South Africa: Software Licences - Be Careful!

Last Updated: 10 June 2015
Article by Rachel Sikwane

Most Read Contributor in South Africa, September 2016

The Supreme Court of Appeal recently handed down judgment in the case of Attachmate Corporation v Minister of Water and Environmental Affairs (20 May 2015). There are lessons to be learned for all those who are involved in the licensing of computer software.

The facts were that Attachmate, a US company, had signed a software licence agreement authorising the Department of Water and Environmental Affairs (DWE) to use certain software, with the idea being that DWE's employees would be able to access, via their own computers, data stored at the mainframe computer housed at the State Information Technology Agency (Sita). There was a separate maintenance agreement in terms of which Attachmate was obliged to support the software.

The licence fees payable by DWE were based on the number of computers on which the software was to be installed. The licence fee (R455 per computer) was heavily discounted, as was the maintenance fee (R204 per unit). Why? Because Attachmate believed that the low price would lead to it generating more business from Sita, seemingly making this deal something of a loss-leader. The number of computers agreed on was 300. Although Attachmate installed the mainframe component of the software, DWE's technicians were able to load the copies onto DWE's computers.

Therein lay the problem. As Judge Brand put it in his judgment, "[DWE] did not pay much heed to its express undertaking not to install more than the 300 copies." When Attachmate became aware of the fact that DWE had installed some 660 copies, it persuaded DWE to take out another 360 licences and maintenance contracts at the same (discounted) rates.

But that wasn't the end of the matter because, as the judge put it, "[DWE]continued, in rather cavalier fashion ... to make and install additional copies of Attachmate's software without its consent." Attachmate then tried to persuade DWE to pay the regular licence fee on the additional unauthorised copies, but this was never resolved. The judge said that the reason for this was"not that [DWE] was trying to avoid payment of licence fees, but that its affairs were in such disarray that it could not determine the number of unlicensed copies involved".

So, Attachmate enforced a clause of the contract (clause 11) that required DWE to submit to an audit. The audit, done by KPMG, determined that there were 1564 unlicensed copies of the software. Attachmate disputed this figure, saying that there was an unlicensed copy on every one of DWE's some 5000 computers, and demanded that DWE pay the "applicable licence fee" on well over 4000 illegal copies, and that it pay for maintenance contracts on all these copies too. The expression "applicable licence fee" came from clause 11, which read as follows: "If an audit reveals that you possess or at any time possessed unlicensed copies of the software, you will promptly pay Attachmate the applicable licence fee for such unlicensed copies."

The court basically had to decide what compensation Attachmate was entitled to. Attachmate was forced to concede that it couldn't prove the existence of more than 1564 unlicensed copies. However, what was the "applicable licence fee"? This term wasn't defined in the agreement. Attachmate argued that it shouldn't be the discounted fee, because "to apply the deeply discounted rate that had been negotiated with Sita ... would be to encourage non-compliance with the licence agreement".

The court disagreed with Attachmate. It said that Attachmate's claim that it could apply a higher fee (even if it was the company's standard fee) would have the effect of making clause 11 a penalty clause. The clause was, however, simply intended  to "facilitate proof of its claim for the damages it had suffered through unlicensed copying ... it was not intended to enhance the quantum of its damages claim". The judge went on to say this: "Even if I am wrong in my understanding of 'applicable fee', Attachmate only has itself to blame ... if it wanted to stipulate for its list price or its standard price or some other penalty in the situation contemplated by clause 11, I can think of nothing which prevented it from doing so."

Judge Brand further explained his thinking: "What the concept of 'an applicable licence fee' conjures up to me is a flexible, supple yardstick; a fee that varies in its application with reference to the circumstances of every case, including the identity of the licensee ... . Once a licence fee had been determined through negotiation between Attachmate and the licensee involved, I do not think the fee applicable to that licensee can be determined without any reference to the negotiated fee."

So, the damages that DWE had to pay were to be calculated on this simple basis: what would DWE have paid had it taken out a further 1564 licences, bearing in mind that it would also have been obliged to take out maintenance agreements on each one?

The lessons from this judgment are clear. If you're a software company, be wary of situations where you aren't in control of the process of loading copies of your software. And if you want the non-compliant licensee to pay a penalty, make this very clear in your contract. For those companies and organisations who use computer software under licence, you need to make sure that you take the software company's IP rights seriously, as well as your contractual obligations.

In companies with significant royalty and licence fee income, management of this stream of revenue often falls between finance, sales and legal departments. Royalty returns from self-reported relationships usually contain errors, with significant levels of under-reporting. This is not necessarily intentional but may result from misinterpretation of agreements, information gathering and system weaknesses, and general clerical errors.

The IP commercial team at ENSafrica works in collaboration with our Forensics team to address these issues in a way that is aimed at preserving, enhancing and maximising the long-term relationship between the licensor and licensee.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

To print this article, all you need is to be registered on

Click to Login as an existing user or Register so you can print this article.

Some comments from our readers…
“The articles are extremely timely and highly applicable”
“I often find critical information not available elsewhere”
“As in-house counsel, Mondaq’s service is of great value”

Mondaq Advice Centre (MACs)
Up-coming Events Search
Font Size:
Mondaq on Twitter
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).
Email Address
Company Name
Confirm Password
Mondaq Topics -- Select your Interests
 Law Performance
 Law Practice
 Media & IT
 Real Estate
 Wealth Mgt
Asia Pacific
European Union
Latin America
Middle East
United States
Worldwide Updates
Check to state you have read and
agree to our Terms and Conditions

Terms & Conditions and Privacy Statement (the Website) is owned and managed by Mondaq Ltd and as a user you are granted a non-exclusive, revocable license to access the Website under its terms and conditions of use. Your use of the Website constitutes your agreement to the following terms and conditions of use. Mondaq Ltd may terminate your use of the Website if you are in breach of these terms and conditions or if Mondaq Ltd decides to terminate your license of use for whatever reason.

Use of

You may use the Website but are required to register as a user if you wish to read the full text of the content and articles available (the Content). You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these terms & conditions or with the prior written consent of Mondaq Ltd. You may not use electronic or other means to extract details or information about’s content, users or contributors in order to offer them any services or products which compete directly or indirectly with Mondaq Ltd’s services and products.


Mondaq Ltd and/or its respective suppliers make no representations about the suitability of the information contained in the documents and related graphics published on this server for any purpose. All such documents and related graphics are provided "as is" without warranty of any kind. Mondaq Ltd and/or its respective suppliers hereby disclaim all warranties and conditions with regard to this information, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. In no event shall Mondaq Ltd and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use or performance of information available from this server.

The documents and related graphics published on this server could include technical inaccuracies or typographical errors. Changes are periodically added to the information herein. Mondaq Ltd and/or its respective suppliers may make improvements and/or changes in the product(s) and/or the program(s) described herein at any time.


Mondaq Ltd requires you to register and provide information that personally identifies you, including what sort of information you are interested in, for three primary purposes:

  • To allow you to personalize the Mondaq websites you are visiting.
  • To enable features such as password reminder, newsletter alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our information providers who provide information free for your use.

Mondaq (and its affiliate sites) do not sell or provide your details to third parties other than information providers. The reason we provide our information providers with this information is so that they can measure the response their articles are receiving and provide you with information about their products and services.

If you do not want us to provide your name and email address you may opt out by clicking here .

If you do not wish to receive any future announcements of products and services offered by Mondaq by clicking here .

Information Collection and Use

We require site users to register with Mondaq (and its affiliate sites) to view the free information on the site. We also collect information from our users at several different points on the websites: this is so that we can customise the sites according to individual usage, provide 'session-aware' functionality, and ensure that content is acquired and developed appropriately. This gives us an overall picture of our user profiles, which in turn shows to our Editorial Contributors the type of person they are reaching by posting articles on Mondaq (and its affiliate sites) – meaning more free content for registered users.

We are only able to provide the material on the Mondaq (and its affiliate sites) site free to site visitors because we can pass on information about the pages that users are viewing and the personal information users provide to us (e.g. email addresses) to reputable contributing firms such as law firms who author those pages. We do not sell or rent information to anyone else other than the authors of those pages, who may change from time to time. Should you wish us not to disclose your details to any of these parties, please tick the box above or tick the box marked "Opt out of Registration Information Disclosure" on the Your Profile page. We and our author organisations may only contact you via email or other means if you allow us to do so. Users can opt out of contact when they register on the site, or send an email to with “no disclosure” in the subject heading

Mondaq News Alerts

In order to receive Mondaq News Alerts, users have to complete a separate registration form. This is a personalised service where users choose regions and topics of interest and we send it only to those users who have requested it. Users can stop receiving these Alerts by going to the Mondaq News Alerts page and deselecting all interest areas. In the same way users can amend their personal preferences to add or remove subject areas.


A cookie is a small text file written to a user’s hard drive that contains an identifying user number. The cookies do not contain any personal information about users. We use the cookie so users do not have to log in every time they use the service and the cookie will automatically expire if you do not visit the Mondaq website (or its affiliate sites) for 12 months. We also use the cookie to personalise a user's experience of the site (for example to show information specific to a user's region). As the Mondaq sites are fully personalised and cookies are essential to its core technology the site will function unpredictably with browsers that do not support cookies - or where cookies are disabled (in these circumstances we advise you to attempt to locate the information you require elsewhere on the web). However if you are concerned about the presence of a Mondaq cookie on your machine you can also choose to expire the cookie immediately (remove it) by selecting the 'Log Off' menu option as the last thing you do when you use the site.

Some of our business partners may use cookies on our site (for example, advertisers). However, we have no access to or control over these cookies and we are not aware of any at present that do so.

Log Files

We use IP addresses to analyse trends, administer the site, track movement, and gather broad demographic information for aggregate use. IP addresses are not linked to personally identifiable information.


This web site contains links to other sites. Please be aware that Mondaq (or its affiliate sites) are not responsible for the privacy practices of such other sites. We encourage our users to be aware when they leave our site and to read the privacy statements of these third party sites. This privacy statement applies solely to information collected by this Web site.

Surveys & Contests

From time-to-time our site requests information from users via surveys or contests. Participation in these surveys or contests is completely voluntary and the user therefore has a choice whether or not to disclose any information requested. Information requested may include contact information (such as name and delivery address), and demographic information (such as postcode, age level). Contact information will be used to notify the winners and award prizes. Survey information will be used for purposes of monitoring or improving the functionality of the site.


If a user elects to use our referral service for informing a friend about our site, we ask them for the friend’s name and email address. Mondaq stores this information and may contact the friend to invite them to register with Mondaq, but they will not be contacted more than once. The friend may contact Mondaq to request the removal of this information from our database.


This website takes every reasonable precaution to protect our users’ information. When users submit sensitive information via the website, your information is protected using firewalls and other security technology. If you have any questions about the security at our website, you can send an email to

Correcting/Updating Personal Information

If a user’s personally identifiable information changes (such as postcode), or if a user no longer desires our service, we will endeavour to provide a way to correct, update or remove that user’s personal data provided to us. This can usually be done at the “Your Profile” page or by sending an email to

Notification of Changes

If we decide to change our Terms & Conditions or Privacy Policy, we will post those changes on our site so our users are always aware of what information we collect, how we use it, and under what circumstances, if any, we disclose it. If at any point we decide to use personally identifiable information in a manner different from that stated at the time it was collected, we will notify users by way of an email. Users will have a choice as to whether or not we use their information in this different manner. We will use information in accordance with the privacy policy under which the information was collected.

How to contact Mondaq

You can contact us with comments or queries at

If for some reason you believe Mondaq Ltd. has not adhered to these principles, please notify us by e-mail at and we will use commercially reasonable efforts to determine and correct the problem promptly.