Life after a Software Audit: Keeping Settlement Confidential
The Business Software Alliance (BSA) is an organization that pursues copyright infringement claims on behalf of many software publishers against companies it accuses of violating its members’ software license agreements. Because the cost of litigation in most cases outweighs the cost to settle out of court, the BSA often is able to force businesses to comply with an arduous and often arbitrary software audit process that typically culminates in a negotiated settlement entailing a significant settlement payment to the BSA.
Due to the nature of the process and the possibility that a settlement may be misconstrued to reflect misconduct on the part of a company, many companies that settle with the BSA seek to keep the existence and terms of settlement confidential. However, the BSA disfavors confidentiality provisions, because they interfere with its efforts to publicize the results of its license enforcement program. Therefore, the BSA typically demands a higher settlement payment to include such a provision.
Absent a confidentiality provision in the settlement agreement, the BSA generally is free issue to a press release detailing the terms of settlement and name of the company. The BSA often then seeks to publish the release in media outlets relevant to the targeted business’ industry or geographic location, in addition to publishing the press release on its web site.
There are many considerations for a company contemplating a demand for confidentiality. Some larger, more recognizable companies seek confidentiality provisions to offset potentially negative publicity associated with their brand. Under those circumstances, the additional penalty amount may represent an acceptable cost. However, smaller companies often choose to pay a lower settlement amount not inclusive of confidentiality, based on a determination that damage to their brands, if any, likely would be less significant. This is a decision in which a company’s upper management should be given an opportunity to contribute. Finally, on rare occasions, some companies seek to issue their own press releases, detailing the settlement terms, and exposing the BSA’s software auditing process as a warning for other businesses.
Regardless of the strategy a company chooses regarding confidentiality, it is important to be aware of the implications of failing to include a confidentiality provision in the final settlement agreement. When in doubt, it is beneficial to seek counsel from an attorney familiar with the BSA process.