Software Licensing Audits: Autodesk Secures Right to Conduct Software Audit on Licensee

Ritvik M. Kulkarni, III BSL LLB, ILS Law College, Pune  

Often we, as individual users, believe that using pirated software (solely for private non-profit usage of course) is not going to cause any financial or other harm to huge corporation like Microsoft. To a certain extent that may be true because for one, the cost involved in the litigation (even more in arbitration) against such an average “middle-class” infringer is going to be far more than the maximum damages that the software owner can possibly cull out from the same person.

However, when huge corporations need software to satisfy the appetite of their large number of computer systems; they have to enter into a Software Licensing Agreement with the Developer Company (or the Company which owns the software) in order to procure such software. In most cases, the SLA will carry a few restrictive clauses which perform the function of risk minimization for the developer company.

A simple example can be that of an agreement between a law firm and Manupatra for installing and getting online access to the latter’s software database. If the said law firm opts for a single-user license, the database can be accessed by the firm personnel only from one computer at any given point of time. On the other hand if the firm opts for IP access, a much larger number of personnel will get access simultaneously.

Similarly, certain developer companies, such as Autodesk, contractually require their licensee to allow the former to conduct periodic software audits on the latter. This is so required in order to ensure compliance with all restrictive clauses and other terms of use and to check the validity (and existence) of the software being used by the licensee company. In a recent case, Bangalore based BMM Ispat Ltd. filed a suit against Autodesk for intruding in the business matters of the former company under the pretext of exercising its contractual right to conduct a software audit of their SLA.

The SLA for Autodesk’s AutoCAD software provided that Autodesk reserved the right to conduct an independent software audit at a given time. Subsequently, when Ernst and Young was hired by the licensor to conduct the said audit in October 2014; it found that there were almost 50 instances of unauthorized use of the licensor’s AutoCAD software. When Autodesk confronted BMM about these findings and asked it to purchase the required 50 licenses, the latter rubbished these claims and instead filed a claim before the Additional City Civil Judge. The Learned Judge did not grant an interim – injunctions against the said audit vide an order dated 17th January 2015. After BMM filed a writ petition (WP No.3221/2015) against that order before the Karnataka High Court on 26th February 2015, the said Court directed the Learned Judge to dispose of the injunction application within 15 days.

The Learned Judge stated that Autodesk had every right to ensure compliance with the terms of the SLA as they have been so incorporated to protect Autodesk from infringement. To that extent such act cannot constitute interference with BMM’s business activities. Furthermore, the balance of convenience in the said case lied with Autodesk, and not with BMM. Consequently the Learned Judge held that while Autodesk (through its officers) was entitled to conduct the software audits, BMM was not entitled to injunctive relief.


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