Navigating Software License Disputes in the Continuing Work-From-Home World

Between lockdowns, quarantines, and evolving economic concerns, the COVID-19 pandemic has presented a wide variety of challenges to businesses and the software providers on which they rely.

In April 2020, we wrote about the anticipated legal issues accompanying the work-from-home landscape, particularly with regard to traditional software licensing agreements amidst the drastic shift to a remote-work model.

In October 2020, Robins Kaplan Partner Bryan Mechell moderated a virtual panel at the 2020 Licensing Executives Society Annual Meeting where panelists including experienced litigators and in-house attorneys examined the issues software providers should consider as they seek to protect and enforce the innovation they bring to market while maintaining amicable customer relationships.

Now, we write again with updates on several risks and opportunities that licensors and licensees might consider in the near term as they craft strategies for managing and protecting their assets against potential compliance disputes.

A. Software Licensors

In the last year, companies everywhere have rapidly scaled their use, deployment, and reliance on software, adopting unprecedented levels of digital transformation in order to maintain business continuity in the work-from-home era. Parties to a software license agreement often carefully negotiate terms, but it is very challenging to anticipate every issue arising in these extraordinary times. For software licensors, these risks potentially include:

• Disputes with licensees during these unprecedented times that result in the nonpayment of fees and cash flow disruption;
• Accommodating rapidly changing customer needs, e.g. accelerating time-tables changing parameters for cloud migration; and
• Potentially heightened risks of IP theft in a world with necessarily less oversight or more uncertainties in oversight schemes.

Still, licensors have a unique opportunity to increase and enhance support for customers while leveraging their software asset portfolios and related intellectual properties. This is a chance to forge and maintain relationships with new industry partners, to re-negotiate outdated terms, or to engage in flexible software dispute resolution mechanisms like license true ups and informal audits.

B. Software Licensees

This is also an important time for those managing software license portfolios to conduct a focused review of key software license duties. A sudden suspension or termination of a software license could significantly impact a licensee’s ability to conduct business. Some key issues for software licensees to assess right now include:

• Obligations pertaining to remote access and cloud functionality, as both use and usage conditions have likely changed in the last year;
• Unintentional misappropriation of IP due to over-deployment of software on new devices or in new environments; and
• Cybersecurity conditions, in new physical environments, as geographic concerns are as poignant as concerns with new virtual environments.

Even amidst these uncertain business conditions, this is an opportunity for licensees to self-audit software usage, take initiative to correct potential misuse of software, and evaluate usage needs going forward. It’s also an opportunity to revisit security and IP management procedures and update them to reflect new business conditions.   

C. Conclusions

In the constantly changing landscape of COVID-19, it is important for both licensors and licensees to be proactive. We remain committed to helping software companies protect the innovation they bring to market while maintaining amicable customer relationships; likewise, we are available to counsel licensees on steps they can take to avoid license disputes, and manage them when they arise.
Hear what our panel of in-house counsel and software license professionals at the 2020 LES Annual Meeting had to say about the future of software license disputes:

• Considerations for software vendors and customers as COVID-19 accelerates digital transformation  
• How providers can effectively manage software licenses, assess deployment, and conduct audits in light of travel restrictions
• New risks related to intellectual property misappropriation for both software providers and their customers
• License terms and conditions should software licensors and licensees be paying closest attention to right now when reviewing software license agreements

For an update on issues facing both software licensors and licensees, we encourage you to join our upcoming presentation with Minnesota CLE on March 9, 2021, “The New Frontier of Software License Disputes,” which will be moderated by Bryan Mechell and feature Ellen Levish as a panelist. The presentation will examine these issues from the perspective of trial attorneys and senior in-house counsel.