A manufacturer is suing ERP (enterprise resource planning) vendor Infor following a dispute over whether it should have to pay nearly $150,000 (£93,000) in additional licence fees.
BMP America, maker of textile and polyurethane elastomer products, first licensed MAPICS software from Marcam in 1995 for $3,992, and later spent tens of thousands of dollars on additional software and annual maintenance fees, according to the company's complaint. In 2004, Marcam was acquired by SSA Global, which was subsequently bought by Infor in 2006.
BMP's contract dictates that the software was to be used only for processing BMP's data and not for providing data-processing services for other companies, the complaint states. BMP has adhered to those terms, according to the complaint.
The company submitted to a software licence audit in August. In late December, Infor contacted BMP, claiming it had violated the licence agreement. Infor cited the use of the software by BMP Asia Industries, a sister company, as well as by BMP's systems integrator Innovative Solutions, according to the complaint.
BMP told Infor that the Asian entity was accessing the software through a terminal "solely for the purpose of allowing the Software to be utilised to place orders with BMP for BMP's customers in Asia (i.e., BMP was not providing data processing services to BMP Asia)," the complaint states. Innovative Solutions was using the software only in the process of maintaining BMP's systems, it adds.
Infor was not satisfied with these explanations and "ultimately demanded that each of BMP Asia and Innovative Solutions be licensed for a 'one-time expanded use fee of $73,590.62.'"
If BMP agreed to those terms before February 28, Infor would have waived the fee for Innovative Solutions, it adds. BMP declined, resulting in a "breach letter" from Infor's legal department.
"Based on the emails received from Infor, together with its litigious history, BMP has formed the reasonable apprehension and belief that Infor will institute breach of contract and copyright infringement litigation against BMP," the complaint states.
BMP is asking the court for a declaration stating that it has not committed copyright infringement or breached the terms of the contract, that it doesn't owe Infor any more money and that it is allowed to continue using the software, according to the complaint.
An Infor spokeswoman said the company does not comment on pending litigation.
"Infor does, however, periodically conduct audits of our customers current usage for several reasons, including to help Infor better address a customer's current and future business computing needs as well as to protect our intellectual property and ensure compliance with applicable licences and agreements," she added.
While Infor is almost always able to reach "an appropriate agreed resolution" with the customer, "in very rare instances, litigation can result," she said.
Software licence audits are a fact of life for all customers, said analyst Ray Wang, CEO of Constellation Research. Vendors often specify their right to conduct one in licence contracts, he said.
Audit rates went up during the recession, but the outcome ended up mixed for vendors, given that customers found in violation may not have been able to pay additional fees, he said.
Ultimately, companies should make sure they understand how the restrictions in their software contracts affect the product's entire lifespan, from procurement to production to retirement, Wang said.
For one, CIOs, procurement teams and business users should all be in alignment on how the software will be used before any contract is signed, he added: "Too many times you get into these contracts where people just focus on price. People forget that buying software is a business decision, not a technology decision."