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20 questions about software licensing audit case. While software

companies have a legitimate right to protect their copyrighted works there is
a fine line between calling someone a criminal software pirate and pursuing
legitimate legal rights to be paid for the software being used. This blog tries to
address the common issues and questions our clients have had.

1. What is the business software alliance?

The business software alliance is a group of companies that have organized in the
software industry and is comprised of large software companies such as Microsoft,
Adobe and other software companies. The BSA represents its software member
companies, and the BSA may be represented by an Attorney who sends you a
demand letter. It is important in every software licensing audit case to find out
what company is auditing you and to demand legal proof that you agreed to a
voluntary internal audit.

2. Does the business software alliance really have the authority to force me
into audit of my internal software installs?

Their basis for authority is that (they will claim) you signed a software licensing
agreement that gives them the right to audit your software licenses any time they
want. You never BUY software, you only license the USE of software (just alike an
internet domain name – many people don’t understand this concept). They will say
that you agreed and consented to the audit in advance. How many companies out
there are aware that they signed an “agreement” to allow a software company to
come audit their business licenses whenever they feel like it. This is a really
interesting position the BSA and other software “compliance” companies might
make.

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Keep in mind, the BSA is not the only software licensing entity you might encounter.
There is also the Software and Information Industry Association (SIIA) and
voluntary audits may be initiated by them or their representatives as well. We can
help you with BSA audits, SIIA audits and other third party “software licensing
compliance groups” out there.

3. Is there any way top stop the BSA from auditing my company?

The BSA audits are positioned as a “voluntary audit” (i.e. if you audit your internal
computers and servers and inventory your software and prove your paid for
everything, we just might refrain from filing a federal copyright lawsuit against your
company). The approach is very aggressive. This puts you in an interesting position
of either succumbing to the audit (and prove you have the receipts for each piece of
software you are using), or else refusing to perform the audit and inform the BSA or
its law firm that you will not be disrupting your business.

This is of course a game of chicken. If they have the proof your company is using
software without paid license(s), they could always decide to sue you for a federal
copyright violation (which is possible, but not always completely likely since
wasting the time of a federal judge for a missing receipt may not always be in their
best interest and real damages may be hard to prove).

Each case has to be evaluated on its own to decide what the best course of action is.
If you have solid proof of each and every license, it might be best to submit to the
audit, assuming the software company or its lawyers can prove their legal right to
audit you.

4. Can I just ignore the BSA audit letter?

You can, but you take your chances with the BSA filing a copyright
infringement lawsuit. A federal lawsuit can cost quite a bit in litigation fees
and the potential losses to your company could be STAGGERING. The BSA is
not goofing around and software licensing theft is a matter taken very
serious by the industry that lives on licensing fees. So, your best bet is to hire
a law firm to help you navigate through the serious legal issue that could
literally bankrupt your company.

5. Where would the BSA file a software license copyright infringement
lawsuit?

The most likely answer is the federal copyright infringement lawsuit would
be filed in the closest federal courthouse near your business. Copyright law
is an exclusive federal law issue and your case will become a federal lawsuit
as it is a “federal question” jurisdiction case.

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6. Will the BSA or its representatives give me advance notice that they are
filing a lawsuit against me?

They might, or they might not. Some companies and their CEO and corporate
officers believe that receiving a legal demand letter for demanding payment
for software licenses is a pre-requisite to filing a copyright infringement
lawsuit. It is not. There is no requirement that someone send you a demand
letter before filing a lawsuit against you for copyright infringement. As such,
you could be sued in federal court if the BSA or other software compliance
group believes they already have the evidence they need to prove their case
with a preponderance of the evidence (the basic civil lawsuit standard or
proof).

7. Is it an ex-employee that turned my company into the BSA for a reward?

Frankly, this is often the case. The software industry loves ex-employees
who are willing to knark out their former employers and willing to serve as a
witness against them in a federal copyright infringement lawsuit. They do
this for two reasons. One, to get back at their employer, and two, the
rewards of financial gain offered by software industry giants to tattle on any
perceived software infringement the company is engaged in. No one should
be surprised by this. Here is an example of a report your boss software
piracy ad.


8. Should I hire an attorney or law firm to represent me when there is a BSA
software licensing demand letter.

Yes. Some companies believe that hiring a lawyer means you have
“something to hide.” That is an argument, so people make, and I do
understand the logic, however, I usually tell my clients “what would Donald
Trump do if his company was under audit” or “what would Bill Gates do if his
company was under investigation.” The point is simple, when another
company comes around and tries to shake you up and demand an internal
investigation of your computer and IT systems, don’t you think that is a
serious enough matter that you should get a software and technology law
firm to assist you? I think this is a fairly simple answer. As the old saying
goes “a person or company that represents themselves has a fool for a client.”
That is not to say there is anything prohibiting you from representing
yourself in a BSA software audit and investigation case.

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9. How long will it take to resolve BSA software audit?

BSA audits are not resolved overnight. But we do everything within our
power to try to ensure the process as painless as possible. A BSA audit can
be resolved in just a few weeks or it could take much longer. It really
depends on how large your enterprise or organization is and your status of
software licenses and negotiations with the BSA, SIIA or their
representatives, such as their IP law firm.

10. What happens if I cannot find a receipt for software?

This is a potential problem. The BSA is very aggressive in demanding solid
proof that you purchased each software license. Without that, they are not
likely to give you credit just based on your word. It is thus imperative that all
companies keep a file containing all their software licenses and the proof of
purchase for each. This is something we can seek to explain, and if
everything else is in order, it might be something they are willing to give you
credit for. It just depends on your overall case.

11. Am I being accused of being a “software pirate”?

Companies that develop software and market it to the masses have federal
copyright protection in their software works. This is their business and they
take that serious, rightfully so. And yes, in the process of forcing you to open
up your books, there is an element to it where they may be suspecting you of
being a “software pirate” (notice how the first thing you see when you watch
a movie is the copyright notice informing you that you face serious civil and
potential criminal liability for copyright violations). So yes, it is a big
business, and yes, they have a legal right to protect what they create.
Unfortunately, the word “pirate” in my opinion gets thrown around too much
but it is done to stigmatize people into realizing that illegal music downloads,
movie distribution and software use without proof of licensing is something
that is frowned on.

12. What are the damages my company faces if a federal copyright lawsuit is
filed against us?

There are different damages to consider. First, you would suffer out-of-
pocket attorney fees (it is doubtful any copyright law firm would take your
case on a contingency fee basis as there is not much to gain from
representing a Defendant in a software infringement case). So, you would
have those costs to deal with. Next, you have statutory damages, which could
go into a hundred thousand dollars or more.

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Should you take a BSA software audit serious? Yes, you should, your legal
exposure could be into the six-figure range, so you should treat this the same
as any other legal audit. Get a lawyer, protect your interests and try to
minimize your legal exposure.

13. If I end up in a software-licensing audit how long will the process take?

A software license audit is voluntary, and it depends on how big your
company or organization is. For smaller companies, you could be looking at
something as short as a few days to several weeks for a larger company. The
BSA or its representatives will want an audit of ALL your computers, servers,
laptops and the software running on each along with matching that up with
proof of purchase for the license. The negotiation process can also take 1-4
months or even more. It really just depends. A federal copyright lawsuit
could consume 1-2 years and cost $50,000 or more. So, there is an interest in
trying to get your case resolved without litigation, and there is a built-in
incentive to comply with the audit. But each case is different. In some cases,
you may have a lost receipt, and it would be doubtful the software companies
would want to present such a flimsy case for money damages to a federal
court (not to say it couldn’t happen of course).

14. Can Vondran Intellectual Property Law represent me even if I already
submitted voluntary software audit results to the BSA?

Yes, we can represent you from initial software investigation demand letter
to representation in a federal civil litigation lawsuit and everything in
between. Hiring an intellectual property law firm does not make you guilty
of anything. Larger companies would not mess with the potential legal
exposure of a federal copyright lawsuit on their own. They would engage
their business and technology law firm to assist in making sure your legal
rights are protected and to demand proof (see below) of whom you are
dealing with and their grounds or “probable cause” for trying to subject you
to an audit.

15. Are there certain types of proof of software licenses that the BSA audit
will NOT ACCEPT?

Yes, if you don’t have solid proof of purchase and receipts for each piece of
software, the BSA or its law firm will demand a licensing fee and may also
demand attorney fees, a “statutory multiplier” and other damages. They may
reject proofs of purchase from un-approved vendors, or phony or doctored
receipts or receipts that do not appear to be legitimate. We can review these
issues with you upon being retained to represent you in your BSA software
licensing audit.

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16. Can Vondran Law conduct a software audit remotely?

Yes. In some cases, we (or a third-party IT auditing firm) can setup a remote
audit of your computers and IT networks for the purposes of responding to a
BSA or SIIA software licensing audit.

17. Can I file a lawsuit against the BSA or its software lawyers?

If the demand for internal software audit letter is based on nothing (no
probably cause whatsoever) and the software compliance company or its
representatives produce nothing to indicate why your should have to shut
down your business (to appease them in a voluntary audit) and go on a
software license “proof-of-purchase hunt” - without any reasonable basis for
believing you have violated the software licensing agreement – you could be
dealing with a Copyright bully or Copyright troll as judges sometimes call
them. At some point if a software company has no legitimate good faith
cause in what they are doing, and they threaten, or imply, you are engaged in
criminal copyright infringement and to report you to the district attorney or
attorney general, (or threaten jail time), for no valid reason, their conduct
can potentially approach issues covered under the RICO racketeering law
and state extortion laws. While I have not seen such a case being brought, if
they cannot confirm there is real “substance” to their high legal demands –
often for hundreds of thousands of dollars – and it is based on nothing more
than a random letter, all rights should be explored with copyright counsel.

In the event you are sued for federal copyright infringement due to a
software licensing shortage that is non-existent and not supported by any
credible evidence, you may have a counterclaim for civil RICO, declaratory
judgement, or potentially other causes of action that need to be reviewed by
your software counsel.

NOTE: This is not to suggest that I believe or have proof that BSA is engaged
in any legal violations, it’s just that it is important to force them to explain
why your company is being audited, and whether or not they ever met the
“informant” (often times a disgruntled ex-employee) and vetted them for
credibility and motives and whether or not there is any real evidence. So, I
just want to be clear we are not making that accusation against any software
publisher or the BSA at this time.

18. Are there software licensing audit internet scams out there?

Yes. We truly believe there are possibly Nigerian or other Internet software
audit scams out there wherein an Internet software compliance company will
demand you submit to a software licensing audit. When we ask simple
questions such as (a) prove to me who you are (b) prove you are licensed to

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 do business in California or Arizona (the two states our law firm practices
in), (3) who me a agency agreement or power of attorney agreement that
allows you to act on the software companies behalf, and (4) show me the
licensing agreement my client signed authorizing you to request a voluntary
audit (we have actually had “software compliance” company disappear into
the software auditing night when asked these basic questions.

19. Isn’t this just a software licensing “shakedown” and a RICO violation?

As eluded to above, it could POSSIBLY be in rare cases. We have raised this
point against software company and their lawyers questioning conduct that
appears to potentially violate CIVIL RICO law, and if there is no good cause
to what they are doing and they are demanding payment at the threat of
reporting you to authorities without any evidence (extracting payment
on threats and force and threatening you with criminal law violations under
Copyright laws) as civil litigators we are able to sue them for CIVIL RICO
violations. RICO is a law that has to be very carefully applied and does not
apply in all cases. Click on the link in this paragraph to read our blog
about civil RICO and software & copyright bullies.

20. What are your top five tips in responding to a BSA or SIIA software license
audit demand letter?

(a) Speak with an intellectual property, technology and software law firm to
discuss your rights BEFORE you talk to the BSA, SIIA or other compliance
groups or its attorneys. Do not send emails, make phone calls, or discuss
the case with anyone. Call us at (877) 276-5084.

(b) Do not destroy illegal software copies or purchase new licenses. Just
keep what you have for the meantime and we can discuss what you have
or don’t have proof for.

(c) We can demand that they prove their probable cause for demanding a
voluntary audit, and demand they show their authority to act on behalf of
the company they are purporting to act on another’s behalf (yes, there
are some fraudulent companies and scams out there, so your legal
counsel needs to demand proof), we can also demand confidentiality (ex.
under FRE 408) and to make sure everything is confidential during the
investigation and negotiation stage. This is critical.

(d) Do not fire or retaliate against any of your employees, even if you suspect
someone has turned you in. You could face a gigantic WHISTLEBLOWER
lawsuit if you are not careful.

(e) Have your software attorney help you with the audit, responding to the
BSA or SIIA and try to negotiate a settlement that is fair and reasonable.
If the other side is engaged in fraud, RICO violations or extortion,
counterclaims can be protected and asserted if need be.

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We have helped companies across the United States deal with copyright
software licensing audits and we have had auditors both “go-away” and also
turned a $100,000 demand into a low four-figure settlement to show just one
example.

Don’t go it alone. The attorney on the other side knows more than you do
and will seek to take advantage of you when you represent yourself.

We can structure and fix a low flat rate fee and can be flexible with our fee
structure. We are here to help you. Call our software auditing hotline at
(877) 276-5084.

Steve Vondran, Esq.

RESOURCES

VISIT: www.VondranIP.com

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CALL: (877) 276-5084