15 Aug 2017 in Newsletter
How to Handle Business Software Alliance Audit Demand Letters
By: Keelin Hargadon
Businesses sometimes find themselves the recipients of a letter from the Business Software Alliance (BSA) demanding an audit and accounting of software installed on company computers. The requested audit is meant to uncover unauthorized installations of copyrighted software with the intent of recovering damages on behalf of the BSA/copyright owner. Unfortunately for the recipients, these audit demand letters start a process that ranges from a minor inconvenience to expensive and protracted litigation.
Who is the BSA and what authority do they have?
The BSA is an industry trade group representing software giants such as Microsoft and Adobe. One of the BSA’s primary functions is to help the member companies protect their intellectual property rights against end-user license infringement. For example, the BSA is authorized to take legal action against companies with unauthorized/unlicensed installations of Adobe or Microsoft programs. Keep in mind that, practically speaking, the BSA considers all software installations without a receipt of purchase to be unauthorized. Many times, a disgruntled employee or former employee will tip off the BSA about potential violations. Reporting is further encouraged with possible monetary rewards paid by the BSA to the informant.
How does the audit process work?
The process begins with a letter from the BSA directing a business to conduct an audit of the software installed on machines used for the business. Generally, the letter will identify specific vendors and/or products such as Adobe Acrobat or Microsoft Office. Audits can be conducted by a business’ internal staff or an outside firm and should account for all computers and all versions of the audited software. Be sure that any audit does not inadvertently identify free software as unlicensed. Once the audit is completed, the results are sent to counsel for the BSA with any available proofs of purchase or authorization for installation. More often than not, companies will inevitably find copies of software installed on machines that cannot be accounted for with a proof of purchase. For example, some machines might have outdated versions of software that have not been removed. Based on these “unauthorized” copies of software found in the audit, counsel for the BSA will generally then demand a monetary settlement in addition to other onerous obligations, such as yearly inspections for unauthorized software conducted by the BSA, and agreement to a BSA press release applauding their efforts and settlement on behalf of the member companies.
How to settle
Hiring an attorney to help negotiate the settlement is highly recommended. The BSA generally asks for the following: a monetary settlement, agreement to a press release, agreement to future audits of company computers, adoption and distribution of a software ethics code, destruction of unauthorized copies of software, and proof of purchase for all remaining copies of installed software. First, do not be surprised to see a large initial monetary demand. It is common practice for the BSA to unbundle software suites and account for each program individually. It is also common practice to multiply the demand amount by a factor of three and include attorney’s fees. While the demand may seem daunting, it is important to remember that, for the most part, each point is negotiable. Depending on the particular circumstances of the audit, firm push back on the BSA can be a successful tactic to help reach a more favorable settlement. It is not unknown to negotiate the monetary settlement portion to below half the initial BSA demand amount.
While the anti-piracy mission statement of the BSA is mostly universally lauded, the tactics used to squeeze restrictive settlement terms out of “innocent” infringers is not. Whether a company is aware of any unlicensed software or not, the software audit process is a headache for businesses of all sizes. If your company has recently been contacted by the BSA, our firm has the experience and knowledge to help your business navigate the audit and settlement process.