Software licensing is almost always complex and software asset managers need to ensure that they remain alert to changes in standard End User License Agreements (EULA), as well as bespoke terms that may have been agreed at the time the product was purchased. Unfortunately, US retailing giant, Walmart, appears to have overlooked terms of CA, Inc. (“CA”) licensing and the software vendor considered it serious enough to take the case to court.
The Federal lawsuit, filed in US District Court of Central Islip on the 20th of February 2020 (CA, Inc. v. WalMart, Inc. Docket: 2:20-cv-00925-JS-ST), centers on a dispute that seems to have arisen from an unlicensed use of CA software for “processing services” for Walmart Brazil – an entity that was divested by Walmart, Inc. in August 2018.
However, the complaint filed by CA alleges that, although it provided written authorization to Walmart to continue using the software for the divested entity until 30th of June 2019, Walmart “continued to provide unauthorized processing for months afterwards”.
Accordingly, CA, Inc., owned by California based Broadcom, Inc. since November 2018, terminated the license agreement, which was originally signed in 1990, and requested that Walmart removes all software related to it. Unsurprisingly, Walmart refused.
In its lawsuit, CA demanded an injunction to stop Walmart using the software related to the agreement, as well as ceasing services from that software to Walmart Brazil. It also claims legal costs and unspecified damages.
Those with knowledge of software license compliance will know that there are thousands of compliance situations between software vendors and organizations every. However, compliance disputes are settled quietly and rarely make it to court as neither the software vendor, nor the customer, wishes to generate adverse publicity. Primarily, this is because:
– Licensors who take customers to court discourage other companies from doing business with them
– Licensees who are taken to court for using unlicensed software are risking brand reputation
– Litigation means paying potentially unnecessary and expensive legal fees for both parties
– Court cases are notoriously time-consuming and stressful for employees
– Litigation frequently leads to long-term relationship damage between both parties.
The fact that the court documents for this case were filed, means that there was a notable breakdown in communication between the two companies and the resolution demanded, usually the sum of money expected from the under-licensed customer, was deemed unreasonably high.
Interestingly, It appears that the summons received by Walmart altered the dynamic of communications as, by the 4th of March 2020, CA. Inc. had returned to court to request a Voluntary Dismissal; the case was dismissed on the same day.
This case goes to show the importance of license management and ensuring contracts are terminated or renewed before they lapse. A good contract management system should be part of your SAM software with notifications on upcoming software license or other contract renewals, and a warning on agreements that have lapsed.