1. Managing Software License Disputes: Cooperation or Litigation www.ScottandScottllp.com Presented by Robert J. Scott Scott & Scott, LLP 800-596-6176

2. Managing Software License Disputes: Cooperation or Litigation © 2006 Scott&Scott, LLP Publisher Enforcement on the Rise º BSA Audits º SIIA Audits º SAM Engagements º Big Four Audits º Publisher Enforcement Programs

3. Managing Software License Disputes: Cooperation or Litigation © 2006 Scott&Scott, LLP Investigation & Evaluation º Inventory of Software Installed º Review and Analysis of Purchase Documentation º Analysis of License Agreements º Determination of Platforms º Review of Customer-facing Functionality º Determination of License Requirements º Reconciliation of Installations and Licenses º Anticipating the Publisher’s Strategy

4. Managing Software License Disputes: Cooperation or Litigation © 2006 Scott&Scott, LLP Resolution Frameworks º License True Ups are the least adversarial and best for strategic relationships. º Cease and Desist Letters may be effective low cost mechanisms to avoid a protracted dispute. º Software Audits are the most frequently used and extremely effective. º License Termination is the publisher’s hammer and prelude to litigation. º Mediation prior to formal legal proceedings may facilitate communication and resolution. º Arbitration favors end users but can be extremely costly and protracted. º Litigation is surprisingly uncommon between parties with ongoing business dealings of any kind.

5. Managing Software License Disputes: Cooperation or Litigation © 2006 Scott&Scott, LLP Software Audit: The Most Common Resolution Framework º Self Audits are the least disruptive and most predictable. º Independent Audits involve a third party and increase costs, but independence is favorable. º SAM Engagements are audits in disguise but may fit certain situations. º Publisher-Staffed Audits present the highest risk with no upside and should be avoided.

6. Managing Software License Disputes: Cooperation or Litigation © 2006 Scott&Scott, LLP Mediation & Arbitration º Pre-litigation mediation can frequently bring the appropriate parties to the negotiation table. º Mediation can help the parties better understand each other’s position and perspective. º Arbitration permits the selection of a qualified decision maker. º Arbitration may present problems of proof for publishers. º Arbitration will not necessarily save time or money.

7. Managing Software License Disputes: Cooperation or Litigation © 2006 Scott&Scott, LLP Litigation Considerations º Amount in Controversy may be difficult to determine because contractual audit provisions do not specify a formula for resolving licensing gaps. º Switching Costs may change the balance of power especially if termination provisions are present. º Probability of Success on the Merits of ambiguous contractual provisions may be the most likely scenario for litigation.

8. Managing Software License Disputes: Cooperation or Litigation © 2006 Scott&Scott, LLP The Importance of Ambiguities in Software License Agreements º Determine whether the license in question contains a provision indicating that ambiguities will not be construed against the drafter. º The Parol Evidence Rule states that the parties may introduce extrinsic evidence to prove that their interpretations of the contract are consistent with the parties’ intent when entering into the contract. º Triable issues of fact regarding software license contracts with ambiguous provisions generally favor the end user instead of the publisher.

9. Managing Software License Disputes: Cooperation or Litigation © 2006 Scott&Scott, LLP Combining the Best of Both Strategies Software audit disputes usually evolve over a period of months or years. Many disputes can be avoided through improved communication. Clients should cooperate without jeopardizing their legal rights. There is a “right” resolution framework for each situation. Litigation is necessary in rare cases.

10. Managing Software License Disputes: Cooperation or Litigation © 2006 Scott&Scott, LLP Contact Information Robert J. Scott Scott & Scott, LLP 2200 Ross Avenue, Suite 5350E Dallas, Texas 75201 Phone: 214-999-0080 Fax: 214-999-0333 rjscott@scottandscottllp.com