at discounts.” I said “if I were a multi billion dollar software company I would have a team of online sleuths patrolling the marketplace and I would be sending “take down” notices and “Cease and desist” letters to every last one of them, no question. I was then told “well your Client should contact our customer service center before they purchase software online to make sure they are buying a properly authorized copy.” I said “do you have that phone number to the call center you can give me right now, and do you advertise this online so people are aware of this. His response was “no we do not.” I asked “are you telling me if I was fortunate enough to find the customer support number, and waited on hold for a half hour, are you saying the person on the other end of the line will know if a website operator is valid or not and whether or not the software they were selling is valid or not and he basically went silent. This is a typical day in the software piracy trenches. They know they should be policing online, and in fact, I pointed out there are still videos on youtube that tell a person how to get illegal software crack codes for particular pieces of software. Why are these sites still up and running?
Contact a software audit law firm
If you are facing a software audit demand letter from the BSA (business software alliance), SIIA, or other software company before you call their counsel directly, you should call us to determine your software audit rights and speak with a copyright lawyer. We offer a free initial consultation and low predictable fat rate fees. We are a leader in the field and no other firm provides more audit defense information (videos, blogs and software audit checklists) than we do. Call us at (877) 276-5084.