Outsourcing sparks software licensing row

Companies have been warned not to overlook software licensing compliance when negotiating outsourcing deals.

A business could unwittingly leave itself open to breaches of software contracts by passing on the terms of its licensing agreements to an outsourcing supplier, the Federation Against Software Theft (Fast) has warned.

At the same time, outsourcing companies could risk criminal and civil proceedings if their clients don't have adequate licences in place for their software.

"People fail to realise that software licences are usually a form of copyright and most are personal to the user," said Bill Jones, a lawyer with Wragge and Co.

Jones, a member of the Fast Legal Advisory Group (Flag), a group of over 30 law firms engaged in IT/IP issues in the UK and overseas, also warned that having inadequate software licences could result in costly delays to the negotiation of outsourcing contracts.

"People find that their rights don't go as far as they initially anticipated. The end user may have to negotiate to get the rights he needs, and that can be open territory in terms of what it will cost," he said.

"You need to do this ahead of time and do it early to make sure that the outsourced vendor doesn't find the problem for you.

"If you do it yourself it will give you time to approach the software owner and negotiate with them about extending the terms of your agreement."

Simon Briskman, a lawyer with Flag member Olswangs Solicitors, warned that too few companies consider software issues before committing to an outsourcing contract.

"Current licences should be pulled out of bottom drawers and read, as they may not allow outsourcing. New licences must clearly set out rights of use for both the service provider and customer," he said.

"For example, licence providers whose pricing model is affected by the outsourcing may want to look carefully at the proposals, and may even require additional fees before the service can go ahead."

Jones added: "Many software houses deal with this on a regular basis, and many would not seek to exploit it, but some will see it as a revenue generating opportunity."