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Check software compliance following a merger, warns FAST

IT Management: Politics & Law
by Daniel Thomas

Check software compliance following a merger, warns FAST

The Federation Against Software Theft has warned companies going through a merger or acquisition to check their software licence compliance, or risk facing civil or criminal prosecution.

The warning comes as the number of mergers and acquisitions is at its highest level since 2000, with £80bn worth of global deals announced in January this year alone, according to figures from The Economist.

John Lovelock, manager of FAST and Legal Affairs, said, “Software is an area which can get overlooked in the middle of a takeover deal. Lawyers need to ensure software licences are included on the asset register - often the total cost of software licences can be considerably more than hardware. If all parties involved are clear about what is being exchanged, the legalities of software licensing won't become an issue.”

Under the Copyright & Trade Marks (Offences and Enforcement) Act in 2002, company directors can be liable if their business software is found to be unlicensed if consent or connivance can be demonstrated. In 2002, changes to the law increased the maximum penalty for software infringement from two to 10 years’ imprisonment.

Because of the pressure surrounding mergers and acquisitions, there is not always enough time to check software compliance, but companies need to treat their licences like any other asset, Lovelock said.

“More often than not information on software compliance levels and existing licensing agreements is simply not to hand and available for scrutiny,” he said. “This lack of information creates a host of liability issues and is, therefore, a high-risk strategy for any organisation.”

First published April 7, 2004

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