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Sometimes the Best Defense is a Good Offense (Just Ask the Patriots)

This has been an intriguing year for professional football, one in which the old adage of “defense wins championships” has been sorely tested.  Of the four remaining teams in the playoffs last week, the two teams with top five defenses, Baltimore and San Francisco (#3 and #4 in regular season yards allowed/game) lost to the teams with defenses ranked in the bottom six (New England and the New York Giants).

What does this have to do with software compliance? Interestingly, many software companies still rely solely on licensing to defend their intellectual property, without using an offensive compliance strategy as an integral part of their defensive plan.

Consider the following statement:

We may not be able to protect our intellectual property rights (including our source code) from third-party infringers, or unauthorized copying, use, disclosure or malicious attack.

Every listed ISV has some variation of this warning on the business risk of illegal use in their Annual Report, but few actually embrace a compliance strategy in order to fulfill that obligation. The truth for many software companies (listed or private) is that they can’t protect their intellectual property rights using just licensing from infringers, nor is it realistic to expect them to legally defend their rights given the lack of uniform intellectual property law and enforcement globally.

Instead, we find leading software companies balance their defensive efforts with an offensive compliance program to recover lost revenue from infringers create a winning IP protection strategy.

There are two real victims when your intellectual property is misused: Paying customers and your Shareholders. A good software compliance strategy is implemented to do three things:

1. Stop Piracy. With no rights enforcement, history has shown that users will not pay for software licenses. By tracking who uses your software illegally, you give your compliance team the data they need to enforce your rights when and where you choose. By making examples of companies that misuse your software, other companies will learn from that example and stop using your software without a license.
2. Protect your paying customers. When customers buy a software license from you, there is an implicit contract that you will enforce a level playing field by ensuring that all users pay. By allowing misuse, you are actually rewarding companies that misuse your software by giving them a competitive advantage (zero cost of software) over your loyal paying customers. Additionally, some ISVs increase the cost of their software licenses to try and recoup the lost revenue due to misuse with the ironic result of making their paying customers fund their competitors’ software licenses.
3. Increase Shareholder Value. It is estimated that for medium to large ISVs (revenues exceeding $25 million), up to 31 percent of software license revenue is lost to “license leakage” from overuse.Users stealing software licenses don’t actually “eventually pay” for them unless you make them. The only proven way to recover revenue and increase shareholder value is to actively enforce software compliance.

By implementing a Software Intelligence strategy for compliance, you can fulfill your obligations to both your loyal paying customers by keeping the playing field level, and your shareholders by maximizing top line revenue with compliance. The best defense is a good offense: there is no better way to protect your intellectual property than by enforcing your rights with companies that are misusing your software.

- Jim Nauen

Recent Events

Waltham License Compliance Panel 2012
May 1, 2012

V.i. Labs hosted a license compliance panel discussion on "Best Practices for Generating, Investigating and Converting License Compliance Opportunities" featuring guest speakers from Dassault Systèmes, Sullivan & Worcester, and Software Compliance Group.

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