Negotiating Audit Provisions in Software Licensing Agreements

Description

Software licensing audits are costly and disruptive for businesses. While the audit is a mainstay of any software licensing agreement, counsel must carefully negotiate its terms to ensure minimal disruption of business operations while assessing the licensee’s compliance.

Software providers may engage third-party auditors, like the Business Software Alliance (BSA) or Software & Information Industry Association (SIIA), to manage the assessment and negotiation of any necessary “true-up” payments—the fees for using the software beyond the scope of the license. Third-party auditors typically work against a contingency of the fees assessed for noncompliance.

Counsel for businesses employing software solutions, whether on-premise or cloud-based, must craft audit provisions which narrowly focus on compliance assessment and limit access, scope and duration of audits to minimize their impact on the company’s bottom line.

Ample consideration should be given to additional team members to engage during the audit process, the potential to correct any noncompliance before the audit, and limits on the number of third-party authorized auditors in the assessment.

Listen as our panel of seasoned practitioners provides critical guidance on this key aspect of software licensing agreements.