Tuesday, September 16, 2014

Does a “seat” limitation in a software license mean a specific machine or any number of machines?

This dispute is one to watch: it is ongoing and hopefully leads to a decision on a perennial issue that irritates software vendors.

In June 1999, the Commonwealth Department of Defence and software vendor Attachmate Australasia Pty Ltd signed an agreement by which the Department of Defence had the rights to use Attachmate’s Extra! IBM 3270 terminal emulation software on 8000 machines. The licence was under an automatic renewal under the same terms, but during an audit in October of 2009, Attachmate found that their software was used in more than 8000 machines.

As a result of this, Attachmate filed a copyright infringement complaint at the Copyright Tribunal. Defence argued that it could use the software without a seat limitation, provided that it did not do so on more than 8,000 machine at once. Defence also argued delay and acquiescence, citing that Attachmate already knew what was going on from a very early date yet did nothing.

The Commonwealth also sought additional information from Attachmate pertaining to licensing and copyright compliance revenue received by the company since 1999. The allegations is that Attachmate incentivises its license compliance team, which encourages those personnel to ignore breaches of the terms of the license. The Commonwealth was successful in their application for further discovery, having managed to obtain an order that requires Attachmate to file an affidavit explaining matters related to the allegations that their incentive structure encourages unfair practices by the company’s license compliance team.

I was involved in a similar matter in Racing & Wagering Western Australia v Software AG (Australia) Pty Ltd [2008] FCA 1332, in which a software vendor argued (unsuccessfully) that a disaster recovery site which mirrored software was a second use of the software and therefore attracted a second license fee (in this case, totaling AUD 3 million). These two matters underscore the need to ensure software procurement documents have a high level of precision in order to avoid ambiguities around how the software is used in technical contexts.


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