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Unchecked indirect software access can be costly – what to look for in software license agreements

Simple and straight-forward are two words rarely associated with software license agreements. For example, a ruling out of the UK demonstrates the importance and real-life costs that can result when the full meaning of an agreement is not understood.

A UK justice recently ruled in favor of SAP and found that a UK beverage company, Diageo, had breached its SAP license agreement when it failed to purchase additional named user licenses for customers that were indirectly accessing SAP software. SAP sought 54 million GBP in damages for additional license and maintenance fees.

Diageo had licensed mySAP ERP software to manage various aspects of its business operations, including inventory management, sales and distribution, financials, and human resources. Diageo later deployed an application called Connect that allowed its customers to log in to an online portal so that the customer could view its historical sales and accounting data and place and review its orders online instead of having to call Diageo’s customer service center. Connect was integrated with Diageo’s instance of mySAP ERP software via SAP Process Integration, and information from the mySAP ERP software flowed back and forth between Connect and mySAP depending on the transaction the Diageo customer was performing in Connect.

The court found in favor of SAP and pointed to language in Diageo’s license agreement with SAP that required a license for every user that accessed the mySAP ERP software directly or indirectly. The court found that integration between Connect and Diageo’s instance of mySAP ERP meant Diageo customers were indirectly accessing the mySAP ERP software when the customers used the Connect application, and thus, Diageo was required to purchase additional named user licenses for their customers’ access.

When licensing software, the key is to make sure the license agreement is reviewed by experienced counsel and extra attention is paid to the license grant and the license model. As with this scenario, particular uses such as indirect access of a software program may require additional licensing rights that need to be understood and negotiated.