Newsletter | Volume 1

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Issue XXXI

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High Court Ruling On Indirect Software Licensing may result in huge incremental license and maintenance fees

Any business using SAP in future is exposed to substantial SAP penalties and ongoing maintenance charges unless they obtain licences. This is applicable not only for their internal users but also their customers and suppliers. The danger arises where there is any flow of data from the systems via customer portals to individual customers – even indirectly.

If you use software licensed by SAP you should review your license. If you plan to acquire some SAP software, make sure you use an experienced IT licensing lawyer first. SAP's standard license terms and use the software license may cost millions of dollars in completely unexpected incremental license and maintenance fees for large corporations.

Software licensing; The High Court in London has ruled in favour of SAP and against Diageo in an indirect licensing case concerning the use of mySAP enterprise resource planning (ERP) software on a Salesforce platform.

The case, SAP UK v Diageo Great Britain, concerned Diageo's use of mySAP ERP software for the management of manufacturing, stock and supply chain, financial reporting and control, and human resources.

According to the text of the judgment, the liquor and drinks company and SAP had begun their software licence and maintenance agreement in 2004 and came into dispute after Diageo deployed two new third-party systems in 2012;
  • Diageo Connect, allowed Diageo's customers to place orders online, rather than through a call centre, by way of a system that utilised data held in an Oracle database but also associated with an SAP software engine, SAP XI (SAP Exchange Infrastructure), now called SAP PI (SAP Process Integration).
  • Diageo Gen2, allowed Diageo's sales staff to use an iPad to access, via a application, customer data in an Oracle database associated with the mySAP ERP software.
  • SAP maintained that Diageo's customer IT platforms, though based on Salesforce technology, connected back into mySAP ERP software and, accordingly, all Diageo's ultimate customers (5,800 individuals) needed to be licensed as "named users". The judgement was based on the following;
    • Rejection of Diageo's submission that SAP PI is a 'gatekeeper' licence for gaining access to the SAP suite of applications and database. [There is] a separate basis of pricing for the SAP PI software engine and adapters, which applies even where there is a named user licence for mySAP ERP… Therefore, it is clear that it is an addition, rather than an alternative, to authorisation under a named user licence.
    • Only named users are authorised to use or access the mySAP ERP software directly or indirectly. Named user pricing is the only basis on which the mySAP ERP software was and is licensed to Diageo. Usage by Gen2 sales representatives is not authorised... [and so] SAP is entitled to additional licence and maintenance fees.
    The judge was unable to ascertain the category of user licence required by Diageo. There is no applicable named user category for the Connect customers… They do not have access to source or object code. They do not have access to the functionality provided by mySAP ERP in support of the wider operation of Diageo’s business. They access business process functions and information from the database for the purpose of ordering products and managing their own personal accounts only.

    Although the judge ruled that Diageo's business customers and sales representatives were within the ambit of SAP's licensing controls, she resisted SAP's full demands, declaring that such usage did not need to be licensed at professional user level – £9,400 per user including VAT, as demanded by SAP – but rather as other types of users that could not be identified and were not listed in SAP’s price lists.

    SAP's licensing controls go beyond major software suppliers.
    Theoretically, the requirement to license 'indirect access' covers any consumer accessing a price on a website or placing an order or tracking delivery if any of the information has been generated by, or delivered through, any SAP software. Although SAP at present appears to be only pursuing B2B usage – for example, by distributors and sales reps – SAP's wide licence terms can extend to B2C customers as well.

    The exact amount of the award in favour of SAP will be determined at a later date.

    For the entire judgement see;