Clackmannanshire had a Microsoft Select agreement, which provides a volume discount on Microsoft software. When it needed more desktop licences a supplier offered extra licences more cheaply than were available under the Select agreement.
The deal turned sour when an audit, done in cooperation with Microsoft, revealed that the new licences were counterfeit. After a year of argument the council agreed an out of court settlement to pay £42,500 compensation and buy 470 Microsoft Office XP licences at a cost of £102,229.
The case casts light on the BSA's approach to clamping down on software piracy and has surprised many in local government.
In August 2000 the Local Government Association (LGA), the nationwide organisation for local authorities, reached an agreement with the BSA to recommend its "Software Asset Management" approach to its members.
A circular to all council chief executives, as well as police, fire and passenger transport authorities, stated: "BSA recognises that large organisations such as local authorities face huge practical issues of software management."
It said the BSA wanted to sign "Co-operation Agreements" with local authorities, which the LGA was "pleased to recommend to its members".
Paul Bray, the LGA official who helped arrange the BSA agreement, told CW360.com that Microsoft introduced the BSA to the LGA.
"We wanted to be proactive on the issue of software licensing. We were attracted to the BSA's offer of consultation services, rather than any tendency it might have towards confrontation," he said.
Understand what the implications are
But the Society of Information Technology Management, which represents local authority IT professionals, was not impressed by the LGA initiative.
"Before signing the agreement (with the BSA) it is very important to understand the implications as it commits the entire authority to an extensive and potentially expensive exercise in a tight time scale," it warned in a legal briefing.
The BSA/LGA agreement required councils to audit and report on any corrective action taken within 45 days of the audit and within 60 days of signing the agreement.
For Socitm, this time scale was "probably unrealistic" while the proof required, "either copies of licences or purchase orders or a third party audit," was onerous.
Terry Street, Socitm's legal adviser, told CW360.com that the LGA's agreement with the BSA seemed to turn local authorities into targets. "It was being said that local authorities were short of money and therefore likely not to be compliant. We challenged that," he said.
"As an organisation, we urge all our members to uphold the highest professional standards. The public sector has to be seen to be above board."
The BSA's own figures seem to bear this out. It is currently investigating 500 organisations across the UK for suspected under-licensing but only six of these are government funded.
Don't expect a soft touch
Despite this comparatively good record, Street was concerned that Clackmannanshire council had been named and shamed even though it bought the counterfeit licences in good faith and subsequently approached Microsoft in an effort to sort out the issue.
"What protection is there for other innocent authorities in cases like this?" he asked.
Mike Newton, programme manager at the BSA said: "I have a degree of sympathy for Clackmannanshire as it did not know the software was counterfeit." Nevertheless the BSA accused the council of persistently refusing to cooperate and took action against it.
Meanwhile the firm which sold the dodgy licences has yet to be prosecuted although the BSA said it was "known to Microsoft and the BSA as a supplier of illegal licences".
Beware rogue licence salesmen
On one thing at least Socitm and the BSA agree is the need to buy software from legitimate suppliers. Clackmannanshire was "a classic case of the deal being too good to be true and proves that councils are not immune to unscrupulous vendors," according to the BSA's Newton.
For Socitm's Street the best defence is for users to buy from reputable vendors and put terms and conditions into purchase orders that indemnify them if any licensing problems subsequently emerge.