Breakfast seminar Future Proofing the Licence Agreement in ... · •The good old days -when...

BreakfastseminarFutureProofingthe

LicenceAgreementintheMachineAge

RichardKempandDeirdreMoynihan21June2017

• Intro&context(Richard)• Customer-sidesoftwareover-deployment– agrowingrisktothebusinessrelationship

• SAP vDiageo (UKHighCourt,16.02.17)– theUK’sfirstsoftwareoverdeploymentcase(Deirdre)• Background• Case• Keytakeaways– auditsandlicencescope

• Newsoftwaredeploymenttechniquesandmanagingtheoverdeploymentrisk(Richard)• Newpiecesinthepuzzle:AI/cognitivecomputing,Xaas,RPA,APIs,SOA,smartcontracts,OSSandalgos• Solvingthepuzzle– ‘it’sonlyAIuntilyouknowwhatitdoes,thenit’sjustsoftware’• Cleardraftingoflicencescopeiskey

• Q&A

Agenda

• Thegoodolddays- whenlicencescopeclauses&restrictionsgenerallywellunderstood- arechangingØ Commercially:softwarevendorsarebecomingincreasinglyassertiveonover-deploymentØ Legally:softwarevendorsarestartingtohavesomesuccessinenforcinglicencescopeclausesØ Technically:newsoftwaredeploymenttechniquesmeanssoftwareisinteractingmuchmorewidely

• Risksforlicencesinflight• softwareover-deploymentrisksdisputes,extrafees,contractingdelaysandinefficiencies• needforclear,concise,future-proofedlicencescopeclauses

• Vendors:‘communicatewellandtrustbutverify’• Customers:• Alignusecasetolicenceriskthroughcontractlifecycle• structuredsoftwareassetmanagement?

Introductionandcontext

Howover-deploymenthappens• changeofuse• acquisition/divestment• techrefresh• clouddeployment• clickwrapoverride• morerestrictivelicences• changeofuseHowover-deploymentcomestolight• supportrequest• pro-activeaudit• newproductlaunch• productcatalogue• whistleblowing

Commercially:softwarevendorsarebecomingmoreassertive

Facts• May2004:

• DiageolicensedvariousSAPproducts,includingmySAPERP("SAPERP")andSAPProcessIntegration("SAPPI").

• SAPERPprovidesasuiteofenterpriseresourceplanningfunctionsformanagingoperations,financeandHR.ThelicensefeeforSAPERPiscalculatedbyreferencetodifferentcategoriesofNamedUsers.Themaintenancefeeisapercentageofthelicensefeeandpayableannually.

• SAPPIfacilitatescommunicationbetweendifferentSAPsystemsorbetweenaSAPsystemandanon-SAPsystem.ThefeesforSAPPIarecalculatedonthebasisofthemonthlyvolumeofmessagesprocessed.

Legally:SAPvDiageo(Feb2017)theUK’sfirstsoftwareover-deploymentcase

SAPvDiageo[2017]EWHC189(TCC)

• Connect

• SystembasedonSalesforce.complatformthatallowedcustomerstomanagetheirbusinessaccountswithDiageo,andtoplaceandreviewordersdirectly,ratherthanthroughcallcentres.

• InteractswithSAPERPviaSAPPI.

• Gen2

• AppbasedonSalesforce.complatformwhichmanagestheoperationsofDiageosalesandservicerepresentatives,enablingthemtomanagetheircustomervisitsandcalls,andtorecordinformationobtainedduringthosevisitsandcalls.

• InteractswithSAPERPviaSAPPI.

2011/2012,Diageodeveloped2newsystems:


SAPEPR

Gen2Salesforce.com

ConnectSalesforce.com

SAPPI

SAPPI


• SAParguedthattheGen2andConnectsystemsuseand/oraccesstheSAPERPdirectlyorindirectlyandclaimedadditionallicenceandmaintenancefeesof£54,503,578undertheAgreementorasdamages:

• HighCourtappliedusualrulesofcontractualinterpretation(para.38):

• Courtascertainstheintentionofthepartiestoacontractbyaskingwhatareasonableperson,havingallthebackgroundknowledgewhichwouldhavebeenavailabletotheparties,wouldhaveunderstoodbythelanguageusedinthecontract.

• Focusisontheonthemeaningoftherelevantwordsintheirdocumentary,factualandcommercialcontext.

• Thatmeaninghastobeassessedinthelightof(i)thenaturalandordinarymeaningoftheclause,(ii)anyotherrelevantprovisionsofthecontract,(iii)theoverallpurposeoftheclauseandthecontract,(iv)thefactsandcircumstancesknownorassumedbythepartiesatthetimethatthedocumentwasexecuted,and(v)commercialcommonsense,but(vi)disregardingsubjectiveevidenceofanyparty'sintentions.


• Ruling:

• Ontheplainandobviousmeaningofthewordsinthelicenceonly‘NamedUsers’wereauthorisedtoaccessanduseSAPERP,andtheextentoftheirpermittedaccessandusewasdependentontheirusercategorysetoutinascheduletotheAgreement.Althoughtheterms"access"and"use"werenotdefinedinthelicence,"theplainandobviousmeaningof"use"inthecontextoftheAgreementisapplicationormanipulationofthemySAPERPsoftware.Theplainandobviousmeaningof"access"inthecontextoftheAgreementisacquiringvisibilityof,orconnectionto,themySAPERPsoftware."

• AlthoughtherewasnoexpressstatementintheAgreementthatusersofthirdpartysoftwarewhichinteractswithSAPapplicationsviaSAPPIrequiredindividuallicensingasusersoftheSAPapplications,thisfactdidnotdetractfromthe"clearwording"intheAgreementthatusagewassubjecttoNamedUserPricing.

• SAPPIisnota"gate-keeperlicense".


• Ruling(cont.):

• DespitedifferentNamedUserdefinitionsintheAgreement,thecourtfoundthatnoneofthesedefinitionswasexactlyonpointwhenconsideringtheinteractionsbetweenSAPERPandConnectandGen2.

• Quantificationofdamagesdueistobeaddressedinseparateproceedings,unlesssettledbytheparties.



• CurrentversionofSAPOnPremiseGTCs:

• "Use"meanstoactivatetheprocessingcapabilitiesoftheSoftware,load,execute,access,employtheSoftware,ordisplayinformationresultingfromsuchcapabilities.(cl.1.16)• "LicenseeagreestoinstalltheSoftwareonlyonDesignatedUnitslocatedatLicensee’sfacilitiesandinLicensee’sdirectpossession.WithadvancewrittennoticetoSAP,theinformationtechnologydevicesmayalsobelocatedinthefacilitiesofanAffiliateandbeintheAffiliate’sdirectpossession.LicenseemustbeappropriatelylicensedasstatedintheUseTermsforanyindividualsthatUsetheSoftware,includingemployeesoragentsofAffiliatesandBusinessPartners.UsemayoccurbywayofaninterfacedeliveredwithorasapartoftheSoftware,aLicenseeorthird-partyinterface,oranotherintermediarysystem."(cl.2.1.2)

• LicenseScope


IstheSoftwareonpremiseorinthecloud?

Isthelicenseperpetualortermlimited?

Howfrequentlycantheprovidercheckuseisincompliancewiththe

licenseterms?

What’stheimpactofafailuretocomplywithusagerights/license

terms?

HowwillthecustomeraccesstheSoftware?ViapeopleorwilltheSoftware“talk”tootherSoftware/Systems?

Whorequiresaccess?Isitemployees,subcontractors,suppliers,customers?What

aboutaffiliates?

Canthecustomersharelicenses/grantsublicenses?

DisputeResolution

• AuditRights

• "Onceinany12monthperiod,unlessotherwiserequestedbySAPandinanyeventnomorethanthreetimesinany24monthperiod,theCustomershall,usingthetoolsprovidedbySAP,generatefromeachinstanceoftheSoftwareanddelivertoSAPtheinformationnecessarytocheckthatusageoftheSoftwarecorrespondswiththeExhibit.IfCustomerfailstodosothentheCustomershallpermitSAPreasonabledirectand/orremoteaccesstotheSoftwareandtheequipmentonwhichitisinstalledtoverifyusage.Insodoing,SAPshallcomplywiththeCustomer'sreasonablesecurityrequirements.IfusageisdiscoveredwhichdoesnotcorrespondtotheExhibit,additionallicenceandmaintenancefeeswillbecomepayableasreferredtoinclause6.2.Fortheavoidanceofdoubteachpartyshallbearitsowncostsincurredintheperformanceofitsobligationsofthisclause."(Clause3.19)

• DiageohadnothiddentheintegrationbetweentheSAPERPandtheSalesforce.comsystemsfromSAP.IthadalsoprovidedSAPwiththereportsrequiredbyclause3.19.


• Audits– pointstoconsider


Why?Purposeandscope

What?DetailsofNamedUsers?Useofs/w&Materials?

When?Notice

FrequencySub-contractorflow-down?

How?Auditor(un)accompanied?

On-site?Documents?

Who?Supplier?

ThirdParty(NDA,etc)?

Where?

Onpremiseorremotelyusingsoftwaretools?

Whopays?

DisputeResolution

• KeyPoints:

• ContractisKing– termsaddressingthefollowingissuesshouldbeexpress,preciseandclear:

• typesofuser• natureandtypeofaccess• scopeoflicense• interactionwiththirdpartysystemsandapps• improvement/scopechange• chargingmechanism,plusmethodologyforcalculatingchangesinusetype,access,etc.• auditrights• terminationrights


Technically:softwarelicensingismovingfromthis….

Inthebeginning("nodelocked"):• "TheSoftwaremaybeloadedontonomore

thanonecomputer.Asinglecopymaybemadeforback-uppurposesonly."

• "LicensorherebygrantstoLicenseeanon-exclusivelicensetoinstallandusetheSoftwareononesingleusercomputerinitspossession."

Tothis:

SOFTWARE

APIs/Plugins

SOFTWARE

DesktopMobile

DatabaseServerServer

…tothis…

cloud/XaaS,AI,RPA,APIs,SOA,smartcontracts,OSS&algos–apuzzleuntilyourealisewhattheydo,thenthey’rejustsoftware!

Newsoftwaredeploymenttechniquesimpactlicensing

XaaS



Cloud/XaaS(anythingasaservice)

keylicensing/contractingissues:• All:dataformat,ownership,return,termination

• SaaS:restrictionsonuseofs/wwithothersystems?

• PaaS:restrictionsonusingruntime/middleware/OSwithothersystems?

XaaS

AI

machinelearning

machineperception

machinecontrol

ArtificialIntelligence(AI)

ArtificialIntelligence(AI)

KeyfeaturesofAIinprofessionalservices:• naturallanguageinterface+• bigdata(trainingdatasets)+• machinelearning (AIsoftware)• cognitive(learnsfromuserfeedbacksoimprovementgetincrementallyfaster)

Suitableforsupporting:• repetitive• process-intensive• standard/isablecomponentryofhighervalueprofessionalserviceswork(duediligence,contractassembly,advisory,e-discovery)

keylicensing/contractingissues:• writinguptheproject(SoW)• ownership,etctreatmentofdatainputs• ownership,etctreatmentofoutputs (reports)• derivedwork (improvementsthroughcognition,etc)• regulatory (e.g.SRACoCO(7.1)andoutsourcing

RPA

people

process

tools/tech

governance

RoboticProcessAutomation(RPA)RPAisbasicallysoftware……thatreplacespeopleprocesseswithsoftwareprocesses

Itincludesthefollowingelements:1. phaseofconsultancy/profservices to

migrate/translatetheprocessesfrompeopletosoftware

2. scope,map,timetable,projectplan etc3. s/wtoolslicensed toexecuteprocesses

keylicensing/contractingissues:• interactionofthes/wprocesseswithothers/wsystemsatseveralremoves

• licensingandfees/paymenttreatment

API

server

Webservices

manager

datafeed

ApplicationProgrammingInterface(API)• APIisaninterface bywhichanapplicationaccessesothersoftware(operatingsystem)

• Itsetsouttherulestheapplicationmustcomplywithto‘call’theothers/w(e.g.gettheOStoprint)

• complianceensuresoneapplicationcanrunondifferentOS’(portability)orworkwiths/winanotherlanguage(compatibility)

• APIscanbedocuments (specs)ors/wtoolsandroutines,oracombination

keylicensing/contractingissues:• DoyouneedanlicencefortheAPI?• Arethereanyknock-oneffectsonwhatitinterfacesto/with?

• Ongoingstandardscomplianceobligations?

SOA

orchestrationsoftware

ESBmiddleware

applicationsoftware

SoftwareOrientedArchitecture(SOA)SOAisbuilt(architected)onassociating(orienting)customer’srequiredbusinessprocesses(services)withthesupplier’ssoftware.Keyelements:• orchestration:menuofapplicationstobeselectedandsequencedforcustomer

• enterpriseservicebus(ESB):middlewareconnectsorchestrationandapplicationsoftware.

• applications:s/wselectedthroughorchestration&integratedthroughESBtoperformcustomerfunctions.

Keylicensing/contractingissues:• DoesSOAagreement/licencepermitinteractionwithothers/woutsidetheSOA?

• Change/developmentinflight?

smartcontracts

execution

audit(control)definition

programexecutionSingleinterpretationIrreversibleautonomous

softwareprogram

realtime,immutable

SmartContracts• think‘ChittyonContractsinCode’asablockchainapplication

• Softwarecoderepresentingaself-executingcontractasanarrangementthatthesystemcanmake→ verify→execute→enforceautomaticallyundertermssetinadvance

• softwarecanalsobeusedtomakeandexecutechainsofcontracts linkedtoeachother,alloperatingautonomously

Keylicensing/contractingissues:• Howfardoestheuser’slicenceextend?• Allcontractinthechain(many‘000spotentially?

• Interactionwiths/wandsystemsoutsidethesmartcontractsystem?

OSS

freeredistribution

withsourcecode

modificationpermitted

OpenSourceSoftware(OSS)

OSSissoftwareprovidedunderlicencethatmeetsthe3requirementsoftheOpenSourceDefinition:

• redistributablewithoutpayment

• redistributablewiththesourcecode orwellpublicisedaccesstoit;and

• OSSmodification &distributionofderivedworksispermitted

Keylicensing/contractualissues:

• inOSS,thelicencewrapper,notthesoftware,isdifferent

• keyissueisaround‘copyleft’(inheritance)requirement,espin(L)GPLlicences

Algorithm=mathsformula

𝑨 = 𝝅𝒓𝟐

Algorithms

Keylicensing/contractualissues:

• Algorithmitselfcouldbecopyright,etc

• Softwareembodimentofalgowillbecopyright,etc

• Howisalgoused– treatmentofinput&outputdata?Usewithothersystems?

XaaS



• LicencescopeclauseswillneedmoreattentiongoingforwardØ Commercially:softwarevendorsarebecoming

increasinglyassertiveonover-deploymentØ Legally:softwarevendorsarestartingtohavesome

successinenforcinglicencescopeclausesØ Technically:newsoftwaredeploymenttechniquesare

startingtointeractmuchmorewidely

• Themovetothecloud,APIs&interoperablesystemsmakesclearlydraftedlicencescopetermscritical• newsoftwaredeploymenttechniques• systemscaninteractatseveralremovesfrominitiallicence

…tolicencescopeterms...

alignusecase…

…overcontractlifecycle

Takeaways

• greaterriskforlicencesinflight• softwarelicencenon-compliancethroughover-deploymentisinefficient• risksextracharges(licencefees,legal,managementtime)delay,audit,enforcement• needforclear,future-proofedlicencescopeterms• avoidunattractivechoicebetweenunbudgetedexpense&removing/workingroundoffendingsoftware

• Customers:• usecasesfors/wwillbecomemoreinterdependent• shouldensuretheirdeploymentprocessesalignusecase tolicencescopeterms throughcontractlifecycle• structuredsoftwareassetmanagementprocesses?• Vendors:• communicatelicensescopeclearlyinbusinessdocs• criticalthatbusinesstermsdovetailwithTs&Cs• ‘trustbutverify’(audit)

Takeaways

…tolicencescopeterms...

alignusecase…

…overcontractlifecycle

[email protected]

[email protected]

thankyou

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