Imagine this: you’ve just bought a cafe. The previous owner used an espresso machine that makes the best coffee in town. The machine isn’t included in the sale, but you use it, hoping nobody will notice.
Well, guess what? In the realm of software, that’s a big no-no. Using software without a license is like making coffee with a borrowed machine. It’s not exactly stealing, but it’s certainly not following the rules.
Our story revolves around a company called Shepparton Partners Collective Operations, or Shepparton for short. In 2019, they bought a food business known for brands like ‘SPC’ and ‘Goulburn Valley’. But here’s the kicker: the business depended on a software owned by QAD Inc. The software license, however, wasn’t part of the deal.
QAD offered to transfer the software license to Shepparton. All they had to do was pay a fee, sign an agreement, and voila! They’d have the right to use the software. But Shepparton decided to play a waiting game.
QAD gave Shepparton a month to consider their options. Shepparton let the deadline fly by but kept using the software. Four months later, they told QAD they wouldn’t pay because they didn’t think they were required to. Uh-oh.
This prompted QAD to sue Shepparton for copyright infringement in 2020. You see, copyright is like a golden ticket. It’s an exclusive right that protects original works, including computer programs. No disputes there; the software was protected, and QAD held the copyright.
The court found that Shepparton had reproduced the software by using it and creating backups. But did Shepparton have an implicit license to use the software? They did when they decided not to pay the license transfer fee.
Like a house of cards, their implicit license crashed when Shepparton told QAD they wouldn’t pay.
Shepparton’s decision came at a hefty price. They were ordered to pay over $1 million in damages. The damages included compensatory damages of $602,208, which they should have paid for the license transfer and a year’s maintenance. The court also slapped additional damages of $500,000 because of the boldness of the copyright infringement.
Let’s not beat around the bush. If your business hinges on software, you’ve got to play by the rules. Make sure you understand the terms of your software license agreements. If you don’t have an explicit license, you’re treading on thin ice and could be on the hook for copyright infringement.
Are you thinking of buying a business? Make sure to do your homework. Review all software license agreements of the target business and ensure they’re transferred before the sale is complete.
Sure, there’s a chance that a software license can be implied, but do you want to gamble? Remember, it’s better to be wise and license when it comes to software.