Vendor "Take-Back" Software Licensing
April 19, 2016 10:53 PM   Subscribe

My company bought thousands of dollars of client hardware and software from a vendor on behalf of a valued customer. They apparently gave us a server software license without charging us for it. Can they come back two years later looking for payment? (snowflake details inside)

I recently became the product manager for an IT system product that we sell to small businesses and non-profit organizations. (in Texas if that's relevant)

We have a vendor who in 2014 sold us seven biometric scanners and the client software licenses to install their drivers on seven client machines at a customer's site. This was a handshake deal involving the previous regime at my company and I'm stuck cleaning up the mess. There are no contracts, no license agreements, nada, on paper for this transaction. Only P.O.s for the devices and software..

For these scanners to work with our system, there needs to be a server at the client site. We never sent them a PO for their server software license and they never sent us an invoice. But somehow we ended up with a server license because their stuff has been working just fine with our system at our customer's site since 2014.

That is, until now. I need to simply uninstall and reinstall one of their client drivers to repair one of our customer's malfunctioning devices and the vendor is balking. Their licensing guy is saying that, gasp!, we have a server license that we've not paid for!

So they will not let us fix our customer's client machine until we pony up $1200 for the server license we have had since 2014. Again, we have nothing signed, no contract, no licensing agreement. The vendor cannot produce an invoice they sent us that we didn't pay. I can verify that we gave them thousands for the rest of the system. They apparently changed their licensing approach in 2015 and have decided that the new rules apply retroactively.

The question is -- if they provided us with a server license 2 years ago with no attempt to make us pay, can they come back and say that we now need to pay for it? We paid thousands for the client hardware and software, so I can't figure they just "forgot" to charge us $1200 for the server software they gave us. Even if they did, isn't that on them?

Help me to decide how hard to push back on this or break it to me gently if I don't have a leg to stand on.
posted by cross_impact to Computers & Internet (6 answers total)
Talk to a lawyer in your jurisdiction. If you can't afford a lawyer, at minimum, ask them to produce the contract from 2014. The obvious compromise would be to buy a server license now, instead of retroactively. I have no idea of your rights or obligations, though. Hence, my suggestion to talk to a lawyer in your jurisdiction. (I realize it's hardly worth that for $1,200, but maybe at least you can get a 30 minute consult?)
posted by Happydaz at 11:24 PM on April 19, 2016

I can't speak to the legal angle, but I think they are not obligated to support your license needs without an agreement for support. Do you have any kind of support agreement which covers the service they'd normal be performing when you do the uninstall/reinstall? If not, then this basically amounts to a new charge for your support vis-a-vis the licensing-whatever they do. It's a dick move, but without a contract or agreement, they can throw arbitrary charges at you all they like and refuse service as a penalty for not paying. It's more or less what happens when a support agreement ends without renewal.

I'd consider paying, though I'd bargain them down to their 2014 price at most. I'd also consider passing the cost onto the customer, unless your agreement with them is more robust than your agreement with the vendor so as to preclude you charging the customer. They are responsible for any money lost as a cost difference between 2014 price and 2016 price. If the service license is cheaper now, of course, certainly pay the cheaper price and say nothing on this, heh.

I'd demand a support agreement in writing with the vendor containing terms to which you can agree, and I'd also hit them up for a statement in writing that there will be no more surprise retroactive charges no matter how much backbearing and filebox diving they do. If you pay this ransom, you should get a clean slate in return, not having to sit on the edge of your seat every time the product needs a reinstall.

Right the wrongs of the past by establishing an agreement now. Neglecting this could've cost a lot more than $1200, and both sides could do well to acknowledge their respective roles in this fuckup.
posted by Sunburnt at 11:35 PM on April 19, 2016 [2 favorites]

Oy, don't bother (time-wise and cost-wise) talking to a lawyer for a $1200 business matter. I would instead treat this as a sales and customer service matter rather than as a legal matter. Tell the vendor that this is creating a hardship for you and seems somewhat unfair since so much time has passed already. Try to negotiate them down to a lower cost. I think a reasonable person would conclude that both parties are culpable in some way and you should split the cost.
posted by OCDan at 12:40 AM on April 20, 2016 [7 favorites]

Depending how much your customer is worth to you and how critical this problem is to them, it might be worth paying up to maintain good relationships with them. If you have a bit of time to resolve the issue with the vendor then I think it's a negotiation with the vendor to get a reasonable deal. They may well be expecting you to push back, but if they are naively thinking that they have you over a barrel and won't move, you can tell them that if you have to pay the full amount, you will immediately start looking for another vendor and put all their revenue from you at risk. That will get their attention :-)
posted by crocomancer at 3:26 AM on April 20, 2016

I worked with software companies and yes, they can absolutely do this. This happens and most places are willing to let it go right up until they have you over a barrel and you HAVE to pay. It's called compliance, and you are not complying.

Companies do this all the time. Licenses are typically renewed in year increments, (1, 3, 5) and some companies proactively reach out to customers who have not renewed to get them to do so.

You can negotiate them down on the price, but you'll pay. Get them to renew the license for 3 years for that price.
posted by Ruthless Bunny at 4:23 AM on April 20, 2016

IANAL, but a large part of my job seems to be debating charges with vendors and customers, so here's my $.02:

I think your predecessor is more the bad guy here than the vendor. If you're running a server with someone else's environment on it, it's pretty customary to either pay for a license or have an explicit agreement that it's free (or included because of a related service agreement). Some rep may have made a handshake deal, which your predecessor didn't get in writing, but you can't really expect your vendor to have a record of that if you don't.

Assuming everything you've said is accurate, it sounds like probably a billing oversight, and you're basically saying "finders keepers." I can understand why you feel that way, because it's going to be hard to bill your customer for this (in fact, I probably wouldn't, unless it can be construed as paying for something going forward - see next point). I would even see your point if you said "you didn't bill then; tough -- I'm not straightening out a billing mess from 2 years ago."

But now you're coming to them for support, and apparently you don't have a copy of the software so you can handle all this yourself, which changes the situation. I don't see how you can expect them to provide support or a fresh download for something they haven't been paid for. In fact, licenses that include support are rarely, if ever, perpetual, so you could view it as (and sell it to your customer as) -- "we need to renew this license so we'll have support." This is not uncommon, and if your customer balks they don't really understand it.

Related questions:

- are you charging them for support, monitoring, etc.? If so, you might consider eating this expense. I myself expect a reseller to buffer me from these kind of surprises when I buy a turn-key system. If you sold them a system 2 years ago and haven't charged them since, however, it's not reasonable for them to expect free support.

- You mentioned this deep into your question: They apparently changed their licensing approach in 2015 and have decided that the new rules apply retroactively. If I'm reading this right, this might put a different spin on it. This would be different than "we forgot to bill you." If a server license was included before, that would be something I'd at least argue about a discount on. However, it's still problematic for your case that now you apparently need them to do something for you...
posted by randomkeystrike at 5:59 AM on April 20, 2016 [3 favorites]

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