Demystifying Software Licenses

Origina’s General Counsel Guy Tritton explains the basics of software licenses and the importance of knowing what’s in the fine print.

The world of IBM licenses, including maintenance and support agreements, can seem dense and impenetrable. However, a little thing like remembering to keep track of your legal contracts and maintenance agreements every year can help stave off potential issues.

Origina General Counsel Guy Tritton discussed the structure and anatomy of IBM licensing in the second of his webinars, the “Above the Law Series: IBM Software Agreements.”

A barrister for 25 years, Tritton also serves as the company’s Chief Risk Officer and Data Protection Officer. He has appeared before almost every court in the U.K. and Europe, including the European Patent Office, the European Union Intellectual Property Office, the Court of Justice of the European Union, and the Supreme Court of the United Kingdom. Tritton also is the author of “Tritton on Intellectual Property Europe, 6th Edition,” which focuses on European intellectual property laws and is widely studied in universities.

What is a license?

Most contracts are straightforward — one person agrees to do this, the other person agrees to that — both parties sign on the bottom line and it becomes a binding legal contract.

Licenses are a little different.

Licenses are agreements that grant permission to do something that would otherwise be an infringement of intellectual property rights.

They can have other provisions, such as payment terms or audit provisions, that are part of the bargain reached between the two parties. The difference is that if you breach an audit provision, that does not mean you are infringing on copyright.

However, if you have a license to install 10 copies of software and you install 20, not only are you in breach of agreement, but you’re also infringing on the copyright.

Software companies use a set of metrics for their licenses, including the following:

• Number of copies installed
• Processor core made available to software
• Number of users
• Level of usage
• A blend of aforementioned points

Tritton suggests being hyperaware of what your software licenses say.

Structure of IBM licenses

The general anatomy of an IBM license contains three parts:

1. Support and maintenance: Includes Proof of Entitlement and is customer-specific, such as IBM® Passport Advantage
2. Product: License Information (LI), which changes over time and is product-specific
3. Base license: International Product License Agreement (ILPA), which is the base license. It is a perpetual license, can be used indefinitely, and is not product-specific.

Terms and conditions for these licenses change constantly, so it best to check IBM’s website frequently to stay up to date, particularly when renewing.

Then there are full-capacity and sub-capacity licenses. Full capacity refers to the overall number of processor cores on the physical server upon which the product is installed. Since many companies do not use all their processor cores every day, there is a sub-capacity license, which refers to the overall number of processor cores available to the software product at any given time.

“The more powerful the processor, the more PVUs you have to buy,” says Tritton.

Some people mistakenly believe sub-capacity licensing applies to all operating systems, but it doesn’t. Tritton cautions to be hyperaware of whether sub-capacity licensing is allowed.

“Otherwise, you’ll be deemed to be on a full-capacity license,” Tritton says. “And that could be very costly.”

Constant vigilance

There are three main things to be vigilant about when dealing with your licenses.

1. Keep track of licenses and legal contracts. Download them when you first sign them and when you renew.
2. Keep track of IPLA, LI, and Proof of Entitlement.
3. Prior to renewing Passport Advantage for another year, look at the current LI terms and conditions.

“Remember when you renew, you are accepting the latest LI terms,” says Tritton.

Want to learn more about software licenses? Watch the full webinar here.