Robotic Automation and Software Licensing

Robotic Automation and Software Licensing

1

Ole Horsfeldt

Tue Goldschmieding

Kasper Laustsen

Partner

Partner

Attorney

D +45 33 41 43 65 M +45 24 28 68 40 oho@gorrissenfederspiel.com

D +45 33 41 42 03 M +45 24 28 68 75 tgg@gorrissenfederspiel.com

D +45 33 41 43 96 M +45 27 80 40 24 kla@gorrissenfederspiel.com

Introduction

Robotic Process Automation (RPA) introduces a number of substantial benefits to companies, including (i) high and uniform quality, (ii) reduction of costs, and (iii) reduction of the turnaround time.

However, when considering whether to adopt a robotic automation solution, you should be aware of the possible prohibition and/or cost exposure associated with integrating RPA into legacy software arrangements.

Most robotic automation solutions are working in the interfaces of the applications in much the same way had it been a physical person – however much more efficient.

However, software which are licensed on a user basis (e.g. named users licenses) may not be drafted with such use in mind and in the absence of clear and specific wording, there is a significant risk that the use of RPA in combination of licensed applications may constitute a license breach. Especially, if the robotic automation solution is also leading to a reduction in the number of named user licenses – due to the effectiveness of the robotic automation solution.

This issue is namely relevant to consider, if your robotic automation solution is used together with software based on old license agreements.

The same issues applies when using licensed products in combination with e.g. Internet of Things (IOT) or other digital access that can be licensed based on transactions processed by the system itself (indirect/digital access).

The issues identified in this note will apply to AI based solutions, as well as cloud solutions which integrate legacy systems.

2

SAP UK Ltd v.

Diageo Great Britain Ltd

The issue of using legacy software in combination with new technologies or processes was first raised by the UK court case SAP UK Ltd v Diageo Great Britain Ltd from 16 February 2017.

In 2004, SAP UK Ltd (“SAP”) and Diageo Great Britain Ltd (“Diageo”) entered into a Software Licence and Maintenance Agreement on SAP’s standard terms. The Agreement provided Diageo with a license to use the SAP software (mySAP Business Suite) on a “Named Users” basis.

In 2012 Diageo acquired two new software applications (Connect and Gen2), neither of which were provided by SAP. These new applications allowed Diageo’s customers to place orders based on the data produced by mySAP Business Suite.

As a result of this integration, the sales team at Diageo no longer needed to check the data on the MySAP Business Suite themselves and then relay this information to Diagio’s customers over the phone – i.e. the new software allowed Diageo to automate some operational processes.

3

SAP claimed that Diageo’s customers’ were able to use and/or access the SAP’s software directly and indirectly, and therefore this utilization required a license. The judge ruled in favour of SAP and concluded that Diageo would be liable to pay a license fee for every direct and indirect access of the mySAP Business Suite by one of Diageo’s customers, where such customers access or use the mySAP Business Suite through other systems.

The fact that the solution which Diageo implemented did not exist at the time of the contract did not prevent Diageo from being liable for substantially higher license fees due to indirect use and access by parties or systems not explicitly described as users in the license agreement.

Although, the court case does not related to RPA technologies, the case illustrates the risks of using licenses in a technical setup different from what was possible when the license agreement was conducted.

Dentons: the SAP v. Diageo decision – a realistic ­approach to indirect access

4

SAP cloud and SAP ERP services

5

SAP cloud and SAP ERP services

Oracle ERP licenses

According to the General Terms and Conditions for SAP Cloud Services (v.10-2018b), the “Customer may permit Authorized Users to use the Cloud Service.”.

Oracle has over 50 license metrics for its database technology, applications and middleware. None however refer to robots or reference robotic process automation specifically. Oracle technology at enterprise level is mainly licensed on a Processor-basis or as Named User Plus.

According to the glossary list, “Authorized User” ­means “any individual to whom Customer grants access authorization to use the Cloud Service that is an employee, agent, contractor or representative of (a) Customer, (b) Customer's Affiliates, and/or (c) Customer’s and Customer’s Affiliates’ Business Partners.”.

However, is it true or even accurate to argue that a robot is an “employee” or “agent” of the Customer? It is likely that a robot to some extent may constitute a “representative” of the Customer, however, does the terms only refers to physical persons? In general license terms will be subject to strict interpretation.

Further, in accordance with clause 2.2 of the ­general ­terms, “Usage is limited to the Usage Metrics and ­volumes stated in the Order Form”. As such, even if RPA services are allowed there may be a cost impact if the RPA services lead to a greater usage then set forth in the Order Form – which will again affect the business case.

In April 2018, SAP introduced a new pricing model for SAP ERP. The new pricing model combined a traditional user-based model with an “outcome based” pricing model covering indirect and digital access. Further, in April 2018, SAP introduced a guide for “Indirect Access”.

As such, SAP has taken a number of steps to be more transparent in respect of compliance when using SAP ERP in combination with other technologies. However, we always recommend that companies are conducting specific analysis on pricing models and license compliance when designing its new business processes.

In Oracle’s definition of “Named User Plus”, Oracle refers to “non human operated device”, which will be counted as a named user plus in addition to all individuals authorized to use the programs, “if such devices can access the programs”.

As such, all “robots” being able to access the programs shall be calculated as a “Named user Plus”. It is important to note that the license requirement is not depending on if the robot does actually access the programs. The fact that the robot can access the programs is sufficient to trigger a license use.

Further, “If multiplexing hardware or software (e.g., a TP monitor or a web server product) is used” it is the number of robots in the front end that needs to be measured. As such, you cannot use multiplexing technologies to reduce the named users to one “connection”.

When using RP technologies there are a number of similar license issues.

6

Are you in a license breach?

You should also ask yourself the following questions when applying RPA in combination with applications:

?

Does the license agreement support use of RPA (or use AI or remote access), and if confirmative how does this affect pricing metrics and the business case of using RPA?

?

Does the use of RPA constitute an assignment of rights from the named user to the robot and is this allowed under the license agreement?

?

Does the use of RPA undermine/disrupt the pricing metrics on which the license model is based and how will this trigger the behaviour of the licensor?

?

7

What are the process and next steps if the company is uncertain to which extent the RPA may lead to a license breach?

8

Considerations when negotiating new software licenses or buying more of the same There are a variety of considerations you must consider before purchasing new software, particularly when such software will be integrated or more generally combined with other services as part of your transformation ­strategy:

9

1 2 3 4

Determine your needs Does the license terms support your digital transformation strategy? Create a roadmap of the technologies to be used and how they interact with each other. If the transformation strategy involves the use of RPA, we recommend that software robotics provisions are included within the software license to determine usage permissions and to what extent direct/indirect access is permitted.

Clear definitions of key terms Does the license terms support your digital transformation strategy? Create a roadmap of the technologies to be used and how they interact with each other. If the transformation strategy involves the use of RPA, we recommend that software robotics provisions are included within the software license to determine usage permissions and to what extent direct/indirect access is permitted.

Pricing You must assess how the pricing metrics applies to your transformation strategy, and how to ensure flexibility in terms of future amendments to the transformation strategy. E.g. will it be possible to change between “per unit”, “outcome based”, or “per user” pricing metrics.

The overall purpose must be to minimize the risk of future disputes, by having clear pricing schemes for all types of use.

Flexibility The license agreement must include a right for the licensee to relocate or change users, for example changing from human being to a robotic or AI process. Further, you should ensure that integrator software is allowed and assess whether the software includes a gatekeeper license.

In the SAP v. Diageo case the judge dismiss the argument that there exists a “gatekeeper” licence, which would give access to the SAP suite of application and databases.

Therefore, be aware of whether the agreement imposes fees when you use integrator software. You cannot assume that the integrator software is allowed and that the Supplier will know of the use of integrator software.

SAP v. Deiageo no. 45.

10

Our new service offering – review of current SW agreements ahead of robotics project

11

Gorrissen Federspiel has specialized in assisting our clients in their digital transformation plans including:

Current SW agreements

Review & Assessment

Negotiation of license terms

Review and assessment of existing license terms and the use of specific license in combination with different technologies and products;

Negotiation of license terms. We have substantial experience in negotiating license terms with all from top tier software providers to less known software providers.

We have a strong commercial focus in order to make sure that the license agreement (i) allows for the specific use, (ii) creates the right amount flexibility and (iii) provides transparent and marked conform pricing terms.

Robotics Project

12

Axeltorv 2 1609 Copenhagen V Denmark T +45 33 41 41 41 Silkeborgvej 2 8000 Aarhus C Denmark T +45 86 20 75 00 gorrissenfederspiel.com