EURIM Working Group on Fair Dealing in Software and Services

Introduction and Terms of Reference

Meeting Details, Agendas, Tabled Papers and Minutes

Group Outputs (Papers and Briefings)

Other Relevant Documents & Links

Introduction and Terms of Reference

This group was active between 1999 and 2002. Its objective was to raise awareness of the issue of software "stiffing" which is the practice of exploiting weaknesses in software contracts so that suppliers can derive excessive profits from customers.  Stiffing relies on the broadly exclusive nature of software contracts which causes customers to find themselves technically in breach of the terms of their contract for trivial reasons or due to market changes that could not have been foreseen by either party.  Because of the nature of software, customers are not always in a position to decline the contract under the new circumstances because the original software may have been incorporated into critical systems and cannot be uninstalled without significant consequences. As a result a number of organisations were "trapped" into paying grossly inflated fees without receiving any benefit.  (See Background)

The Group identified that the key problems related to poor drafting in legacy software contracts, so a set of priorities was defined in 5 steps:

Priority 1- Education

To educate users regarding the existence of stiffing so that they were aware of the dangers and could avoid exposure to it in future.  The group collated a series of Computer Weekly articles that demonstrated how organisations of all sizes had been affected and the costs involved.  The group then prepared a short series of case studies (see outputs below) involving large organisations that had been subject to stiffing, or attempted stiffing, by their software supplier.  These case studies illustrate how the issue arose in each case and how it was resolved. 

Priority 2- Best Practice

To improve procurement practice and contract drafting.  Most stiffing is the result of poor or unclear drafting in contracts or the practice of contracting for IT without the involvement of legal and procurement expertise.  Yet there is a great deal of best procurement practice material readily available.  The working group set up a sub-group that identified suitable sources of such information (such as CIPS- the Chartered Institue of Purchasing and Supply) and also prepared a number of suggested Model Contract Terms.

Priority 3 - Code of Fair Use and Best Practice

The group prepared a set of simple guidelines to cover areas in software contracts that are most commonly in dispute - for instance where a software contract is silent. They give a rough idea of what is, and what is not, acceptable practice and are designed to be used as a quick reference guide.   If both parties agreed to comply with the guidelines, then the scope for dispute is much reduced.

Priority 4 - ADR and Mediation

Because a number of issues cannot be resolved and are not between parties that have agreed to follow the draft guidelines, the parties must resort to other means to resolve their disputes.  Mediation and Alternative Dispute Resolution are two potential solutions that can replace expensive litigation. The group worked closely with the Chartered Institute of Arbitrators who established best practice guidelines for the arbitration of software contracts.  The meeting minutes of May and December 02 relate to ADR, and EURIM's Network Governance working group prepared a Status Report on ADR.

Other issues that the group tackled include:

Microsoft's Changes to its License Regime

During 2001 Microsoft Corporation announced major changes to its licensing policy which led to a long-running debate.  Many organisations believed that the changes simply disguised a large increase in price without any guarantee of service improvement and believed that this constituted a major case of stiffing.  Minutes and other outputs relating to this debate are available Here.

UCITA

UCITA, or the Uniform Computer Information Transaction Act, was implemented in Maryland and Virginia and there was concern that it would spread to other states.  The legislation was very heavily weighted in favour of software suppliers and there was much opposition from user groups.  For instance it would introduce liability waivers for defective products and extend the software licence to cover the device that it that it operated.  For instance, cars would be covered by UCITA and could not be re-sold second-hand if the parts contained software or microcomputers.  Medical devices incorporating operating software - including surgical implants - would also be subject to the Act and effectively controlled by the supplier. The group kept a watching brief on the legislation which appeared elsewhere only in watered-down versions.

Group Leadership

Geoff Petherick of GSoft was the group's Chairman and Peter Monk of CGNU was the Vice Chairman.  The Rapporteur was Emma Fryer. 

Minutes and other Archive documents are listed below and most are available in electronic form.  For further information or hard copies of papers not available online, please contact the Group Rapporteur, Emma Fryer at  emma.fryer@eurim.org

Group Outputs

Other Relevant Documents & Links

Microsoft Licensing Regime