The court based the award on “actual usage” of the software (i.e. auditable use by uniquely identifiable users). In a real life contract negotiation, the Navy would have purchased far more licenses. Enterprises tend to buy surplus licenses so they don’t need to renegotiate and in some cases in defense deals the government actually has to buy the software for everyone, and cannot license only for specific people due to internal guidelines. This could have and should have been a lucrative deal for the german software company, instead the Navy went ahead with deploying the software widely without a legitimate license deal in place.
I don't want to say anything too specific, but for our SaaS company, it's very common for larger clients to pay an effective price that's around 2x the intended "call us" sticker price even after negotiated discounts because they overbuy on long-term fixed-price contracts and then fail to grow into them (I don't know if this is merely a recent trend due to hiring freezes or if it's always like this).
Our default plan type is active-user pricing (i.e. only pay for active users each month), and most large companies would save a ton of money if they stuck with this instead.
Their goal is to create cost predictability and ensure things are budgeted for. It's about reducing risk and locking in cost. In some cases, if the cost is discretionary, people may also want to ensure they spend their budget so it isn't cut. But in the >10k MRR territory usually that is budgeted for and approved through multiple levels and not coming out of a team budget. Going back to ask for more later is too time consuming.
Why? $150K just a slap on the wrist for the Navy, and the whole "actual usage" argument is suspect, but I'd love for a cyber law expert to weigh in here.
It's super interesting to see the court go for active user and not install when calculating damages, may be the first acknowledgement ever that piracy distribution figures aren't a reasonable source for calculating damages.
This stood out to me as well. If the damages is only based on actual usage/active users, it seemingly values availability of the software at $0.
The value of this software to the Navy I would argue is much more than how many active users ever actually used it. Given that Navy need to have software available to rapidly deploy in worst case scenarios (large conflict requiring extensive use of a particular type of software), this would often or usually necessitate acquiring many software licenses to be purchased, even though they'd typically never get used in peacetime situations.
As another example, a business may have a disaster recovery plan that would make extensive use of alternative cloud-hosted remote computing services. If the business waited until the next global pandemic to purchase and setup these services, they'd likely be met with "sorry our capacity is full" responses from providers. Thus the business should be paying for the service at all times as if the disaster recovery plan could be immediately activated and alternative cloud-hosted remote computing services used immediately without risk of a "sorry out capacity is full" response. This service is worth a significant amount to the business as without the service in place and ready to use at a moment's notice, the business would have an unmitigated and costly risk presenting a much higher future liability to the business.
As one last example, if a jukebox existed with a library of 1,000,000 pirated songs for users choose from, wouldn't this be more valuable than a jukebox with a library of only 1,000 pirated songs for users to choose from? Whilst only 500 songs from each jukebox may have ever been selected and played under similar conditions, users (and thus the venues hosting the jukeboxes) would more highly value the first jukebox with a larger library to play the exact song users want to listen to, not a song that is only similar enough.
Had this not been the government deferring to the government I might agree with you.
As an entity with large legal and IT resources at its disposal there is no reason for this scale of violation. Especially if there is a per install license and acknowledgement.
>This figure is lower than the $370 per install that was negotiated earlier. However, the expert witness believes that this is warranted due to the large volume of the deal and the fact that the software company’s cash position was rather low at the time.
Interesting how the court is using the business' past financials to reconstruct what would have been negotiated if the infringement hadn't happened.
This seems reasonable as the US Navy likely hadn't bough licenses for $155 mil, but had negotiated or accepted other use patterns than en-masse installation.
Importantly, this should also be seen as precedence for private piracy and that people with thousands of movies on their harddrives naturally aren't liable for the sum of their retail price.
>Importantly, this should also be seen as precedence for private piracy and that people with thousands of movies on their harddrives naturally aren't liable for the sum of their retail price.
I don't think that holds. They installed all this software automatically, when you download movies you have to manually action each one. I mean, unless people are downloading movie packs from torrent sites these days or whatever?
The problem I have with this type of verdict is that it's based on a hypothetical version of what could have happened had the Navy not actually violated the license agreement.
It reeks of deference to a favored party, in this case the Navy. It's doubtful a commercial entity would have received this same deference.
That's the part that got me. It's like stealing 1000 iPhones with a retail price of $999 each and then arguing in court that had I legally purchased 1000 iPhones I would have gotten a volume discount from a wholesale distributor and should only be responsible for the wholesale value of what I stole versus the retail value.
I don't know how common that method of figuring damages is in copyright infringement cases, but it is often done in patent infringement cases regardless of whether the defendant is the government or a commercial entity.
I once saw a true-up scan on banking software come up with a million dollar bill. Turns out the software ended up on the new starter form and most mangers checked the box in case it was needed but nobody realised it was 5k a seat. I would also be suspicious that the reason for the scan was due to the vendor getting wind that they were being replaced. With the contract being iron clan and no leverage the bill was paid.
Unclear why the company didn’t just try to get the US Navy to sign a contract after they found out? “you have hundreds of copies of our product already installed” seems like a good starting point for a negotiation?
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Our default plan type is active-user pricing (i.e. only pay for active users each month), and most large companies would save a ton of money if they stuck with this instead.
The value of this software to the Navy I would argue is much more than how many active users ever actually used it. Given that Navy need to have software available to rapidly deploy in worst case scenarios (large conflict requiring extensive use of a particular type of software), this would often or usually necessitate acquiring many software licenses to be purchased, even though they'd typically never get used in peacetime situations.
As another example, a business may have a disaster recovery plan that would make extensive use of alternative cloud-hosted remote computing services. If the business waited until the next global pandemic to purchase and setup these services, they'd likely be met with "sorry our capacity is full" responses from providers. Thus the business should be paying for the service at all times as if the disaster recovery plan could be immediately activated and alternative cloud-hosted remote computing services used immediately without risk of a "sorry out capacity is full" response. This service is worth a significant amount to the business as without the service in place and ready to use at a moment's notice, the business would have an unmitigated and costly risk presenting a much higher future liability to the business.
As one last example, if a jukebox existed with a library of 1,000,000 pirated songs for users choose from, wouldn't this be more valuable than a jukebox with a library of only 1,000 pirated songs for users to choose from? Whilst only 500 songs from each jukebox may have ever been selected and played under similar conditions, users (and thus the venues hosting the jukeboxes) would more highly value the first jukebox with a larger library to play the exact song users want to listen to, not a song that is only similar enough.
As an entity with large legal and IT resources at its disposal there is no reason for this scale of violation. Especially if there is a per install license and acknowledgement.
Deleted Comment
Interesting how the court is using the business' past financials to reconstruct what would have been negotiated if the infringement hadn't happened.
Importantly, this should also be seen as precedence for private piracy and that people with thousands of movies on their harddrives naturally aren't liable for the sum of their retail price.
I don't think that holds. They installed all this software automatically, when you download movies you have to manually action each one. I mean, unless people are downloading movie packs from torrent sites these days or whatever?
It reeks of deference to a favored party, in this case the Navy. It's doubtful a commercial entity would have received this same deference.
- S.J.