It’s pretty much standard procedure for astute software suppliers to insist on audit provisions in their software license agreements. The purpose, of course, is to help the supplier protect its intellectual property – the software you license. Still, while you understand their motivation, you need to negotiate forcefully to ensure that the suppliers don’t impose onerous audit conditions that can allow them to unreasonably profit from or penalize you.
In other words, don’t allow a licensor to use its rights to take advantage of you.
Here’s a reasonable expectation: The software licensor should be allowed to periodically verify that you’re using the software within the scope of the license and the number of copies authorized. You have an obligation to pay the supplier for your actual usage if you’re using more software than your license allows. (Of course, the software licensors don’t reduce your charges if you’re using less than what the license allows.) But many software licensors want more than what they should be entitled. Does this surprise you?
Here’s an example of particularly aggressive language in a supplier’s software license agreement:
“With or without prior written notice, supplier may audit licensee’s use of the software to ensure that licensee is in compliance with the terms of this agreement. If an audit reveals the licensee has underpaid fees to supplier, licensee shall be invoiced for such underpaid fees based upon supplier’s price list in effect at the time the audit is completed. Licensee shall pay supplier an additional fee of 25% of the applicable unpaid fee disclosed by the audit. If the underpaid fees exceed 5% of the license fees previously paid by licensee, then licensee shall also pay supplier’s reasonable cost of conducting the audit.”
That should certainly get your attention – hopefully before you sign the contract.