Here, for example, is an old software audit clause of a WRQ software contract: As stated in the first term of the WRQ audit clause above, customers must “implement internal safeguards” to manage the intellectual property to which they rent access – which is the development of a modern ITAM practice. Licensing agreements cover many industries, including the technology industry. In this context, it should be noted that the Court of Justice of the European Union (CJEU) reaffirmed in a recent judgment that non-compliance with a licensee clause on intellectual property rights in a software license agreement should not be considered as a mere breach of contract, but also as an infringement of intellectual property within the meaning of the Enforcement Directive. Therefore, in such a case, the software manufacturer should be able to benefit from the safeguards provided for in this Directive (including a variety of measures and remedies), regardless of the applicable liability regime (contractual or non-contractual) (Case C-666/18, 18 December 2019 – see the blog post by Raf Schoefs and Thomas Gils on this subject for more details). Even in cases where a license agreement exists, a sublicensee situation can be considered, treated and sanctioned as a (non-contractual) infringement of intellectual property. A license verification (also known as a license verification) is an inspection of books and records that determines whether a licensee (patent/license/franchise user) pays the licensor (patent owner/license/franchise) the correct amount of the license or royalties. The Licensor and Licensee have each entered into an agreement on the use of the patent/license/franchise. The agreement may have an explicit or implicit right of review to verify that royalties are paid correctly. When concluding a settlement agreement, the parties must comply with the general conditions of validity, in particular those of a valid consent. Among other things, consent may be considered invalid if it is given under pressure. In the past, there have been several cases in which Belgian courts have annulled settlement agreements imposed on software licensees.
Most audit clauses include terminology about notice periods – how much warning your company receives before publishers need access to your records to verify non-compliance. Our twenty publishers have been broken down roughly as follows: Difficulties can arise when licensors and licensees interpret the measures differently, especially in the case of older licensing agreements, whose wording may be outdated and which do not have to be applied predictably to new technologies and interfaces at the time of the initial signing of the agreement. Perhaps the best way to protect your business from the risks of software audits is to negotiate sufficient collateral in your software license agreements when establishing your relationships with publishers. By putting the terms of future audits on paper, you mitigate many of their potential risks. As you can see. The customer who signs this contract must put in place safeguards to manage the intellectual property to which he purchases access, keep records and cooperate in a software audit. These measures are used to determine whether Licensee`s use of the Software is equal to the number of software licenses purchased. Depending on the software product and vendor, these measures may vary.
The software may be licensed e.B. for named users or for concurrent users, on a processor basis, for direct registration (via user ID) or for access via a plug-in (API) or similar indirect method, for a flat rate or for a variable fee depending on the type and scope of use, etc. Depending on the software license agreement, the level of detail of the audit clauses may vary. In any event, the scope of the right of examination must be properly assessed. Such a scope includes a number of factors, including: the more you can design an audit clause in your favor when negotiating with a supplier, the less likely you are to suffer headaches when the inevitable audit arrives. But if that`s the case, SHI has staff on hand who can help you in this process. Feel free to contact your SHI account manager if you think we can help. The software is not “owned”, but customers purchase the “Right to Use” software. This right of use is subject to the terms that are generally set forth in the Software Agreement. The audit clause is their way of verifying that you comply with the conditions. But what are the best conditions to negotiate? We thought we could provide guidance by reviewing the audit clauses that various publishers have included in their standard End User License Agreements (EULAs). By seeing what standards and variations exist between several publishers, we were able to get an idea of what fair play is in the negotiation of a software license agreement.
The product of our years of experience in conducting highly specialized license and license audits is a consistent approach to conducting effective and efficient audits and delivering concise and relevant results. In addition to traditional audits, six vendors included language on regular self-reporting of compliance figures. Consider the impact of such self-reporting and consider postponing it as it is not a standard request. Or vice versa, push to improve the self-assessment process to replace site visits, as mentioned earlier. A software license agreement is usually not just a contract or document. Rather, it is a patchwork of many documents, including service contracts (masters), product terms, order forms, licensing policies, and more. As a general rule, Licensee shall in all cases provide Licensor with information that enables Licensee to verify compliance with the License Agreement. Information that does not contribute to such a review should not be provided. The licensing measures defined in the relevant contractual documents form the basis of a licence audit.
Hi Martin,. I agree with you, and they are very true. In the event that the audit results in a non-compliance of less than 5%, we may establish a clause stipulating that the issuer must pay the client compensation for the loss of time spent during the audit. We divided the data into four general parts of a verification clause. Since we began offering royalty and royalty services in the 1980s, our department has grown to become one of the leading royalty law firms in the country. Our royalty compliance services help our clients identify significant underpayments and other violations of their license agreements that are often overlooked. We have become known for finding the appropriate and effective balance between audit accuracy and maintaining the integrity of the licensee-licensor relationship. We try to avoid the disruption that audits often trigger by focusing on open communication, effective investigative methods, and efficiency through planning and proper staffing. The contractual framework for software licenses is not always easy. However, most other penalties are rare, which can provide some support for negotiating them outside of agreements. The best option is simply to add a language that explicitly limits the purchase prices of licenses to those on your normal and discounted price list from the publisher. We`ve seen that when the language about pricing is completely excluded, publishers often try to charge first at the list/sale price and then negotiate a price from there.
If the licensee has used software without corresponding licenses, the licensor may claim damages. The Enforcement Directive (2004/48/EC) provides that compensation must be proportionate to the actual damage caused by the infringement. In principle, this excludes punitive damages, a term established in common law countries. This should be taken into account in particular by software providers in common law countries. Many customers report that the number of software audits requested by vendors has increased significantly in recent years. .