Software Licensing Disputes: Common Issues and Resolution Tactics

Software licenses are essential contracts for all types of businesses. While they are the lifeblood of software developers, they are also essential to nearly all aspects of most other businesses’ operations. From data security to project management, numerous business functions require software—and this means that they require software licenses.

But, like all contracts, software licenses can—and frequently do—lead to disputes. When these disputes arise, an informed and strategic approach is critical. Taking the right approach requires a clear understanding of the relevant issues and the options that are available, and this starts with engaging an experienced Florida IP litigation lawyer who can guide you forward.

7 Common Issues in Software Licensing Disputes

Issues in software licensing disputes can range from disagreements (or misunderstandings) regarding the scope of the license granted to issues arising out of data breaches and breaches of confidentiality. For example, some of the most common issues include:

1. Scope of the Software License

Many software licensing disputes involve issues related to the scope of the license itself. In some cases, licensees will exceed the scope of their license, either knowingly or unknowingly, by using the licensor’s software for unauthorized purposes or providing access to unauthorized users. In other cases, licensors may unduly restrict licensees’ use of the software due to bugs, inadvertent mistakes or in response to licensees’ alleged software license violations.

2. Updates and Features

Disputes can also arise in relation to software updates and features—or lack thereof. If a licensor is contractually obligated to provide updates, proposed features, bug fixes or other add-ons to the software as initially licensed, its failure to do so can trigger informal or formal legal action by the licensee.

3. Outages and Downtime

Outages and downtime can lead to contentious and potentially costly disputes as well. The global IT outage triggered by CrowdStrike’s faulty update earlier this year cost Fortune 500 companies an estimated $5.4 billion alone. While software licenses will usually include provisions for a certain amount of planned downtime for updates and system maintenance, unplanned outages can prove incredibly costly for all parties involved.

4. Copyright and Patent Infringement

Software licensing disputes will also frequently involve issues related to copyright and patent infringement. Exceeding the scope of a license, sublicensing, reproducing, reverse engineering, and other similar acts by licensees can violate licensors’ exclusive rights—and responding effectively to these violations can be critical for licensors to protect the value of their software going forward.

5. Data Privacy Breaches

While software license agreements often contain comparatively few protections for licensees, one of the protections generally afforded is protection for the licensee’s data. If a licensor fails to adequately protect a licensee’s data (or its customers’ or employees’ data), this can also require an immediate and effective response. If a licensor does not take all contractually required actions to remedy and mitigate the consequences of a data privacy breach, this can lead to additional issues as well.

6. Confidentiality Breaches

Confidentiality breaches on both sides can also trigger disputes that require immediate action. These breaches can involve improper disclosure of software code, sensitive business information, personally identifying information or the existence of the software license itself. While confidentiality violations often (though not always) involve inadvertent mistakes by employees who are unaware of the company’s obligation to keep information private, this does little to mitigate the consequences of the violation.

7. Representations, Warranties and Indemnification

Breaches of representations and warranties are also common issues in software licensing disputes. If a licensor overpromises and underdelivers, this presents a high risk for a commercial dispute. Breaches involving third-party code incorporated into licensed software can lead to issues as well, including issues that can trigger the licensor’s or the licensee’s indemnification obligations.

Resolution Tactics: Keeping Software Licensing Disputes Out of Court

When these issues (among others) arise, what options do software licensors and licensees have for resolving their disputes without going to court? Of course, the answer to this question depends on the specific facts and circumstances involved. Broadly speaking, however, potential resolution tactics in software licensing disputes generally include:

Informal Resolution

In many cases, it will be in both parties’ best interests to target an informal resolution. If one of the parties (or if both of the parties) misinterpreted a key provision of the license agreement, then ensuring that both parties have a clear understanding of their respective rights and obligations could be enough to allow them to move forward. Similarly, if the parties’ dispute exposes an ambiguity or oversight in the software license agreement, working out an informal resolution that preserves the parties’ commercial relationship could be the best option in this scenario as well.  

Renegotiation

Renegotiating will be in both parties’ best interests in some cases as well. If one of the parties can no longer meet its contractual obligations, or if one of the parties’ goals or priorities have changed, then it may make sense to revisit the terms of the parties’ agreement so that they can focus on growth rather than dispute resolution.

Alternative Dispute Resolution (ADR)

If necessary, the parties can also use alternative dispute resolution (ADR) to find a path forward without resorting to litigation. It is worth noting that many software license agreements include mandatory ADR provisions as well. Whether voluntary or mandatory, software licensors and licensees can pursue mediation or arbitration (or both) as needed. Mediation adds structure to the informal dispute resolution process, while arbitration results in a binding decision that is only subject to appeal on limited grounds.

Speak with a Florida IP Litigation Lawyer at Lott & Fischer, PL

If you have questions about resolving a software licensing dispute, we encourage you to contact us for more information. We represent software licensors and licensees in informal dispute resolution efforts, ADR and litigation. To speak with an experienced Florida IP litigation lawyer at Lott & Fischer, PL in confidence, please call 305-448-7089 or tell us how we can reach you online today.

Leslie Lott and Ury Fischer are both Board Certified in Intellectual Property Law by the Florida Bar—and they have been since the inception of the Florida Bar’s Intellectual Property Law Certification program. Ury has also served as Chair of the Florida Bar’s Intellectual Property Law Certification Committee. As the Florida Bar explains, the purpose of its Intellectual Property Law Certification program is to identify lawyers who “have the special knowledge, skills, and proficiency, as well as the character, ethics, and reputation for professionalism, to be properly identified to the public as certified intellectual property lawyers.”