Outsourcing brings legal woes over software licences

Companies that provide outsourcing services could face prosecution if they do not ensure that their customers' software licences are outsourcing-friendly and up to date.

The Federation Against Software Theft (Fast) claims it has seen the first case in which a company that took on the outsourcing contract for an organisation found itself in legal difficulties after discovering its customer did not have an adequate software licence in place.

According to Fast, the relationship between software licensing and outsourcing is "poorly understood" by users and could cause problems if licence restrictions are not discovered at an early stage. This problem will be magnified if analysts are correct in predicting an increase in outsourcing activity over the coming years. In a recent report, research firm Meta Group said that 70 percent of companies currently outsource, with nearly all expected to embrace the model by 2006.

Simon Briskman, a partner at media law firm Olswang, and a member of Fast's Legal Advisory Group, said in a statement: "Current licences should be pulled out of bottom drawers and read, because they may not allow outsourcing." Briskman points out that new licences must clearly state the "rights of use" for both service provider and customer.

Chris Butler, sales manager at business process outsourcing firm Liberata, said: "Outsourcing the problem does not mean outsourcing the liability." Butler warned that vicarious liability -- where for example, a parent or employer can be held liable for the harmful acts of their child or employee -- does not transfer with the purchase of a service level agreement.

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