Software Audit Essentials – Keeping it confidential!
When you finally get down to settling your case, and you have agreed on a settlement amount, payment terms, and other critical points, a draft of the settlement agreement will then be sent over to us, which will need to be closely reviewed. As we have discussed in other software audit blogs, there are many tricks that can happen at this stage of the case. This blog discusses the role of the confidentiality agreement. If you are facing an audit from trade associations such as the business software alliance or the software information industry association, fill out the contact form below to discuss your case in confidence with one of our copyright attorneys. We can handle BSA, SIIA, Autodesk, Microsoft Audits and cases with IBM.
Listen to Attorney Steve, The Software Lawyer, explain common terms you may encounter in a BSA software settlement agreement
PODCAST: Click on the icon above to hear our legal radio show that discusses in general terms handling a settlement contract with the software alliance.
Does the BSA really publicize the settlements?
Yes. In fact, we recently dealt with a intellectual property lawyer from a large law firm that indicated “if your client wants confidentiality with this settlement, that will cost an extra 5-7k.” I felt like I was at McDonalds being “supersized.” At any rate, the lawyer made clear to me that the BSA would be more than happy to post the terms of the settlement on their website. In fact, as you can see here, this has been done before on their “press release” page:
That theory is that by posting and publicizing the settlement terms, this will deter other companies from pirating software in the future. So this is something that needs to be taken serious in every case UNLESS OF COURSE YOU WANT THE WORLD TO KNOW YOUR BUSINESS JUST SETTLED A CASE FOR SOFTWARE LICENSING SHORTAGES.
Will the public find out about the copyright infringement settlement?
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Is it extortion to require me to pay money to keep the settlement secret?
This is not a question that has been answered yet. It is important to think about this. Click on the podcast icon below to hear Attorney Steve discuss this legal issue. We have also written a blog addressing potential extortion in the software settlement context.
Sample confidentiality clause
Here is a look at what a sample provision in a software settlement agreement might look like following an audit, give or take (this is just to provide you with an idea of how one sided the provision might actually look):
Confidentiality. The parties to this Agreement agree that the terms of this Agreement shall remain confidential to the extent possible, and that the settling software company agrees there will be no press release issued by the settling software company.
The settling software entity or association agrees only make disclosure of the terms of this settlement agreement if they reasonably deem it to be necessary or required by a lawfully issued subpoena or valid court order. This means, if we receive a subpoena, which appears to be valid, we will turn over and disclose the terms of this settlement without any prior notice to your company.
We will also disclose the terms if we deem it necessary to comply with local rules, state or federal regulations, ordinances, requirements of government agencies, mandates of state and federal courts, or demands for the information from the software company's CPA, auditors, lawyers, insurers, etc., and no notice to you is required. What they do with the information is up to them.
NOTE: While this is not the exact language you will likely see, it does highlight some of the important issues and DEFICIENCIES you are likely to encounter as far as protecting your business from future embarrassment if the terms of the settlement agreement are leaked.
Points of negotiation for confidentiality provisions in software settlements
Here are some things to think about (not an exclusive list) when reviewing the software settlement agreement you are presented to sign:
- Is the BSA or software company (ex. Autodesk), going to make you pay for confidentiality?
- If so, what do they want (ex. 5-20k)?
- Should you agree to pay this amount?
- Is this legal extortion?
- If so, how should this be countered / approached?
- How do I protect against language that the settlement could be revealed pursuant to a court-ordered subpoena?
- Are you going to make sure the company gets notice prior to any disclosure of the protected information?
- What are the remedies if the software company breaches confidentiality?
- Will there be a liquidated damages clause?
- If so, how much for liquidated damages?
- Will any disclosure be deemed a “material breach of the contract?”
- How do you make sure the law firm representing the software company agrees to keep everything confidential?
- For required disclosures to the software company's auditors and regulators, how will you be sure they have an obligation to keep the settlement secret?
These are just a few things to consider and every settlement agreement with every law firm must be closely examined, as these agreements are usually not out to protect your business, it is to protect the giant software companies. This is a very important point because if the settlement is leaked to the public or the press, you will have a public relations nightmare on your hands trying to put the jeannie back in the bottle. Protect your business by hiring experienced BSA and software counsel to negotiate these terms.
Our first general suggestion is to try NOT to do this yourself, or by using an in-house counsel who is not experienced in these matters. Focus on your core business and let an experienced BSA defense law firm handle your negotiations and settlement agreement. We will not address all key points that should be addressed in a software agreement. However, here are a couple of things to think about:
- Put in a liquidated damages clause
In the event disclosure is requested by any third party, or required to be made to any lawful entity, Settling software company agrees to immediately notify Ace Architecture in writing and to provide them with an opportunity to object by any legal means available. Failure to provide such notice will be deemed a material breach of this agreement and will trigger a liquidated damages event. In the event of failing to advise settling parties with prior notice and chance to object, because damages are incapable of being calculated with reasonable certainty, Software company will be obligated to pay, within 30 days of any disclosure that violates this section, a liquidated damage in the amount of $500,000 plus any attorney fees and public relation fees that may be incurred in remedying the negative effects of an improper disclosure under this section.
2. Demand prior notice before any disclosures of confidential settlement communication is made.
There are other ideas, so contact us below if you are facing an audit by the SIIA, BSA, Autodesk, Microsoft or other software compliance company.
Contact a BSA defense law firm
Our firm is a leader in software licensing defense. We have helped countless companies both large and small and both local, regional and international companies resolve disputes involving software licensing shortages. While other firms may tell you the process takes 9 months to a year and while they may demand $20,000 or more in a retainer fee (billing all of their time hourly – get ready for the ongoing shocking legal bills), our firm takes a much different approach and we offer affordable flat rate legal fees for most cases. Contact us at (877) 276-5084 for a no cost initial discussion or fill out the contact form below to have one of our software audit lawyers contact you, normally within the hour.