International Trade/Offshore Manufacturing/Sourcing/Export/Import/Consulting Prevent Software Legal Disasters By Susan Pravda and Gabor Garai This disaster could happen to you. You are a software developer seeking to capitalize on a tremendous market opportunity in France for your newest product. You ship your French distributor 20 English-language copies of the software to evaluate its sales potential in his native country. The distributor, in turn, sells the copies to his customers. The only glitch in this rosy scenario is that your firm is immediately subjected to several significant lawsuits. The reason? Your software is incompatible with the software the French companies already have installed, and using it has caused their networks major problems, resulting in heavy losses in productivity and sales. If your software had affected American customers in this way, your liability would have been limited to the cost of your product itself, by reason of the legal language of your shrink-wrap license agreement. But because you have sold your software in France, and because you have not taken adequate legal precautions beforehand, the limitations on your liability are greatly reduced. With the emergence of a global marketplace, this kind of disaster has the potential to become more and more common. The only way to prevent it from happening to your firm is to localize the text of your software license and its corresponding package, thereby ensuring you have accounted for the laws and regulations of each country in which your product may be sold. Even though copyright restrictions automatically provide you with some protection on the illegal copying of your software, they are not sufficient in today's marketplace. Without taking additional precautionary measures, you forfeit your ability to control warranty and liability limitations, to restrict and manage overseas distribution, and to protect your intellectual property. How can you control your liability ahead of time? Here are several steps to take. Define initial terms. Whether you want to sell a product domestically or internationally, there are basic questions you must address as you develop a software license, including: Who owns the copyright? Under what terms can the software be used, i.e., on one server or multiple servers; by one user or many simultaneous users; etc.? What are the warranties? What are the limitations of your liability if your product malfunctions? Write and package with care. When you sell software within the U.S., your shrink-wrap license is generally considered to be legally enforceable as soon as the buyer opens the software package. But if you are selling software abroad, the rights and limitations of that same written license have the potential to become immediately invalid unless you take protective measures. For example: In many countries, a license is unenforceable if it is not written in the local language. Standard conditions of an American license may be illegal abroad. The standard American three-month warranty on software, for example, violates German laws that generally require a longer warranty period. A written license that is assumed obvious within the United States must receive double-emphasis on packaging sold overseas. In Germany, again, software packaging must feature both a red seal and a warning label on the outside calling attention to an attached license. In a number of foreign countries, shrink-wrap licenses - that is, license agreements that are not signed by the user, but are deemed accepted upon opening of the packaging materials - are outright invalid, or have questionable legal significance. Ensure full localization and compliance. To localize your software license and package according to the guidelines of the international markets you have targeted, and to achieve full compliance with each country's unique statutes, you should contract with an American law firm with reliable connections to firms throughout the world. Few U.S. intellectual property attorneys are capable of providing full counsel on the statutes of each country on his/her own; but many belong to international networks where they develop close working relationships with attorneys abroad. American firms can steer you to lawyers overseas who specialize in the laws regulating intellectual property in their native countries, who consider economic efficiency a high priority in their dealings with American clients, and who understand the practical business needs of U.S. software firms. You need to be directed to a separate firm within each individual country where you will sell your software. Your next step is to begin developing universally applicable, and cost-effective, packaging and licensing language that conforms to the statutes of every country within your target market. You can start to accomplish this by translating the license and documentation (including the cover text, user's manual and the software itself) into an official or primary language for a series of countries (i.e., a Spanish-language package for Spain, Mexico and many South American countries; a German-language package for Germany and Austria; and a French-language package for France and parts of Canada). Use U.S.-based translation firms that are familiar with translating highly technical concepts into a foreign language. Their specialized expertise will be essential; a firm that is unfamiliar with leading-edge technical terminology will translate incorrectly and awkwardly, leading to wasted time in revisions that delay your time to market. Once you have a translation in order, send the text and your corresponding package to each law firm within the same language states you have targeted. Each firm will review what you have sent to make sure you are complying with all laws necessary to enforce your license as is. In addition, the firms will comment on the appropriateness of specific language, double-checking the accuracy of your original translation. Finally, these firms will assist you in constructing an introductory master page within your written license, addressing the specific statutes in each country where your software will be sold. For instance, in your Spanish-language license, you might have copy on the page reading, "This document is used in a number of Spanish-speaking countries. For provisions and applications to your country, see below." The copy at the bottom would then cover the statutes of each country in paragraph form, i.e., paragraph one for relevant statutes in Spain, paragraph two for statutes in Mexico, etc. These necessary steps - and any final back and forth revisions to ensure translation accuracy and legal compliance - should take you about one month to complete for each package. Expect to spend approximately $500 to $3,000 in legal and translation costs for each country within your target market. Remain up-to-date. Once you have developed a package, you should have a lawyer from each country in which you operate review it once every two years to assure your continued compliance in light of changing statutes. When this article was first published, Susan Pravda and Gabor Garai were managing partners of Epstein Becker & Green, P.C., of Boston. They represented many high-technology companies in various stages of development. Advertise on this site Put your company on this site!