What is the lesson for business? In order to avoid potentially astronomical legal fees and significant financial liability, you always negotiate your software licensing contracts in order to obtain advantageous terms for your business. You only buy/concede if buying/conceding is cheaper than theft (Reverse-engineering functionality and rewriting of all code from scratch to evade accusations of copyright infringement) If a licensee agrees to release rights against third-party intellectual property, a licensee will generally offer closer compensation and will agree to take certain measures if an injunction against the use of the software is sought. One of the most common mistakes for technology buyers is to rely on confidentiality agreements (NDaes) or privacy clauses to protect data. Confidentiality conditions protect trade secrets, not data held or accessed by the provider, let alone private data. Another common exception to IP compensation is that the provider does not need to cover claims generated by “The vendor`s modification of the software in accordance with the customer`s specifications.” That sounds reasonable. If you (the customer) have written specifications that would have breached a third party`s IP address and the seller has just followed them, why should the seller defend the complaint? But the typical language eliminates all cases related to your specifications. What happens if you just sent very high specifications to a new system and the manufacturer`s decisions about how the software should be written triggered the IP color? Or what would happen if you sent detailed specifications, but then the vendor created the system with another person`s software without a license (also known as “stealing”)? Why should the use of your specifications excuse the seller in both cases? While sales and sales teams are focused on the points of activity of the agreement, not focusing on the “legal conditions” of the contract, including compensation, restrictions and/or caps on liability and insurance, is a serious mistake. These provisions can impose potentially burdensome financial risks on you as a small business, especially if it turns out that the software you have authorized to BigTech Co. violates the software copyright of another.
I like to call these risks “a millimeter wide and a mile deep.” The risk of liability may be low, but if the risk arises, the financial risk can be enormous. Mitchell Stein is a partner in the intellectual property group and litigation department at Sullivan worcester in New York. Its activities focus on litigation and licensing related to software, e-commerce, biotech, copyright, trademarks and advertising rights. For more information or to contact Mitchell, please visit his Firm Profile page. For example, if you download and install iTunes, did you know that you are protecting Apple by paying damages and legal fees if Apple discovers that you have breached the license agreement? You may be surprised at how easy it is to accidentally violate the terms of the agreement if, for example, you burn an audio playlist eight times on a disc and not the seven allowed. If Apple has sued you, you are contractually obliged to go to court in California to defend yourself (all while paying the legal fees and associated legal fees). On the other hand, if the installation of iTunes has caused your entire network to fall and cost you thousands or even millions, you have contractually agreed that you will not sue Apple and that Apple will not be held responsible for the damage. Like most other licensing agreements, Apple`s agreement also allows Apple to change the terms of the contract when and how it wishes, and you are bound by the new terms by continuing to use iTunes.