Software Licensing and Intellectual Property Law Blog

New Blog Location

Our new blog is located here:

http://www.mshtechlaw.com/blog/

Sony Stung By Buzztime Entertainment’s Trademark Lawsuit

Gamespot, in a story located here, is reprting that Buzztime Entertainment, the maker of a line of electronic trivia games found in restaurants and bars, has filed suit against Sony Computer Entertainment Europe in the Southern District of California, alleging that Sony’s Buzz! line of games and the "It's time to get buzzing" tagline violate Buzztime’s trademark rights.

Buzztime owns a variety of trademark registrations and applications for marks containing or comprising the term “buzz,”  but does not appear to own any registrations or applications for the term “buzz” on a standalone basis.

Sony has filed three trademark applications for the term “buzz” (application data located here, here and here). Sony’s applications all passed the opposition phase without incident and are set to register once Sony files a Statement of Use.

Interestingly, Sony filed the first of its three “buzz” applications as far back as 2004 and the first of its “buzz” applications was published for opposition as early as 2006. It’s hard to imagine that Buzztime’s failure to file an opposition against Sony’s applications was a strategic move. Most likely Buzztime only became aware of Sony’s applications shortly before it filed suit. Had Buzztime filed an opposition proceeding, it’s likely that Buzztime would have been able to force a settlement at a much lower cost than the cost of the federal litigation in which it is now involved.

Buzztime’s failure to file an opposition emphasizes the importance of enrolling strategically important marks in a trademark watching program. A trademark watching program monitors pending trademark applications and provides early notice of potentially conflicting marks. Early notice provides ample time to assess the situation and formulate an appropriate course of action. By failing to monitor strategically important marks a party runs the risk of eroding its trademark rights or being forced into litigation to protect its rights when it discovers a potentially infringing use. The cost of implementing a trademark watching program is minimal compared to the cost of litigating in federal court.

Oracle Claims Broader Copyright Infringement by SAP

Oracle, in a Joint Case Management Conference Statement (located here) filed last week, alleges that it “has uncovered a broader program of [SAP] copyright infringement that is entirely different from the scheme alleged in the current complaint.” What this broader program of copyright infringement is exactly is not clear. Oracle is apparently still gathering facts and analyzing the need to file an amended complaint.

It will be interesting to see if Oracle actually files an amended complaint or if the current allegation is simply another attempt by Oracle to try their case through their PR Department.

Original story here.

TN Lawsuit Portal here.

Avoiding An SAP Software Implementation Fiasco

The LA Times in a story located here describes what it calls an SAP software implementation fiasco. In 2005 the LA Unified School District entered into a $95 million contract with Deloitte Consulting to customize and implement SAP. The implementation apparently resulted in the new software "generating thousands of wildly inaccurate paychecks -- 32,000 in June alone -- especially to teachers. Some received a fraction of what they were owed; others were grossly overpaid."

According to the LA Times the School District experienced "[t]urnover among the top ranks [which] meant the district lacked the expertise to oversee the $95-million contract. Lower-level tech people were undertrained, and many were underqualified but could not be replaced because of union contracts." While the LA Times finds fault with the School District, it also places the blame squarely on Deloitte for "bad programming and worse advice."

Unfortunately, failed software implementations are not unusual. One of the biggest tools you have as a customer to minimize the likelihood that your implementation does not succeed is a carefully drafted and negotiated software implementation agreement with statements of work that clearly and carefully define:

• the deliverables to be provided;
• the milestones associated with those deliverables;
• clear language describing each party's responsibilities with respect to milestones and deliverables;
• robust warranties and representations that hold the provider's feet to the fire;
• remedies if the provider fails to deliver.

In the coming weeks we will discuss some of the standard provisions vendors include in their software implementation agreements and how to counter them with language that is fair and reasonable.

Software Audit Provisions

KPMG's Tom Lamoureux, in an article located here summarizes the results of a recent KPMG survey of software vendors regarding the issue of software license compliance. "[S]urvey respondents said their companies lose significant amounts of revenue due to unlicensed use of their products. For example, 34 percent of those polled said losses amount to more than 10 percent of revenue, and 21 percent of respondents said their companies lose over 20 percent of overall revenue."

The survey also indicates that "[m]ost [software companies] said license compliance activities have a positive or neutral impact on their relationships with end-user customers and channel partners."

That last quote is particularly interesting. I don’t remember one client ever coming away from a software audit thinking it was a positive experience.  A more common experience, at least in our practice, is an angry client coming to us after being contacted by a software sales representative that needs to make his quarterly numbers and leveraging an overly broad audit provision and an unclear license grant that were never reviewed by a software attorney.

The above numbers indicate that software vendors have a big incentive to aggressively enforce the software audit provisions contained in their license agreements.

As a licensee you should not be surprised if a vendor license agreement includes an audit provision allowing the vendor to audit your use of the licensed software. While you may be successful in having the audit provision removed in its entirety during the negotiation process, it is much more likely that the vendor will hold his ground and insist that audit language be included in the contract.

A typical vendor software audit provision looks something like this:

During normal business hours and at any time during which the Software, Documentation, or other Vendor Proprietary Information are being utilized, Vendor or its authorized representative or licensors, shall have the right upon reasonable advance notice to audit and inspect Licensee's or any Affiliate's utilization of such items, in order to verify compliance with the terms of this Agreement.  Upon Vendor’s request, Licensee shall deliver to Vendor a report, as defined by Vendor, evidencing Licensee’s usage of the Software licensed under this Agreement.

From a licensee perspective, this is a potential nightmare. For example:

1. Is it clear who will conduct the audit – who is an authorized representative and how are they are authorized and by whom?

2. If the authorized representative is a third party does that third party have any confidentiality obligations to the licensee? If those confidentiality obligations are breached, can the licensee look to the vendor for a remedy? Is the vendor willing to be responsible for any breach or bad act of the “authorized representative?”

3. Is there at least a reasonableness standard regarding how the audit will be conducted? How many auditors will be on the licensee’s site? What happens if they disrupt the licensee’s normal business?

4.  What happens if an unauthorized use is revealed? Does the licensee have the ability to license the seats (named users, servers etc.) it is using without authorization to bring itself into compliance? If so, will the license fees be based on list or any negotiated rates? Should it matter if there is an inadvertent expansion of the license grant or an intentional breach?

By asking the right questions and anticipating issues during the negotiation process, you should be able to mitigate the risk posed by vendor audit provisions and adequately address any reasonable issues the vendor may have concerning the unauthorized use of its software.

Critical Success Factors For SAP Implementation

John Lagaay in this article lays out certain factors critical to a successful SAP implementation. He cites using SAP suggested interfaces as one of the biggest safeguards against future issues during future upgrades. He also cites change management (as in users transitioning from legacy systems to the SAP system) as being important and sates that "prior to implementation, organisations should work out what their training requirements will be and then multiply it by three to ensure that they have budgeted adequately."

While there is no doubt that these issues are important, one of the most important factors to a successful SAP implementation is a carefully drafted and negotiated SAP Professional Services Agreement. A PSA with carefully defined deliverables and milestones, robust performance warranties and remedies for breaches of those warranties is one of the greatest tools you can have to ensure your SAP implementation meets your expectations and SAP's representations.

Open Source Business Conference

InfoWorld's 5th Open  Source Business Conference will be held March 25-26, 2008 in San Francisco and is entitled Putting Open Source to Work. The conference will explore how both traditional and non-traditional open source businesses are achieving benefits from platform flexibility and better performance to cost savings.

Keynote speakers include:

Steve Pearson, VP of Advanced Technology, CBS Interactive ;

Brad Smith, SVP, General Counsel & Corporate Secretary, Microsoft Corporation;

Jon Williams, CTO, Kaplan Test Prep & Admissions.

The early registration deadline has been extended to February 4. More information about the conference can be found here.

Building A Video Game Company in the Midwest

Starting a video game company in the Midwest? Then the following event is for you. Frozen Codebase is a video game development company in Green Bay, WI. They will be giving a presentation in Milwaukee on January 26th to talk about how they were able to raise money locally and nationally to get
their company started. Their most recent game, Screwjumper was released about 2 months ago in
November and has been doing fairly well on Xbox Live Arcade. More information about the event is located here.

ITA City Lights

The Illinois IT Association's annual City Lights event will be held on April 3 this year. The event celebrates vitality and innovation in the Illinois technology community and as billed as:

The largest technology gathering of technology executives in the state of Illinois;

A chance to network, collaborate and build relationships with other technology companies in the state;

An opportunity to meet with up-and-coming technology companies in the state;

A chance to celebrate Illinois’ amazing technology community.

More information about the event can be found here.

McAffee Issues Open Source Warning

McAfee, in its annual report filed in December of last year, (and originally reported here) warned its investors that its ability to commercialize its products could be impacted by “ambiguous” "open source license terms. McAfee noted that “despite having conducted the appropriate due diligence,” these ambiguities “may result in unanticipated or uncertain obligations regarding our products.” According to McAfee the GPL is of particular concern since it has “not been interpreted in a court of law” and use of GPL software “could subject certain portions of our proprietary to the GPL requirements.”

Under the GPL, licensees may redistribute open source software provided the licensee’s software that incorporates the open source software is also made available under the terms of the GPL.

The Software Freedom Law Center recently filed lawsuits alleging violations of the GPL by Monsoon Multimedia, High Gain Antennae LLC, Xterasys and Verizon.

Companies such as Monsoon Multimedia and Xterasys have settled their lawsuits and have resumed distribution of their products.  As part of their settlements, the companies agreed to pay undisclosed amounts of damages.  They also agreed to adhere to the terms of the license as well as appoint an internal Open Source Compliance Officer.  The Open Source Compliance Officer’s duties include ensuring compliance with the GPL licenses as well as informing downstream parties of their rights pursuant to the license.

These suits are significant because the enforcement of the GPL against a party unlawfully distributing software in violation of the GPL had previously been rare.  Users of software subject to the GPL need to understand that the very real threat of suit for noncompliance with the GPL license looms whenever a company uses and incorporates open source software without fully understanding the requirements of the GPL. 

McAfee’s warning and the recent GPL enforcement lawsuits emphasize the importance of developing an Open Source compliance program. With the increased adoption of Open Source Software and future Open Source enforcement lawsuits likely, ensuring that you have the ability to exploit your commercial software on your own terms is critical.