WHD Blog

Be Careful Letting Your Friends Use Your Software!

by Christian D. Lavers, posted Wednesday, October 27, 2010 12:00 AM

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On October 18, the Fifth Circuit ruled that a software licensee violated a license agreement by allowing its lawyers to access and use the software. The court found that this use was a violation of the license because the license expressly prohibited any use of the software other than that explicitly granted by the license—and no right to allow use "on behalf" of the licensee was granted. (See Compliance Source Inc. v. GreenPoint Mortgage Funding Inc.). The Fifth Circuit reversed the summary judgment motion that had been granted in favor of the licensee at the district level.
 
In the case, GreenPoint installed software that develops and prepares loan documents, and then allowed its attorneys to access and use the software to prepare loan packages for GreenPoint loans. The court found this to be a violation of the license, and stated that it would not "look past the actual language of a licensing agreement and absolve a licensee who grants third-party access merely because that access is on behalf of, or inures to the benefit of, the licensee." In distinguishing prior cases, the court held that the license itself must allow use "on behalf of" the licensee in order for third-party contractors or agents to have the right to access or use the software. While the concept that those rights not granted are reserved is certainly not new, this case highlights the importance of carefully drafting or negotiating license agreements to insure that all of those people you need to use the software actually have the right to do so.
 
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