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By: Jeff Alitz
For more than a decade, software companies or software trade groups/alliances have pursued aggressive cost-recovery strategies against customers and former customers for their alleged unauthorized use (i.e, no license available) of software and other intellectual capital published and marketed by the companies. While the deliberate use of such software without license is not condoned nor encouraged, the cost recovery tactics – and the targets of such tactics – are not always appropriate nor warranted. The savvy tech user and their counsel should be aware of the most egregious recovery strategies and the best protocol to fight them.
The least scrupulous piracy enforcers may employ a variety of methods, from targeting small and undercapitalized companies with only several software users with the threat of crippling fines to giving whistleblowers not only anonymity but also cash for their reporting of the use of unlicensed software to the imposition of damage multipliers (3X actual damages are common) found in seldom read software-license agreements against even the unintentional use of unlicensed software (even where the user has simply misplaced the license over time). Most often, the law firm or other designees of the software company or trade group initiates contact with an alleged unlicensed software user by a demand for a software audit. If the user cannot demonstrate that the products it uses are fully licensed and up to date and tied to all the users’ employees, the software company sharpens its knives.
What can be done? Obvious, but maintaining and internally broadcasting that all the software IS licensed will go far to discourage whistleblowers and will help thwart the piracy hounds if they continue their hunt. IF violations of the software agreements remain unexplained after the audit is complete and the software company continues its pursuit, the “target” and its counsel can employ a variety of defenses to the claims including arguing any infringement was innocent ( which typically reduces the available fine but does not outright exonerate the software user), focusing on statute of limitations defenses and to project a willingness to defend the license violation allegations while at the same time working to achieve a cents on the dollar settlement with the best release that can be negotiated.
Freeman Mathis & Gary’s Data Privacy and Security Practice Group is here to help clients with policies and training. If you have any questions or would like more information, please contact Jeff Alitz at [email protected].