Lexpert magazine features articles and columns on developments in legal practice management, deals and lawsuits of interest in Canada, the law and business issues of interest to legal professionals and businesses that purchase legal services.
Issue link: https://digital.carswellmedia.com/i/834783
68 LEXPERT MAGAZINE | JUNE 2017 TECHNOLOGY | COLUMNS | George Takach is a senior partner at McCarthy Tétrault LLP and the author of Computer Law. the company (the call centre rep) uses and accesses the ERP soware; the customer ordering the product does not, as they liaise only with the call centre rep. But then things got interesting, and complicated, when the company licensed another piece of soware, called cus- tomer relationship management (CRM) soware, which connected the company much more effectively and efficiently to its customers. Each customer restaurant, for example, could now go online and place its weekly order through the company's website, using the new "self-serve" CRM soware module. When the developer of the ERP so- ware learned that the company's ERP so- ware system was interacting with its CRM system, the ERP developer commenced negotiations for additional licensing fees, and when a consensual resolution was not reached, it brought litigation against the company. e ERP soware developer ar- gued that the CRM soware worked in a way (by, among other, things pulling data from the company's key databases in the ERP soware, when instructed to do so by the CRM soware) that made each restau- rant owner that used the ERP soware a user of the soware developer's ERP so- ware as well. And there were many thou- sands of such customer "users" of the com- pany: hence the claim that the company should pay another $90 million or so in li- censing fees to the ERP soware developer. INDIRECT ACCESS Based on the facts (much simplified) of this case, aer looking very closely at the types of ways the CRM soware used by the company interacted with the soware developer's ERP soware, the court came to the surprising (in my opinion) conclu- sion that all the restaurant staff indirectly accessing the systems of the company were in fact a category of user that attracted li- censing fees. is came as a big, and very expensive, shock to the company. ey argued that their customers did not access the ERP soware; rather, they merely had a link (technically, an application programming interface) to the ERP soware, so that the CRM program could exchange data with the ERP program. e court disagreed, and found for the soware company. We do not yet know what the final amount of damages will be that are awarded by the court (this part of the litigation was postponed from the merits of the liability hearing), but it could be significant if the judge accepts the argu- ments of the soware developer on that score as well. LESSONS FOR THE FUTURE ere are a number of useful tips to take away from this recent case. First, as a user of third-party soware, you should absolutely take your soware licensing (and related payment) obligations very seriously. is case is not an unusual scenario, at least in respect of the approach of the soware de- veloper to collecting fees for what it alleges is prior, non-compliant use of its soware (although the financial figures are quite a bit larger in this case than in the typical soware licence fee dispute). Second, it is nowadays not a trivial ex- ercise for soware licensees simply to un- derstand where the terms of their contract reside. Many soware developers load their licences up onto websites, and usually multiple websites. And there is a plethora of forms, and cascading provisions, that purportedly apply. As a user, you should insist on having a hard copy printout of all the terms that will apply, and make the old-fashioned but sensible step of stapling together all the relevant contract terms that make up your licence. If you fail to do this at the front end of your relationship with the soware developer, I can almost guar- antee you will have a difficult time later on figuring out what constitutes the four cor- ners of your applicable contract. ird, once you have your agreement distilled into a manageable set of paper- based pages, you must, with laser-like accu- racy, parse the "licensing language" so you understand clearly what fees will apply to your organization depending on what use you — and possibly others — will be mak- ing of the relevant soware. Ideally, as a soware user, you will want the pricing algorithm to apply only when one of your employees actively uses and ac- cesses the particular soware. At the other end of the spectrum, you must be very care- ful if there are fees associated with "third parties who might derive benefit from the soware directly or indirectly," or words to that effect. One way to achieve certainty and avoid surprises is to attach an "architecture" dia- gram of the specific configuration of the soware you are licensing, and then have the licence agreement confirm what the en- tire fees are for this specific configuration of use (which may or may not include third parties in your workflow, etc.). In short, achieving certainty around soware licence terms can take some up- front investment of time, but the effort will pay dividends down the road by help- ing you avoid expensive disputes with your soware suppliers. ONE WAY TO achieve certainty and avoid surprises is to attach an 'architecture' diagram of the specific configuration of the software you are licensing, and then have the licence agreement confirm what the entire fees are for this specific configuration of use