Software licence disputes – value of early case assessment

Drawing on our extensive experience of commercial disputes, we were able to successfully resolve a commercial contract dispute for a startup software development company (our “Client”), by undertaking early case analysis. Our reduced commercial risks, saved significant litigation costs and was able to preserve a key business relationship.

The dispute

Our Client entered into a licensing and service agreement (the “Agreement”) with a technology services provider (the “Provider”). The contract allowed our Client to integrate the Provider's exclusive software into its products, along with ongoing technical support and updates. Shortly after inception, the Provider accused our Client of exceeding the licensed usage limits and demanded that additional fees were paid. Our Client refused to pay for the additional charges, and the Provider subsequently issued proceedings. Our Client approached us for advice and initially considered issuing a defence and counterclaim.

The process

Given the complexities of the dispute, we advised our Client that a comprehensive case analysis was essential, as litigation would be very costly, with potential costs exceeding £100,000, alongside the risk of paying damages and the substantial portion of the other side’s costs if the defence and counterclaim were unsuccessful. As a result of our assessment we were able to:

1. Identify key issues -we reviewed the Agreement and all related documents, to understand the dispute and identify key issues.

2. Facilitate a cost-benefit analysis: we evaluated the strengths and weaknesses for each party, whilst also considering the financial and operational impacts of litigation versus exploring settlement negotiations via a mediation. We provided our Client with a clear understanding of the potential costs, timelines, and outcomes of each option.

3. Mitigate Risk: we identified potential risks, including financial consequences, reputational damage, business disruption, and preserving the business relationship with the Provider, which was a significant aim for our Client.

4. Allow informed decision-making: we advised our Client on whether they should proceed with litigation or ADR.

The findings

Our detailed pre-litigation opinion and report provided our Client with several critical insights:

• Contractual ambiguities: the Agreement contained several ambiguous clauses that could have been interpreted in favour of either party.
• Partial validity of claims: while the Provider’s claim for licensing violations had some merit, our Client also had strong defences, such as the interpretation of contractual definitions used such as “usage limits”, which were vague.
• Litigation risk: the ECA showed that litigation posed significant risks, including high costs, uncertain outcomes, potential damage to our Client’s reputation and business relationship with the Provider.

The strategy

Based on the findings, we recommended a strategy focused on settlement negotiations, via mediation, rather than proceeding with litigation. The goal was to reach a settlement, led by our firm’s expert litigators, that would resolve the dispute quickly and cheaply, whilst protecting our Client’s interests.

The outcome

After we had highlighted the risks of litigation to both sides in correspondence, the parties attended a day-long mediation, which resulted in a favourable settlement outcome that exceeded our Client’s expectations:

• Updates to the Agreement: the parties agreed to revise the licensing terms, including a modest fee adjustment spread over a longer period, which allowed our Client to manage costs more effectively. The Provider also agreed to withdraw their claim.
• Continued access and relationship: our Client retained access to the Provider’s software and ongoing technical support, ensuring business continuity, as well as preserving the business relationship with the Provider, under improved terms, which was essential to our Client’s long-term success.
• Business continuity: the swift resolution ensured that our Client’s product development and delivery schedules were not disrupted, maintaining operational stability.

Protect your business early

Through the expert application of case analysis, we were able to provide a strategic framework for resolving this dispute, in a way that aligned with our Client’s broader business objectives.