[LETTER TO A LAWYER]
Dear Attorney,
I hope this correspondence finds you well. I am writing on behalf of a company that recently received multiple emails and demand letters from a certain law firm alleging unauthorized use of a particular engineering software tool. We originally purchased a single subscription for a specific client’s project requirements in 2021. Once that project ended, we did not renew the subscription because our other ongoing projects did not necessitate the software. However, we have been asked to pay a significant sum of money for alleged “illegal/pirated/unauthorized” use of the program.
The law firm in question has provided logs they claim to have extracted from our internal network dating back to 2021, raising concerns regarding how they were able to ascertain our IP address and internal software usage data. Our technical support team has noted that part of the usage could be associated with a free trial period offered around the time we purchased the software. We have not used the software since its subscription lapsed, and we want to clarify whether we have inadvertently breached any intellectual property rights and, if so, what the proper remediation steps would be under Philippine law.
May I respectfully request your guidance on the best course of action? We wish to protect our organization from any unwarranted demands and ensure that we remain in full compliance with all applicable laws and licensing terms. If you could also advise on potential defenses and the appropriate manner to address these allegations—whether through direct negotiation, mediation, or other legal procedures—our company would be most grateful. We seek to resolve this issue promptly and ethically.
Thank you for your time and assistance. I look forward to receiving your valuable advice on how best to proceed under Philippine legal frameworks.
Respectfully yours,
A Concerned Corporate Representative
The following is a comprehensive legal article under Philippine law, designed to provide meticulous guidance on matters relevant to allegations of unlicensed software usage, intellectual property rights, possible liabilities, and best practices for businesses. This discussion is intended for informational purposes. It does not create an attorney-client relationship and should not be taken as individualized legal counsel.
1. Introduction
Allegations of unauthorized or pirated software use are common worldwide, including within the Philippines. These claims often emanate from software developers or their authorized representatives (often law firms) seeking to enforce the terms and conditions of licensing agreements. In many instances, the demands revolve around compensatory damages for alleged infringements of intellectual property (IP) rights.
When confronted with such accusations, companies—particularly those that relied on software only for a short-term project or under certain specific licensing arrangements—are likely to be uncertain about their legal position. The approach to defending or settling these claims depends on various factors, including the factual circumstances, the contents of the licensing agreement, the veracity of the software usage data presented by the complaining party, and the overall conduct of the parties.
This article will explore the legal frameworks under Philippine law, highlighting relevant statutes, regulations, and case law that guide the resolution of alleged software infringement claims. It will also discuss potential defenses and best practices for engaging with the demanding law firm or IP rights holder.
2. Legal Framework Governing Software Licensing and Intellectual Property in the Philippines
2.1. Intellectual Property Code of the Philippines (Republic Act No. 8293)
The Intellectual Property Code (IP Code) of the Philippines is the primary legislation governing copyrights, trademarks, patents, and other forms of intellectual property. Under the IP Code, software is protected by copyright as a literary or artistic work. The unauthorized use, copying, distribution, or modification of software can constitute copyright infringement if done without the express authorization of the rights holder.
Section 172 of the IP Code categorizes computer programs as “literary and artistic works,” affording them the same legal protections as traditional forms of creative content. Section 177 outlines the exclusive rights of copyright holders, including reproduction, adaptation, distribution, and public display of the copyrighted material.
2.2. Civil and Criminal Liabilities Under the IP Code
The IP Code provides both civil and criminal remedies for copyright infringement. This includes the right to claim damages (actual or statutory), injunction, and destruction of infringing goods. Criminal penalties can involve significant fines and even imprisonment for those found guilty of willful infringement.
For businesses, exposure often lies in the extent of unauthorized copies or instances of usage. While criminal actions typically require a showing of willfulness, civil actions can proceed on the basis of unauthorized reproduction or use of the software, regardless of intent. Nonetheless, good faith may sometimes mitigate damages or affect settlement negotiations.
2.3. Software Licensing Agreements and EULAs
When purchasing a software license, users typically enter into a contract with the software publisher through a Software License Agreement or End User License Agreement (EULA). These agreements spell out the scope of permitted use, the number of installations allowed, renewal terms, subscription conditions, and other restrictions. Any breach of these terms can prompt the licensor to bring legal action for both breach of contract and infringement.
In certain instances, the software developer or publisher will employ tracking mechanisms, including license keys and login logs, to verify the number of active installations. Where usage extends beyond the permitted number of users or beyond the subscription period, the publisher might argue that such usage amounts to infringement.
3. Common Issues and Disputes in Alleged Software Infringement Cases
3.1. Allegation of Unauthorized Installations
Software publishers often argue that the accused party installed the software on more machines or used the software for more users than the license allowed. In scenarios where a single user license was purchased but multiple users had access, the licensor may contend that each additional user’s access constituted an unauthorized copy or usage.
3.2. Non-Renewal of Subscription
Companies frequently license software on a subscription basis for a limited period. If the subscription expires but the software remains installed and operational (whether by oversight or any technical glitch), the publisher may classify ongoing or residual usage as infringement. Even if the software is not actively utilized after expiration, logs might still indicate pings or attempted connections to the publisher’s servers.
3.3. Free Trial Overlaps and Confusion
In many software sale arrangements, publishers offer free trials or demos for a set number of days. If logs capture usage during or immediately after these trial periods, misunderstandings about whether the software was still under a valid license can arise. Publishers may interpret such usage as unauthorized if no formal subscription or license extension was in place at the relevant dates.
3.4. Data Gathering and Privacy Concerns
Demand letters often attach technical logs or usage reports that show the alleged dates of access, IP addresses, and frequency of software runs. Companies might question the legality of data gathering, especially if there was no explicit consent provided for remote monitoring. However, many EULAs do contain provisions allowing software publishers to monitor usage for compliance. The interplay between the IP Code, data privacy laws (e.g., the Data Privacy Act of 2012), and contract law determines whether such logs can be lawfully used as evidence in an infringement claim.
4. Potential Defenses and Considerations
4.1. Checking the Validity of the Claim
Before responding to a demand letter, the accused party should verify if the law firm or representative indeed acts for the legitimate owner of the software. Unscrupulous entities sometimes attempt to collect false claims. One may request proof of authority (such as a Power of Attorney or certification from the software publisher) confirming that the law firm is authorized to enforce the rights in the Philippines.
4.2. Evaluating License Terms
Scrutinizing the original purchase agreement or EULA is crucial. This document should set out the authorized scope of usage and whether usage post-subscription or multiple users’ access would indeed constitute a breach. If the software publisher’s claims exceed what was agreed upon, the alleged infringement might be baseless or exaggerated.
4.3. Documenting Actual Usage
Companies should assess how, when, and by whom the software was actually used. If the logs show minimal usage or primarily revolve around a free trial, the publisher’s demand for extensive damages might be disproportionate. Documenting good-faith attempts to comply—such as removing the software after the subscription’s expiration—can help mitigate potential liability.
4.4. Invoking Good Faith and Absence of Willfulness
Under Philippine law, demonstrating that the company was acting in good faith, such as believing the subscription remained valid or that the usage was covered by a legitimate trial license, can be relevant. Although good faith is not always a complete defense to infringement, it can reduce the likelihood of criminal prosecution or influence settlement negotiations. In some cases, good faith can limit liability if the company promptly ceases the infringing activity upon notification.
4.5. Questioning Evidence and Chain of Custody
If the publisher’s logs or technical data are unclear or appear tampered with, it is possible to challenge the authenticity or admissibility of such evidence. Philippine courts typically require that evidence be properly authenticated and that there is an established chain of custody showing how the data was gathered.
4.6. Prescriptive Periods
While specific prescriptive periods for software infringement might differ based on the nature of the legal action (civil or criminal), it is wise to examine how long ago the alleged infringement occurred. This might be relevant if the claims are based on older data, especially if the law firm only recently initiated a demand letter.
5. Recommended Strategies and Best Practices
5.1. Initial Response to the Demand Letter
It is advisable for a company to promptly acknowledge receipt of any demand letter. In that response, one may request additional information, clarifications, and documented proof of the alleged infringement. This not only demonstrates good faith but also provides an opportunity to gather details necessary for a well-informed legal strategy.
5.2. Engage Legal Counsel
Software licensing disputes can be complex, blending elements of IP law, contract law, and data privacy regulations. Retaining counsel with expertise in intellectual property law can ensure that the company’s rights are zealously protected. An experienced attorney can also help in engaging with the software publisher or their legal representatives on negotiations or settlement discussions.
5.3. Perform an Internal IT Audit
Conduct a thorough audit of company devices, servers, and usage logs to confirm that the software has been fully uninstalled, is no longer accessible, or was used only within a permitted timeframe. This audit helps identify whether any employees or departments inadvertently retained copies or made unlicensed installations. A robust internal audit will also generate documentation that can be used in negotiations or court proceedings to demonstrate compliance.
5.4. Explore Settlement Options
Many software infringement disputes never go to trial, as the costs of litigation can be high. Instead, software publishers and alleged infringers frequently settle. Settlement negotiations can lead to a resolution involving payment of a reduced licensing fee, the purchase of a legitimate license to rectify any prior inadvertent infringement, or an agreement to destroy unlicensed copies. Settling, however, should be done only after consulting legal counsel and thoroughly reviewing the strength of the publisher’s claims.
5.5. Implement Strong Software Asset Management (SAM)
To avoid future allegations, companies should develop a robust Software Asset Management process. SAM includes systematic tracking of software licenses, installations, and usage. By maintaining an accurate inventory of authorized software, businesses can easily demonstrate compliance if questioned. Regular monitoring and timely renewal or termination of licenses help eliminate accidental overuse or post-expiration usage.
5.6. Consider Alternative Dispute Resolution
If direct negotiations stall, one may consider mediation or arbitration. These methods, under Philippine law, can be more cost-effective, confidential, and efficient than litigating in court. A well-drafted arbitration clause in the EULA or a subsequent mutual agreement to mediate can facilitate a dispute resolution mechanism that is less adversarial than litigation.
6. Infringement Actions and Court Procedure
6.1. Filing of Civil Complaint
If negotiations fail, the copyright owner can file a civil complaint under the IP Code, seeking damages, injunctive relief, and possibly the destruction of unauthorized copies. Proceedings generally start in the Regional Trial Court (RTC) with jurisdiction over IP matters, often in designated special commercial courts.
6.2. Criminal Prosecution
For willful infringement involving significant commercial value, the rights holder may file a complaint with the Department of Justice (DOJ) or the appropriate office of the prosecutor for criminal charges. The potential penalties include both fines and imprisonment. However, criminal actions typically require the demonstrating of intent or knowledge of wrongdoing on the part of the accused.
6.3. Preliminary Injunction
Rights holders sometimes request interim relief, such as a preliminary injunction or an order to seize infringing materials. This can disrupt business operations if servers or computers are seized. Hence, it is crucial for companies to be prepared to respond to such motions by demonstrating compliance or by questioning the basis of the requested injunctive relief.
7. Data Privacy Considerations
Under the Data Privacy Act of 2012 (Republic Act No. 10173), personal data collection, storage, and processing must be done in accordance with the principles of transparency, legitimate purpose, and proportionality. While the Act is typically geared toward protecting personal data, it also underscores the necessity for organizations to exercise caution in how they collect and use data related to employees’ software usage.
On the flip side, software providers sometimes track data via automated means to confirm license compliance. Under many EULAs, users provide consent for basic usage metrics to be collected. Should a rights holder gather IP addresses and server logs, it is essential to examine the relevant sections of the licensing agreement, as well as data privacy consents or disclaimers, to confirm that the monitoring did not overreach statutory or contractual limits.
8. Practical Tips for Responding to Demands
Acknowledge Receipt Promptly
A short reply confirming that the demand letter was received demonstrates good faith and allows time to investigate internally.Request Supporting Evidence
Politely ask for a detailed account of how the alleged infringement was discovered, which portion of the software license was violated, and how damages were calculated.Protect Internal Communications
Limit communications about the claim to individuals who absolutely need to know (e.g., legal counsel, executive management, and relevant IT staff). This preserves confidentiality and reduces the risk of contradictory statements.Gather Documents
Collect purchase records, license agreements, email exchanges with the publisher, and internal IT logs. These materials will be vital to formulating a defense.Cease Any Potentially Infringing Activities
If software is still installed or accessible, consider removing or disabling it to prevent further allegations of ongoing infringement. Make sure to coordinate with counsel before taking any step that might suggest acknowledgement of wrongdoing.Be Prepared for Settlement Negotiations
Negotiations often hinge on the extent of usage and the publisher’s willingness to resolve the dispute amicably. Clear evidence that the software was not used extensively—or that any use post-subscription was unintentional—can lead to more favorable terms.
9. Conclusion
Facing a demand letter or potential lawsuit for unauthorized software usage can be daunting for any business, particularly when one believes that the usage at issue was either within the bounds of a short-term license or a free trial period. Under Philippine law, software developers have robust rights under the IP Code, and courts will generally protect those rights against bona fide infringements. However, accused parties also have defenses, especially if they can demonstrate good-faith usage, confusion over trial offers, or questionable data-gathering methods.
The key to effectively managing such disputes lies in thorough preparation: auditing internal systems, reviewing the relevant license agreements, and engaging legal counsel with specialized IP experience. Entities that prioritize regulatory compliance and implement robust Software Asset Management protocols position themselves to avoid—and, if necessary, to defend against—such claims. Meanwhile, if a dispute arises, exploring settlement or alternative dispute resolution can help resolve the matter more efficiently and with reduced costs compared to protracted litigation.
Ultimately, each case depends on its own particular facts and circumstances. Philippine courts will consider the evidence provided by both parties, the clarity of the contract terms, and whether there was genuine intent to infringe. By taking swift, deliberate steps upon receipt of a demand letter, businesses stand the best chance of safeguarding their interests and concluding the matter on just and reasonable terms.
DISCLAIMER
This article provides a general overview of Philippine laws and procedures concerning alleged unauthorized software usage, focusing particularly on the intellectual property and contractual aspects. It is not intended as a substitute for individualized legal advice. The views expressed herein do not create an attorney-client relationship. For specific guidance tailored to particular circumstances, consultation with qualified legal counsel is strongly recommended.