Allegations of Software Infringement

December, 2015

 

I have been seeing more and more activity from the makers of software alleging infringement of their products and demanding payment.  This is what usually unfolds.

The Demand Letter

Through their lawyers, the makers of the software themselves or an organization representing a group of software makers, contacts a business stating that they have information that they are using unlicensed software and therefore are committing copyright infringement.  The lawyers cite judgments for copyright infringement, which contain facts about the most egregious conduct you can imagine on the part of a violator, and tell the business that they also could be liable for such damage awards and penalties unless they do whatever they demand in their letter.

What they usually demand depends on the information they have.  In some cases they have detailed information about the alleged violation.  In those cases their demands may be limited to payment for the alleged violations they know about.  In other cases, irrespective of the information they have, they will demand that the business investigate and tell them all the software violations they have committed.

The difference in the demands stems from the quality and quantity of the information they may have.  That information has been typically provided by disgruntled former and even current employees who have knowledge of violations or may even have committed the violations themselves.  These people provide the information likely because they will be paid a percentage of any amount of money the software makers may recover from the business.  If you pay close attention to your radio, you will hear advertisements that offer cash rewards for people who report software violations.

On the side of the makers of the software, they often have to weigh the evidence they have and determine whether it is substantial enough and trustworthy enough considering its source to file a lawsuit on.  Often the best source of information about alleged violations comes from the business that provides it in response to the demand letter.

 

Limiting Liability

In many cases the business accused of software violations had no knowledge that it had committed any violations or that violations had been committed on its behalf.  Here are some ways to lessen the risk that a business could be found liable for using unlicensed software.

Employees

Provide to employees and have employees sign a code of conduct that requires them to only use and install properly licensed software.  Teach employees how to ensure that software being used in the business is properly licensed.  Give employees a procedure to follow going up the chain of command requiring them to report any suspected use of unlicensed software.  The sooner the business learns about possible unlicensed software the quicker it can be remedied.  Have employees keep a detailed list of computers and servers of the business, a list of software noting on what computers it is installed including license number for each copy of software installed, and a physical depository of the original boxes and receipts for each software product being used by the business.

Contractors 

Oftentimes businesses hire outside contractors to create and maintain a software infrastructure for the business.  In cases where a contractor installs unlicensed software on the computers of a business, the business may still be liable to the software maker for the violation and the business will have to look to the contractor for redress.  Therefore it will be important for the business to have a contract with the contractor that confirms that the contractor shall not use unlicensed software and will indemnify the business in case it does.  Further, despite the contract, the business should supervise the contractor and record all the details about the software the contractor has installed on the computers of the business just like it would if it had purchased its own software.

 

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Ryan K. Smith is a Lawyer and Trade-mark Agent at Feltmate Delibato Heagle LLP.  He is a corporate and commercial lawyer with expertise in all manner of intellectual property matters including trade-marks, copyrights, domain names, and confidential information.  You can reach Mr. Smith at (905) 287-2215 and rsmith@fdhlawyers.com