While everyone knows of the need to comply with contractual terms in software licenses (and elsewhere), the salient point in this context, is that under several recent cases, failure to do so with respect to a license for copyrighted  material (which is usually applicable to software), allows the pursuit in United States District Court of claims for infringement damages under the Copyright Act and related items, such as attorney fees. This is in addition to traditional contract damages, which may be non-existent or difficult to prove. For example, if the evidence establishes (among other things) that the work infringed was a registered work in the U.S. Copyright Office and the infringement was willful, then the court may, in its discretion, award statutory damages of up to $150,000 (regardless of the retail cost of the underlying work).

As licensees of computer software, you should understand that compliance with the letter and spirit of licenses is essential, notwithstanding the apparent absence of substantial actual contractual damages from non-compliance. Infringement damages are likely to be quite substantial. As licensors of computer software, you should be aware of potential leverage that the cases and statutes provide where bona fide non-compliance is found.

Critically, the preceding analysis applies not only to customarily negotiated and executed licenses for proprietary computer software, but also to "open source" software ("OSS"). While OSS is increasingly a cost effective alternative to traditional proprietary software, and we encourage our clients to explore its use, it carries with it binding contractual obligations, which must be identified and complied with. In our practices, we continue to observe a large number of cases where OSS product is embedded in proprietary software. The foregoing suggestions concerning non-OSS works are applicable in these cases to the same extent as in "pure" OSS situations. Licensees should make sure that licensors tell them what OSS product, if any, is being embedded in what is being delivered, while OSS licensors should monitor the use of their products in this context. A brief article by a FisherBroyles’ attorney discussing OSS is available at http://tinyurl.com/OpenSource2008.