United States: Avoid Overpaying For Software Settlements

Last Updated: January 24 2017
Article by Keli Johnson Swan

Most software audits initiated by the software publisher or a third party entity authorized to pursue copyright infringement claims on behalf of the software publishers, such as the BSA| The Software Alliance ("BSA") or the Software & Industry Information Association ("SIIA"), are resolved outside of a courtroom. Many of the settlements require payment of a monetary penalty as part of the resolution.

There are many factors that precede the negotiation stage and affect the total payment. Once a company decides to participate in the audit and submits audit results, the BSA or SIIA identify any gaps in software licensing, according to the auditing entity's rules. These gaps may range from a deficiency of licenses to acquiring the incorrect license for the software installed. Once the auditing entity determines the number of gaps, it calculates a total settlement based on the information presented.

An initial settlement demand typically sets the baseline for negotiations, and it is critical to ensure that the initial number is accurate before engaging in negotiations in order to avoid paying an artificially inflated settlement. There are several key factors to consider with regard to the settlement demand.

  • Actual versus Statutory Damages The Copyright Act, 17 U.S.C. 504, allows the owner of a copyright to determine how to calculate damages related to copyright infringement. The copyright owner may elect to obtain actual damages, which is the actual value of the software installed, multiplied times the instances of infringement (number of installations). This provision references willful copyright infringement, lending the BSA and SIIA to include trebled damages in their calculations. The total actual damages include the number of software installations multiplied by the MSRP values, then multiplied by three.

Alternatively, the BSA or SIIA may elect to assess statutory damages for the copyright infringement. 17 U.S.C. §504 (c). According to this provision, the court may award between $750 and $30,000 per work. For example, if the BSA or SIIA assessed a penalty for $5,000 for Microsoft Visio, the number of copies actually installed would not be multiplied by the actual damages penalty associated with that particular work. Even if a company had 15 installations of Microsoft Visio, if the penalty assigned to that work is $5,000, then $5,000 is the total penalty for that item.

  • Unbundled Pricing for Suites Regardless of whether the BSA or SIIA decide to assess statutory or actual damages, a penalty is assessed for each individual component of a software suite. The BSA and SIIA argue that each component are copyrighted separately, and therefore should be calculated separately.

However, that argument is not supportable, but litigation in New York against the SIIA and Adobe regarding this matter was settled before a court ruled on the unbundling issue. Adobe's End User License Agreement specifically prohibits unbundling the software (Section 4.5 of Adobe's End User License Agreement). Despite this clear treatment of Adobe software suites as a single product, the SIIA will assess a penalty for each individual component of Adobe Creative Suite.

  • Incorrect MSRP values Recently, a trend has emerged among some of the BSA and SIIA's attorneys to assess artificially inflated or incorrect MSRP values for the software that is installed. It is critical to carefully evaluate the settlement demand on a line by line basis to ensure that 1) the number of instances of software incurring a penalty are accurate, and 2) the actual MSRP value of the products is accurate.

Two of the most recurring mistakes I have seen include incorrect pricing for Microsoft suites, and incorrect server pricing. Microsoft Office changed its pricing for its components in 2016 and newer versions to $109.99 for most components. Often the BSA and SIIA continue to assess the older pricing (139.99) for these new instances.

Additionally, I frequently encounter Enterprise or Core pricing penalties for Microsoft Servers that should include Standard pricing.

It is not a concession for the BSA to agree to the accurate pricing for its settlement calculations. Generally speaking, I do not recommend engaging in negotiations until you agree on the initial demand and correct any pricing mistakes.

  • CALs The BSA sometimes includes penalties for a Client Access License (CAL), based on the total number of employees and the type of server installed. However, a CAL is not a software product that is installed on a network, and therefore cannot be included in a penalty for software infringement. Do not allow the BSA to include this penalty.

It is important to note that if CALs are required, part of the post-settlement remediation process will require these licenses to be purchased.

  • Confidentiality and attorney's fees The BSA and SIIA offer to include a confidentiality provision to keep the existence and terms of the settlement confidentiality for a premium. The fee for including this provision varies widely based on the company, number of instances of software infringement, and the counsel for the BSA or SIIA. Typically this provision must be requested as part of any counteroffer to the auditing entity and is included as part of the total settlement sum. Most companies choose to include this provision to avoid the bad press associated with resolving copyright infringement.

The SIIA and BSA also include a line item in the original settlement demand for their own attorney's fees. This number varies based on the length of time a matter has been pending and the specific legal issues involved. However, it is important to ensure that this number is not artificially inflated. For example, an assessment of $25,000 for the BSA or SIIA's attorney's fees is unnecessarily high.

These are just a few key considerations for resolving software copyright infringement disputes. It is strongly recommended that an audit target seeks legal counsel that specializes in software copyright infringement in order to avoid overpaying a settlement.

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 Mondaq.com.

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

Keli Johnson Swan
In association with
Related Topics
Related Articles
Related Video
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
Registration (you must scroll down to set your data preferences)

Mondaq Ltd requires you to register and provide information that personally identifies you, including your content preferences, for three primary purposes (full details of Mondaq’s use of your personal data can be found in our Privacy and Cookies Notice):

  • To allow you to personalize the Mondaq websites you are visiting to show content ("Content") relevant to your interests.
  • To enable features such as password reminder, news alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our content providers ("Contributors") who contribute Content for free for your use.

Mondaq hopes that our registered users will support us in maintaining our free to view business model by consenting to our use of your personal data as described below.

Mondaq has a "free to view" business model. Our services are paid for by Contributors in exchange for Mondaq providing them with access to information about who accesses their content. Once personal data is transferred to our Contributors they become a data controller of this personal data. They use it to measure the response that their articles are receiving, as a form of market research. They may also use it to provide Mondaq users with information about their products and services.

Details of each Contributor to which your personal data will be transferred is clearly stated within the Content that you access. For full details of how this Contributor will use your personal data, you should review the Contributor’s own Privacy Notice.

Please indicate your preference below:

Yes, I am happy to support Mondaq in maintaining its free to view business model by agreeing to allow Mondaq to share my personal data with Contributors whose Content I access
No, I do not want Mondaq to share my personal data with Contributors

Also please let us know whether you are happy to receive communications promoting products and services offered by Mondaq:

Yes, I am happy to received promotional communications from Mondaq
No, please do not send me promotional communications from Mondaq
Terms & Conditions

Mondaq.com (the Website) is owned and managed by Mondaq Ltd (Mondaq). Mondaq grants you a non-exclusive, revocable licence to access the Website and associated services, such as the Mondaq News Alerts (Services), subject to and in consideration of your compliance with the following terms and conditions of use (Terms). Your use of the Website and/or Services constitutes your agreement to the Terms. Mondaq may terminate your use of the Website and Services if you are in breach of these Terms or if Mondaq decides to terminate the licence granted hereunder for any reason whatsoever.

Use of www.mondaq.com

To Use Mondaq.com you must be: eighteen (18) years old or over; legally capable of entering into binding contracts; and not in any way prohibited by the applicable law to enter into these Terms in the jurisdiction which you are currently located.

You may use the Website as an unregistered user, however, you are required to register as a user if you wish to read the full text of the Content or to receive the Services.

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 or with the prior written consent of Mondaq. You may not use electronic or other means to extract details or information from the Content. Nor shall you extract information about users or Contributors in order to offer them any services or products.

In your use of the Website and/or Services you shall: comply with all applicable laws, regulations, directives and legislations which apply to your Use of the Website and/or Services in whatever country you are physically located including without limitation any and all consumer law, export control laws and regulations; provide to us true, correct and accurate information and promptly inform us in the event that any information that you have provided to us changes or becomes inaccurate; notify Mondaq immediately of any circumstances where you have reason to believe that any Intellectual Property Rights or any other rights of any third party may have been infringed; co-operate with reasonable security or other checks or requests for information made by Mondaq from time to time; and at all times be fully liable for the breach of any of these Terms by a third party using your login details to access the Website and/or Services

however, you shall not: do anything likely to impair, interfere with or damage or cause harm or distress to any persons, or the network; do anything that will infringe any Intellectual Property Rights or other rights of Mondaq or any third party; or use the Website, Services and/or Content otherwise than in accordance with these Terms; use any trade marks or service marks of Mondaq or the Contributors, or do anything which may be seen to take unfair advantage of the reputation and goodwill of Mondaq or the Contributors, or the Website, Services and/or Content.

Mondaq reserves the right, in its sole discretion, to take any action that it deems necessary and appropriate in the event it considers that there is a breach or threatened breach of the Terms.

Mondaq’s Rights and Obligations

Unless otherwise expressly set out to the contrary, nothing in these Terms shall serve to transfer from Mondaq to you, any Intellectual Property Rights owned by and/or licensed to Mondaq and all rights, title and interest in and to such Intellectual Property Rights will remain exclusively with Mondaq and/or its licensors.

Mondaq shall use its reasonable endeavours to make the Website and Services available to you at all times, but we cannot guarantee an uninterrupted and fault free service.

Mondaq reserves the right to make changes to the services and/or the Website or part thereof, from time to time, and we may add, remove, modify and/or vary any elements of features and functionalities of the Website or the services.

Mondaq also reserves the right from time to time to monitor your Use of the Website and/or services.


The Content is general information only. It is not intended to constitute legal advice or seek to be the complete and comprehensive statement of the law, nor is it intended to address your specific requirements or provide advice on which reliance should be placed. Mondaq and/or its Contributors and other suppliers make no representations about the suitability of the information contained in the Content for any purpose. All Content provided "as is" without warranty of any kind. Mondaq and/or its Contributors and other suppliers hereby exclude and disclaim all representations, warranties or guarantees with regard to the Content, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. To the maximum extent permitted by law, Mondaq expressly excludes all representations, warranties, obligations, and liabilities arising out of or in connection with all Content. In no event shall Mondaq 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 of the Content or performance of Mondaq’s Services.


Mondaq may alter or amend these Terms by amending them on the Website. By continuing to Use the Services and/or the Website after such amendment, you will be deemed to have accepted any amendment to these Terms.

These Terms shall be governed by and construed in accordance with the laws of England and Wales and you irrevocably submit to the exclusive jurisdiction of the courts of England and Wales to settle any dispute which may arise out of or in connection with these Terms. If you live outside the United Kingdom, English law shall apply only to the extent that English law shall not deprive you of any legal protection accorded in accordance with the law of the place where you are habitually resident ("Local Law"). In the event English law deprives you of any legal protection which is accorded to you under Local Law, then these terms shall be governed by Local Law and any dispute or claim arising out of or in connection with these Terms shall be subject to the non-exclusive jurisdiction of the courts where you are habitually resident.

You may print and keep a copy of these Terms, which form the entire agreement between you and Mondaq and supersede any other communications or advertising in respect of the Service and/or the Website.

No delay in exercising or non-exercise by you and/or Mondaq of any of its rights under or in connection with these Terms shall operate as a waiver or release of each of your or Mondaq’s right. Rather, any such waiver or release must be specifically granted in writing signed by the party granting it.

If any part of these Terms is held unenforceable, that part shall be enforced to the maximum extent permissible so as to give effect to the intent of the parties, and the Terms shall continue in full force and effect.

Mondaq shall not incur any liability to you on account of any loss or damage resulting from any delay or failure to perform all or any part of these Terms if such delay or failure is caused, in whole or in part, by events, occurrences, or causes beyond the control of Mondaq. Such events, occurrences or causes will include, without limitation, acts of God, strikes, lockouts, server and network failure, riots, acts of war, earthquakes, fire and explosions.

By clicking Register you state you have read and agree to our Terms and Conditions