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A majority of enterprises continue to accept and use licenses and agreements that were never negotiated. These may include shrink wrap, click wrap, pre-installed product and other onerous licensing strategies. Failure to negotiate a mutually beneficial software license leaves your enterprise wide open to possible sharp practices in compliance enforcement auditing.
Frequently, enterprises become license non compliance and software piracy audit targets, not because they are intentionally violating copyright, but because they are breaching one or more terms and conditions of highly complex licenses. You may want to begin expecting the copyright holder to modify the following issues during all software license agreement negotiations. Doing so can significantly reduce your exposure to punitive audits.
- The "Right to Audit" Clause - Who has the right to confront your enterprise for non compliance? You should limit this to the copyright holder and eliminate the "...or its representatives..." caveat usually included.
- Compliance Defined - Shouldn't you have the right to a clearly written definition of compliance? Without this, virtually any use of the product can be interpreted as non compliance.
- Audit Triggers and Frequency - What conditions or expectations can the copyright holder use to initiate audit proceedings against your enterprise? As well, how frequently can you be visited with repeat audits? You should establish these triggers and limits up front in any agreement.
- Compliance Documentation - As I noted in a previous Knowledge Briefing, you must possess and be capable of producing specific documentation to prove compliance. Shouldn't you have the right to expect the copyright holder to clearly define and limit that documentation, up front, in the license agreement?
- Retention of Documentation - Many compliance audits have been reported where the copyright holder demanded upgrade documentation dating back as far as ten years. Enterprises failing to produce the documents were summarily deemed out of compliance. If this is a compliance requirement you should be within your rights to have it clearly defined in the license.
- Alternative Dispute Resolution (ADR) - In our asset management training programs we strongly recommend that the enterprise negotiate an ADR clause into every technology agreement - but most specifically into every software license. Without a clearly defined ADR process, any non compliance problems can instantly become costly legal confrontations rather than effectively managed business relationship issues.
- You may also want to clearly define limitations regarding future license agreements being used to supercede existing license agreements. Many enterprises have carefully negotiated mutually beneficial software license agreements only to have their Ts & Cs eliminated by a future click wrap or another potentially invisible license agreement.
- A final issue you may want to address is drafting internal policies and procedures regarding acquisition, distribution, and use of copyright protected products. Then take the single most critical step toward compliance assurance: genuinely enforce those policies. When combined with more clear license Ts & Cs, this process will move your enterprise well forward in minimising audit exposure.
