Copyright remedies can hurt. A copyright owner can force an infringer to pay damages equal to lost licensing fees and profits derived from infringing activities, or it can opt for an award of statutory damages up to $150,000 per copyrighted work, if the infringement is found to be willful. For many businesses, though, much worse than any of that is the threat of an injunction barring use of a software product, or, outside the context of litigation, simply the loss of a license for software deployed for business-critical purposes. If, for example, your business depends on IBM operating systems, middleware (like WebSphere) and database software (like DB2 or Informix) to deliver your products and services to customers, your loss of licensing for that software can cause a severe disruption to your business, if not the end of your business altogether. IBM in particular knows this, and it will not hesitate to use this fact as leverage in the event of an audit.
However, some publishers – IBM among them – have very close relationships with some of their larger customers, to the extent that in some cases IBM will offer to station sales and support personnel at a customer’s location to streamline the deployment and maintenance of software and other IT solutions. This state of affairs can lead to an interesting question: To what extent is a software publisher with intimate knowledge of a customer’s IT environment responsible for bringing license-compliance discrepancies to the attention of the customer’s decision-makers?
This question implicates a legal concept known as “laches,” under which a claimant sometimes may discover that he cannot pursue a claim against an alleged wrongdoer if the claimant waited an unreasonably long time to pursue the claim in court. However, with copyright claims, the availability of a laches defense can be questionable in some states, because the Copyright Act includes an express, 3-year statute-of-limitations period. Some courts (notably, the Fourth Circuit Court of Appeals, which hears federal appellate claims from Maryland, Virginia, West Virginia, North Carolina and South Carolina) hold that laches is essentially unavailable for copyright defendants. Other courts are more permissive, however, especially in cases where a claimant’s delay is found to have been unconscionable.
Therefore, depending on the level of insight that a software publisher has into a company’s software deployments and the amount of time that it allows to pass before bringing a compliance-related issue to the company’s attention, it is possible that a laches claim may be available to counter the significant leverage that a publisher like IBM might be able to wield within the context of an audit. If you find yourself guiding your company through the various pitfalls of an IBM audit in particular (more on that is available here, here, here, here and here), it makes sense to explore the possibility of a laches defense with knowledgeable counsel.