15 October 2015 - Agoria Legal fundamentals of software licensing Setting the scene and clarifying the essential legal concepts and issues linked to software licensing The information and elements contained in this document are of confidential nature and do not constitute in any way a legal advice of any kind. Neither Stibbe, nor the persons associated with Stibbe are liable for any damage arising or resulting from any direct or indirect use of, or inability to use this information and these elements, nor for any damage caused by an inability to use this information and these elements.
Transcript
15 October 2015 - Agoria
Legal fundamentals of software licensing Setting the scene and clarifying the essential legal concepts and issues linked to software licensing
The information and elements contained in this document are of confidential nature and do not constitute in any way a legal advice of any kind. Neither Stibbe, nor the
persons associated with Stibbe are liable for any damage arising or resulting from any direct or indirect use of, or inability to use this information and these elements, nor for
any damage caused by an inability to use this information and these elements.
1. What is “(non-)compliance”?
2. What are the “damages”?
3. An audit: how to anticipate and plan ahead?
4. How is an audit carried out?
Outline
Are you compliant?
Yes, I am
I don’t
know
Definitely not
compliant
> SW is copyrighted and SW’s use normally require a licence from the SW editor
What is “non-compliance"
> Article 1162 of the Belgian Civil Code:
« Dans le doute, la convention s'interprète contre celui qui a stipulé, et en faveur de
celui qui a contracté l'obligation.”
“In geval van twijfel wordt de overeenkomst uitgelegd ten nadele van hem die
bedongen heeft en ten voordele van hem die zich verbonden heeft.”
If unclear, how to deal with?
> Article XI.167 of the Belgian Code of Economic Law:
« A l'égard de l'auteur, tous les contrats se prouvent par écrit. Les dispositions
contractuelles relatives au droit d'auteur et à ses modes d'exploitation sont de stricte
interprétation. »
« Ten aanzien van de auteur worden alle contracten schriftelijk bewezen. De
contractuele bedingen met betrekking tot het auteursrecht en de exploitatiewijzen
ervan moeten restrictief worden geïnterpreteerd.”
If unclear, how to deal with?
> Pursuant to SW editors, no need to demonstrate any “deliberate” contractual breach
// under tort law: the mere possession is sufficient: see e.g. the decision of the Court of
Appeal of Gent dated 6 December 2010:
What is an “unauthorized” use?
> …and the intervening breaches of the SW vendor or integrator (lack of information,
lack of advice…) ?
> legal obligation to provide advice and guidance and to ensure that the services are
tailored to the actual client’s needs: « l’obligation de conseil qui incombe au
fournisseur informatique vise à assurer l’adéquation du matériel et des logiciels
aux besoins et souhaits de l’utilisateur : cette obligation consiste pour le
fournisseur à indiquer à l’utilisateur la solution la plus adéquate et la plus
avantageuse compte tenu de ses besoins ». (E. DAVIO et E. MONTERO, “Aspects
contractuels de l’informatisation de l’entreprise”, Guide juridique de l’entreprise,
2ème édition, Titre III, livre 37, 1996, p. 22, n° 150).
What is an “unauthorized” use?
> Only actual use? à No, see e.g. the virtualization scheme
What is an “unauthorized” use?
What to pay?
> Contractual mechanisms (e.g. back support) are not all beyond reproach (e.g. absence
of any valid cause for fees claimed by the SW editor without any counterpart, or abuse
of right)
> If damages are not contract based à tort law:
> the actual incurred costs, and
> the lost profits
à Lump sum (ex aequo et bono) if damages cannot be determined
> No “punitive” damages (see the decision of the Supreme Court of 13 May 2009:
all prejudice, but not more, is to be compensated by the party whose fault has
caused the harm)
What to pay?
> But see e.g. the decision of the Court of Appeal of Antwerp dated 14 June 2010:
“Nu die schade niet exact kan worden begroot, dringt zich een begroting ex aequo et
bono op. In ieder geval moet meer worden toegekend dan het bedrag aan normaliter te
betalen royalty’s. Het Hof past de schadebegrotingsscoëfficient 200% toe”
How to react?
> Know your interlocutors (e.g. the Oracle LMS team) and appoint your authorized
representatives
> Involve your lawyer/in-house counsel
> Buy time
> The burden of proof (fault, damages & causal link) is on the SW editor !
> SW’s editor interpretation of its own contract is not decisive!
> Know how your programs under license are “installed and running”, reconcile the
results with the available proof-of-purchase information and “optimize” your
environment (e.g. acquisition of missing titles)
> Educate your employees (e.g. implementation of corporate policies)
> (for bigger companies) Check IT procurement terms or RFP wording they propose for
licenses and CPU related terms
> The signatories and the beneficiaries
> The governing law and jurisdiction clauses
> The contracting process (e.g. enforceability of click-wrap documents or whitepapers
such as “Oracle SW Investment Guide”?)
> The relevant correspondence (e.g. prior audit results)
And now, you’ve got a mail…
How to react?
> Agree scope, process and resolution principles
> Scope of audit
> All products or specified products/use/locations ? (e.g. only “reasonable and
relevant” information within the scope of the audit, but not “any” information)
> Audit period
> Methodology & tools, follow-up actions (e.g. agree on the right discovery tool and
pre-assess your compliance situation before sending information to the SW editor
without any detrimental recognition)
> Scope of assistance
> Limitations and restrictions (e.g. enter into a NDA and/or make the SW editor
liable for negative effects of his scripts)
> Resolution of identified issues
Q&A
17
Practical aspects, cases,
questions & answers
18
Oracle vs AFPA and Sopra, Court of First Instance of Paris, 6 November 2014
1. Facts
> Oracle’s usual delivery scheme provides the whole E-Business suite v. customer’s
undertaking to deploy only the duly licensed program(s) thereof (NB: no license keys
required)
> Customer acquired the “Financials” programs from that suite in two steps:
> first, (2002) via an authorized reseller that placed an order with Oracle France as a
result of a tender issued by customer, and
> second, (2007) directly through Oracle France who succeeded its reseller for the
supply of additional licenses
Extra 1 - A relevant case
Oracle vs AFPA and Sopra, Court of First Instance of Paris, 6 November 2014
1. Facts
> (2009) Audit initiated and suspended during follow-up tender, pursued after “non-
award” to Oracle
> Alleged unauthorized use of the program “Purchasing” (part of the E-Business suite).
For customer, it was included in “Financials”, at least performance in good faith since
implemented by reseller.
> (2012) Oracle Corporation’s and Oracle France’s judicial claim of 13.000k € (i.e. 4.000k €
licensing fees + 9.500k € maintenance fees) against customer and the reseller
Extra 1 - A relevant case
Oracle vs AFPA and Sopra, Court of First Instance of Paris, 6 November 2014
2. Copyright infringement or contractual breach?
> The judge “must give their exact qualification to the disputed facts and acts” (Article 12 al.
2 of the French Civil Code //general principle of law: see Belgian Supreme Court dated 2
April 2010)
> Contractual matter since customer and Oracle France entered into a “contractual
relationship”, first through Oracle’s authorized reseller and afterwards directly
> No cracked copy or alleged use of a program that would not have been provided by
Oracle’s representative and that customer would have implemented on a stand-alone
basis
Extra 1 - A relevant case
Oracle vs AFPA and Sopra, Court of First Instance of Paris, 6 November 2014
2. Copyright infringement or contractual breach?
> Copyright infringement claim of Oracle Corporation not admissible
> The sole question is whether or not the program “Purchasing” was included within the
contractual scope
> Statutory limitation period for contractual claim (as from the initial order placed by the
reseller with Oracle) not yet achieved
Extra 1 - A relevant case
Oracle vs AFPA and Sopra, Court of First Instance of Paris, 6 November 2014
3. Breach of contract?
> To customer, no breach whatsoever for using a program implemented by Oracle France or
its representative. To Oracle, such use was not contractually agreed and no implicit
authorization was ever given
> According to the Court, such confusion is deliberate and due to Oracle itself:
> either included in the Financials suite without any further identification needed, or
> even if not included, knowingly provided by Oracle to comply with the tender issued
by customer so that such program eventually became part of the contractual scope
à in any case no contractual breach by customer
Extra 1 - A relevant case
Oracle vs AFPA and Sopra, Court of First Instance of Paris, 6 November 2014
3. Breach of contract?
> According to the Court, such confusion is deliberate and due to Oracle itself:
> also, the presence of this program was mentioned in a first audit conducted in
2005 by Oracle but then without any detrimental effect for customer
à another piece of evidence that such program is being part of the contractual
scope
> Dismissal of Oracle France’s claim against the reseller because it was up to Oracle
France to ensure this program “Purchasing” not to be provided when considering the
order placed by its reseller and delivering the whole E-Business suite as a result thereof
Extra 1 - A relevant case
Oracle vs AFPA and Sopra, Court of First Instance of Paris, 6 November 2014
4. Oracle’s abuse of rights?
> No abuse of a dominant position when conducting an audit to put pressure on
customer when the latter issued a tender that has not been awarded to Oracle because
the fulfillment of the cumulative conditions has not been demonstrated (i.e. the
alleged dominant position of Oracle on the relational database management systems
and the alleged impact on the financial ERP market that was at stake) [doubtful
reasoning].
but
Extra 1 - A relevant case
Oracle vs AFPA and Sopra, Court of First Instance of Paris, 6 November 2014
4. Oracle’s abuse of rights?
> Wrongful Oracle’s conscious choice to conduct an audit to put pressure during a
tendering process and, when not awarded, to go to court, arguing a copyright
infringement instead of a contractual breach so as to try to avoid the statutory
limitation period and the bone fide feature attached to any agreement, while the issue
at stake is obviously of a contractual nature
> However, customer and reseller did not demonstrate damages other than litigation
costs (i.e. lump sum of 100k € awarded per entity)
