Are SAP’s indirect use charges legal?
The German legal system is examining whether SAP can legitimately charge for indirect access to its software from a third-party application
Many SAP customers have been disturbed by its insistence on charging for “indirect usage”. Last year’s case against Diageo supported SAP’s position that access by users that were connecting to SAP systems indirectly was chargeable, even though SAP had no user metric for such use.
However, there is a basic question that is currently being examined in Germany: is SAP permitted, by European Union (EU) law, to charge for indirect usage when this is a necessary part of the program usage?
The possibility of invalidity derives from interpretation of key provisions in the EU’s 2009 Software Directive, which recognised the crucial value of software but also sought to eradicate what it called “negative effects on the functioning of the internal market as regards computer programs”.
The fundamental question of whether the imposition of charges for indirect usage was invalid under EU law was surprisingly neither included as part of the defence, nor examined by the judge, in the Diageo high court case.
However, German academics have now been exploring this point in the context of SAP’s business practices. Representations were also made earlier this month by the German Association of IT Professionals to the country’s competition authority (the Bundeskartellamt), although details of these representations have not been released.
The starting point is that any rights owner, such as a software supplier, will own copyright in its programs and can choose how, under what terms and at what prices it can license these to its customers.
However, copyright law includes certain “permitted acts” that do not require permission from the owner and for which no charges can be levied. Fair use is one example. The UK’s copyright legislation has more than 60 of these exceptions, established over 200 years but more recently often derived from EU directives.
The EU has always sought to support the interests of the rights owners, who should be encouraged to invest and innovate and so expect remuneration. But, equally, this must be balanced against the requirements of business and consumers.
Against this backdrop, the EU issued a directive in April 2009 specifically addressing software.
Such directives are sometimes quite general in nature and do lead to the courts having to interpret the intentions behind a directive, as reflected in the background wording, as well as the specific articles.
The 2009 directive specifically recognised the critical importance of normal usage and interoperability and that these should not be inhibited.
The objective was acknowledged to make it possible that all applications, from different suppliers, could work together without legal barriers imposed by one supplier.
So, against this backdrop, there are two invariable requirements laid down by the EU:
- Use (in the form of running, loading, display, and so on) does not require a licence from the software owner where it is “necessary” for its use by the buyer, including for error correction.
- And (subject to certain conditions) a licence is also not required where the use is “indispensable to obtain the information necessary to achieve interoperability with other programs”. However, this second provision cannot be applied if it “unreasonably prejudices the rightholder’s legitimate interests” or conflicts with “a normal exploitation” of the software.
Read more about indirect access
- The SAP legal case against Diageo highlights the seemingly arbitrary rules governing software licensing.
- Following the high-profile legal cases against brewers Diageo and Anheuser-Busch InBev, SAP has brought some clarity over indirect access to its core ERP system.
So, could this cover indirect usage, as in the Diageo case? There, sales agents and buyers logged into a Salesforce program to access order details, prices and delivery times – information that was ultimately stored within Diageo’s SAP program. SAP, essentially, maintained that such individuals were accessing the SAP program directly or indirectly, this being “via the internet or by means of a hand-held or third-party device or system”.
The judge, rather obscurely, said that access included “acquiring visibility” of the SAP programs and concluded that any such access or use required all persons to be licensed users.
Against this, the legal arguments could be that, today, interoperability means so much more than the insertion of an API. All ERP (enterprise resource planning) systems tend to be interlinked, and one person accessing one program for very limited purposes could well necessarily trigger changes to other, more distant, programs in the IT infrastructure.
In short, everyone who touches any business system might be sending data to and from a raft of other programs and databases. That is how information technology works today.
In an extreme example, a consumer logging on from home to check delivery charges for a product or its availability is probably triggering multiple systems within the supplier. Such a person is an indirect user and would seemingly need to be paid for under many suppliers’ licensing schemes. The licensing costs would, however, destroy many businesses if the software suppliers took their indirect access licensing to its logical conclusion.
If, then, the overriding intention of the EU was to facilitate rather than inhibit business efficiency, then all such indirect usage must be sanitised and require no licence.
If that were accepted – and certainly the European court has been known to make such leaps in its examination of software usage and business – where does this leave SAP?
The conclusion would be that SAP’s licence terms and policies requiring a licence for such usage would be void. No licence charges for this could be invoiced.
This could then open up claims by customers against SAP for recovery of all sums paid for such usage in the past. There would also be possible claims for penalties against SAP for abusing its monopoly position by requiring payment for invalid licensing.
We still do not know how the German investigations will play out and how and whether these kinds of argument will be litigated and whether they would succeed or fail. But certainly, any business on the receiving end of claims for under-licensing on the basis of indirect usage should seriously examine whether the claims – from any software supplier – are indeed lawful.
Robin Fry is a legal director of Cerno Professional Services, which specialises in audit defence and strategic licence optimisation