Revulytics Blog

Apptricity and the Army: Lessons in Unpaid Software

December 3, 2013

Subscribe

armyRegular readers of this blog have likely heard that the U.S. government is paying logistics software vendor Apptricity $50 million to settle a case involving unpaid software. While most news headlines are shouting about software piracy, Apptricity's press release frames it as a settlement of a copyright infringement claim.

What was at the heart of the matter? Apptricity stated that “in its copyright infringement claim, [it] sought compensation for approximately 100 server and 9,000 device licenses the U.S. Army installed and fielded globally – but did not procure.”

What is interesting (and lucky?) is that Apptricity only learned about the possible overuse by chance. The BBC noted that “the unauthorised copying only came to light after a US Army official mentioned ‘thousands’ of devices running the software during a presentation on technology.”

Apptricity realized that this was not even close to what the U.S. Army had procured. According to the Washington Post, the “government initially bought a handful of server and device licenses for $4.5 million in 2004. That was followed by another purchase about five years later.” The complaint sought $225M in damages (the license revenue owed for what was actually being used).

Perhaps most concerning is Apptricity’s claim of a possible coverup in its complaint:

“...the Army had engaged another contractor, Future Research Corporation of Huntsville, Alabama, to reverse engineer a portion of Apptricity’s software application suite and proprietary framework architecture to replace certain infringed intellectual property rather than pay for the license shortfall. Apptricity discovered this effort not because the Army admitted the infringement, but because information the Army provided to Apptricity contained a reverse engineered application using Apptricity’s backend database scheme.”

Once the case was settled, Apptricity CEO Tim Garcia put a kinder spin on the situation: “Our battle-tested integrated logistics software performed so well that it went viral.”

So what are the takeaways here?

  • License overuse happens, but software vendors need to be able to identify when it occurs as quickly as possible. In this case (and many others), there was a bit of luck involved: a matter of fact statement in a presentation shed light on the overuse and the company was put in a reactive posture. CodeArmor Intelligence customers, on the other hand, benefit from automated auditing that enables them to be proactive about unpaid software use before the problem becomes so big that litigation is required. Apptricity might have even received payment closer to the full value of the licenses being used had it approached the Army earlier.
  • Some customers try to cover their tracks when they are accused of using unpaid software. Without speculating about exactly what the Army was trying to do when it hired Future Research Corporation, it seems like someone was trying to undo the damage once the issue of unpaid use came to light. Our CodeArmor customers can point to forensic evidence of unpaid use that infringing companies cannot hide from.
  • Your users recognize the value of your software (if they didn’t, they wouldn’t be using it). It is critical for software vendors to be proactive in uncovering this hidden channel of unpaid use. As Digital Trends reported, “while the [$50M] payment is less than Apptricity was claiming, the company has confirmed the figure represents ‘a multiple of [its] annual revenues’ and will be invested in future software development. The U.S. Army will continue to use Apptricity’s logistics software solutions and it would seem the two parties are still on speaking terms.” Apptricity wants what all software vendors want: paying customers with whom they will have a mutually rewarding and beneficial relationship. The sooner a software vendor can identify unpaid use, the easier it will be to approach the customer with a carrot and not a stick, and the less impact there will be on the relationship. While it seems like Apptricity and the Army have had a meeting of the minds and settled the case, I suspect the relationship might be less tense had Apptricity been able to identify the unpaid use sooner and approach the Army with a friendlier plan for account expansion than filing a lawsuit.

 

Michael Goff

Post written by Michael Goff

Marketing Director at Revulytics
Michael is Marketing Director at Revulytics where he is responsible for corporate marketing, content, and social media. He has helped to educate the industry on the benefits of software usage analytics for compliance and product management through the company's blog and contributed articles in trade publications. Michael was previously a marketing programs manager at The MathWorks and principal at Goff Communications. Michael earned a J.D. from Boston University School of Law and a B.A. from Colgate University.