Leading UK law firm, Pennington Manches, recently carried out an analysis of the case of 118 Data Resource Limited v IDS Data Services Limited & others. This case covered an audit clause in a database license agreement, but has implications for any software vendor audit clause in an agreement.
The judgement reiterated the requirement for software vendors to clearly set out in their licensing agreements the terms, in this case in relation to audits, as vague terms may well not be enforceable.
What your audit clause should state
According to Pennington Manches, In order to be effective, and to adequately protect the software vendor’s rights to check that the licensee is not breaching the agreement and that the licensee’s rights are adequately protected, an audit clause needs to be drafted with sufficient particularity to the individual circumstances of the agreement in question.
In particular they recommend that the audit clause should specifically state…