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Entries in software licensing (2)

Tuesday
Jan062015

Show Me the License: Is Your Company Ready?

 

Business Litigation Attorney EncinoBusiness Litigation Attorney

 

by David Gurnick
818.907.3285

 

Good record-keeping is a burden. But doing so is important. Here is an example of why it is important to keep good records of all software licenses.

Business Software Licensing LawThe Business Software Alliance is a consortium of large software and tech companies like Adobe, Intel and Microsoft. One of BSA’s missions is to stop software piracy.

BSA advertises, asking the public to report piracy. BSA’s ads encourage workers to report their employers for potential unauthorized software, via a toll free number or webform. BSA offers cash rewards. Their website notes that in a recent year, they investigated over 15,000 piracy reports. Many of the reports are from disgruntled ex-employees, seeking revenge for real or perceived grievances.

BSA contacts businesses suspected of using unauthorized software and often demands that the company do a self-audit and inform BSA of all unlicensed software in use. BSA then negotiates settlements, typically a multiple of the license fees that would have been charged. BSA claims the multiplier is essential to deter piracy. The multiplier also generates more revenue for BSA.

Company self-audits might identify typical uses of software programs, for example Adobe Photoshop, Microsoft Office, or other programs. Sometimes a company will respond pointing out that the software was purchased properly and is being used legitimately. One of BSA’s possible responses: “Show us the licenses.”   

Software Licenses: What Does the Law Say?

What if the software was legitimately purchased many years ago? Who keeps copies of old licenses and purchase receipts? 

Most record retention policies allow destruction of documents after four, five or seven years. Many companies continue to use software for a decade or more. Even a retention policy of 10 years would not produce software licenses or purchase receipts for software purchased that long ago. 

Having no proof of purchase and no copies of licenses could potentially result in financial penalties for many companies.  Because, under the law, a software maker like Adobe, Microsoft or BSA as their representative, can prove infringement by showing just two facts: 

  1. That it owns the copyright for the software (easy for Adobe to prove with regard to Photoshop, and for Microsoft to prove with regard to Windows, Word or Excel); 

  2. The company used the software (also easy to prove, especially when the defendant acknowledges using these programs). 

Under the law, the company’s response – that the software was legitimately purchased, and is used under a proper license – is a legal defense.

The law says it is the company’s burden to prove it has a license from the copyright owner. The proof is a copy of the license or proof of purchase. A company that cannot produce a license or proof of purchase may be found liable and labeled a “pirate.”

For a company that cannot readily find such records, there might be secondary methods to prove software was licensed. 

A company might ask the supplier of the software if it still has records of the original sale. The software maker might have records showing the original software purchase was registered by a warranty registration. A software consultant or technology officer may have other records proving the purchase, based on requests for assistance or consultation with the maker over the years.  Old billing and payment records might be unearthed, to see if they reflect the original purchase. But often such records are difficult, or impossible to find.

For most companies, the message is clear: Keep the purchase records and licenses for all software, permanently.

Because copyright ownership can last over a hundred years, and it is always the user’s burden to prove proper licensing, these records may be essential, even many years after the software was first purchased. It is easy to take a photo or screen shot and save these in electronic files. Then, if you are contacted by BSA or someone else demanding that you prove your software is authorized, you will be readily able to do so.

With BSA asking potentially disgruntled employees to report, this is a relatively simple step for proving you're licensed to use.

David Gurnick is a business litigation, franchising and licensing attorney. Contact him directly for more information at 818.907.3285 or email: dgurnick@lewitthackman.com.

 

 

Disclaimer:
This Blog/Web Site is made available by the lawyer or law firm publisher for educational purposes only, to provide general information and a general understanding of the law, not to provide specific legal advice. By using this blog site you understand there is no attorney client relationship between you and the Blog/Web Site publisher. The Blog/Web Site should not be used as a substitute for obtaining legal advice from a licensed professional attorney in your state.

Tuesday
Oct042011

Software Licenses (and Appleā€™s Dominance) Are Reinforced by Ninth Circuit

Business LitigationIP Business Litigation Lawyer

Nicholas Kanter
818.907.3289

 

The Ninth Circuit recently reaffirmed a company’s ability to use a license agreement to significantly restrict customers’ use of its software. 

In Apple, Inc. v. Pystar Corporation (filed September 28, 2011), Apple sued Pystar Corp., a small computer company selling its own brand of “Open Computers” running Apple’s proprietary operating system. 

Apple claimed Pystar would purchase Apple’s software, copy it onto its Open Computer, and sell the computer to purchasers who wanted to run Apple’s software, but not pay Apple computer prices. Pystar would also include an unopened copy of Apple’s software with the computer to show that it purchased the software that was copied onto its computers. 

Apple claimed Pystar infringed its copyright by copying Apple’s software onto unauthorized, non-Apple, computers in violation of the Apple license agreement, which provided: 

“The License allows you to install, use and run one (1) copy of the Apple Software on a single-Apple-labeled computer at a time. You agree not to install, use or run the Apple Software on any non-Apple labeled computer, or to enable others to do so.” 

Pystar argued Apple was misusing its copyright by requiring purchasers to run Apple’s software only on Apple-brand computers. 

The Ninth Circuit rejected Pystar’s copyright misuse argument finding a restrictive software license “represents a legitimate exercise of a copyright holder’s right to conditionally transfer works of authorship, and does not constitute copyright misuse.”  In doing so, the court affirmed the grant of summary judgment in Apple’s favor, as well as the permanent injunction that prohibited Pystar from selling Open Computers running Apple’s software. 

This ruling is significant in that it reinforces a copyright owner’s right to significantly limit a customer’s use of its software licenses. However, to show that the customer is a software licensee rather than an owner, the copyright owner should be able to demonstrate that its purported license: 

1. Specifies that the user is granted a license;

2. Significantly restricts the user’s ability to transfer the 
software; and

3. Imposes notable use restrictions. 

If the copyright owner is not able to satisfy this 3-part test, it may be determined that the user of the software owns the software, and therefore has the right to sell and resell the software without restriction. 

Therefore, copyright owners should not only consider licensing, rather than selling, their software, but also make sure that software licenses meet the above three-part test to avoid relinquishing the ability to control the use of its software. 

Nicholas Kanter is a Business Litigation Lawyer. His practice focuses on business, intellectual property and real estate matters. You can reach him by calling 818.990.2120.

 

 
Disclaimer:
This Blog/Web Site is made available by the lawyer or law firm publisher for educational purposes only, to provide general information and a general understanding of the law, not to provide specific legal advice. By using this blog site you understand there is no attorney client relationship between you and the Blog/Web Site publisher. The Blog/Web Site should not be used as a substitute for obtaining legal advice from a licensed professional attorney in your state.

 

 

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