Legal Commentary

Software vendors playing hardball

By David Canton

For the London Free Press – February 1, 2010

Read this on Canoe

IBM recently announced that Euro Partners, a New York-based brokerage, downloaded $1.7 US million worth of IBM software between 2003 and 2008 without permission.

Euro Partners, a unit of BGC Partners, was acquired by BGC in 2005 for about $97.3 million. IBM accuses BGC of downloading extra copies of its Informix software without paying licensing fees.

IBM is suing BGC for breach of contract and copyright infringement and is seeking an injunction to impound all improperly downloaded copies of its software.

In 2008, after a customer audit, IBM found BGC was downloading more copies of Informix than its purchase agreement allowed. In September 2008, IBM sent BGC a bill for $1,730,665.24; BGC refused to pay.

In December, IBM offered BGC a new licence covering both previously licensed copies of Informix and the improperly downloaded copies. When BGC said no, IBM terminated BGC’s International Program License Agreement.

As a condition of its IPLA, BGC was required to destroy its copies of Informix. Not only did BGC refuse to destroy existing copies, but it downloaded more after the IPLA ended.

This is not the only example of a software distributor playing hardball and cracking down on users of unlicensed software.

The Business Software Alliance, an industry trade group that polices software licences, announced last fall it settled with 12 Canadian companies for a total of $431,336 in damages for using unlicensed software. Settlements ranged from $11,900 to $128,800.

These are not always instances of intentional “theft” of software. Sometimes the business simply doesn’t keep proper track of its software use compared to what they have actually licensed.

The most common way software vendors become aware of improper use is through tips from current or former employees.

In its 2009 Global Software Piracy Study — available at www.bsa.org — the alliance notes that “in 2008, the worldwide monetary value of unlicensed software — ‘losses’ to software vendors — was $53 billion. This was up $5.1 billion from 2007, or 11%, in non-constant dollars.” In 2008, “for every $100 of legitimate software sold, another $69 was pirated.”

Calling this entire amount “losses” is a stretch, since many of those who copied would simply not use the software if they had to pay for it.

Regardless, it is clear that any business or organization that uses a significant amount of unlicensed software — whether intentionally or through lax management — exposes itself to possible fees and damage claims likely to exceed the actual licence fees. Not to mention the internal time and public embarrassment entailed in such a claim.

Full post as published by eLegal Canton on February 01, 2010 (boomark / email).