Time Settlement Right for Software Audits

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There is a growing trend for software publishers to keep software audits in-house and avoid using external organizations to pursue copyright infringement claims. Often, the compliance teams at the software publishers seek payment for software non-compliance through contract provisions, which specify a penalty or include retroactive support and maintenance. External organizations, such as BSA| The Software Alliance and the Software Information Industry Association (“SIIA”), typically pursue copyright infringement damages for unlicensed software based on statutory authority rather than the contract or license agreements. Regardless of the type of damages a company is facing, timing of settlement is often important.

Generally, auditors are particularly motivated to resolve outstanding audit matters by December 31, so timing the settlement right can be financially advantageous. Often the audited company’s interest aligns with the auditors in seeking a resolution to avoid carrying over legal and financial obligations into the new year. Additionally, internal compliance teams are interested in concluding audits as soon as possible.

The month of December is often marked by a flurry of settlement negotiations in an effort to resolve an audit. The following are a few tips to take advantage of the auditing entities’ and software publishers’ motivation to settle quickly.

1) Consider “cutting to the chase” and increasing the settlement offer in an effort to resolve the matter quickly.

2) Offer a lump-sum payment where feasible instead of payment terms that may extend past the end of the year.

3) Request any potential revisions to the settlement terms up front to avoid a lengthy discussion after the payment terms are agreed upon.

It is important to be mindful of settlement goals when negotiating the best resolution possible. A settlement agreement contains complex terms, which should be read carefully and understood prior to executing the agreement. If in doubt, a company should consider consulting an attorney experienced in software audits to ensure the terms of settlement are advantageous.