When responding to any software audit, companies must look to the terms of the license agreement that governs the relationship between the parties. As a threshold matter, it is vitally important to keep all of the actual contractual documents and Order forms together in one place for ease of reference. Also emails and other written communications between the licensor’s audit team and the business being audited should be retained as well. Often what we have found is that the licensor’s audit team tends to correspond in emails and other writings with our clients who are being audited. The licensor is making a written record and demanding documents and other information, and may be doing so in a way so as to cast the company being audited in a negative light in the event of later litigation.
We have also found that although the licensor’s audit teams tend to rely on writings as they attempt to make a record of non-cooperation by the licensee, the licensor’s sales teams, which the licensor may be concurrently deploying will often use the phone and leave voicemail messages, so as not to create a paper trail, which can later be used against the licensor. We recommend that such voicemail messages be transcribed, and if possible an audio recording of the voicemail preserved for use as evidence later on should litigation be initiated.
For example, in the first public filing against Oracle Corporation relating to the VMware virtualization issue in the Mars vs. Oracle case, Mars was able to make use of the written record to support its position that Oracle was in breach of the license agreement by exceeding its audit rights. Care must be taken in any discussions with the licensor, to view every communication to the licensor, with a lens as to how a Judge or jury might view the communication in the event of litigation.
We know from the public filings in the Mars vs. Oracle lawsuit that the contract at issue in that case had a choice of law provision selecting California law, and that the venue selected was San Francisco. As a result, when choosing counsel, companies may want to consider retaining lawyers who are familiar with relevant law and with the local courts and jury pool, in the venue specified in the operative license agreement. We are California lawyers who have been practicing California law in the venue for almost 25 years.
The public filings in the Mars vs. Oracle case also demonstrate how a licensor may attempt to use its audit rights to obtain documents and other information that it might not be entitled to under the license agreement. Licensees may want to weigh whether and to what extent to grant the licensor access to their confidential and proprietary information. Such issues need to be explored very carefully, as the technical and legal teams work closely together to prepare their response strategy.