Hunton Retail Law Resource

Companies across all industries, including retail, are seeing a significant uptick in software audits and similar software license compliance reviews. These audits can disrupt the day-to-day operations of even the most efficient IT departments and result in additional license fees, back-maintenance payments, penalties for noncompliance and external legal fees. The more aggressive software licensors may also threaten breach of contract claims, infringement claims, remote disabling of software, suspension of maintenance and other more disruptive practical measures. However, there are ways to limit exposure to such costly software audits and the associated risks, and to even prevent them from occurring in the first place.

The best way to prospectively limit software audits is through strong contractual protection. Ensuring necessary rights are acquired for intended uses and users of the software, and including an exclusive remedy for a breach of the license scope, are just a few protective measures companies may take on the front end to protect themselves against aggressive software compliance audits on the back end. Where possible, companies should also push for self-audit or self-certification provisions. No matter the approach, audit provisions should be carefully drafted and reviewed by internal or external counsel familiar with software audits and the traps set by software licensors often lay for the unwary.

Companies may further reduce their risk by adopting internal procedures for handling software audits. Upon receipt of an audit notice, the IT or internal business team members should immediately contact their in-house legal department. Any further communications between the company and the software licensor should be managed and directed by the legal department.

Download Software Audits - Strategies for Avoiding and Mitigating the Associated Risk for additional drafting and software audit response tips.