

The SAP vs Diageo case at ITAMOrg ITAM Conference 2017


One of the interesting topics discussed and what was on most delegates lips at the ITAMOrg conference, was the SAP vs Diageo court ruling and its consequences.
Professor in IT-law at the University of Copenhagen, Henrik Udsen, analysed the ruling during his session and indirect use was further discussed during an armchair-session on transparent licensing with participation of SAP’s Head of License Management EMEA, Eben van Heerden.

The background for the case is that Diageo and SAP entered into a SAP Business Suite license in 2004 (incl. a license for mySAP ERP and SAP PI). The license agreement was amended a number of times over the years. The license agreement provided a right to “use or access” the software “directly or indirectly”. The license rights were granted to “Named Users”. The agreement included different types of “Named Users”. The licensee fee was based on the number of “Named Users”. In 2012 Diageo deployed a Salesforce cloud solution which provided Diageo’s customers with the possibility to order products directly with Diageo (the “Connect” system) and Diageo’s account managers with the possibility to check customer specific information directly in Diageo’s database (the “Gen2” system). Connect and Gen2 communicated with mySAP ERP through SAP PI.
The judgement
The UK court concluded that the license agreement did not provide other users than “Named Users” with a right to use the SAP software. That the SAP PI license did not provide an implicit right to use mySAP ERP. That the Connect and Gen2 users do make a direct or indirect use of mySAP ERP in the terms of the license agreement. And with regards to the payment SAP is thus entitled to, that this be based on SAP’s current price list, as the license agreement stipulates that usage not corresponding to the agreement is subject to payment in accordance with the current SAP price list.

Professor Udsen continued and asked: “Is it a legally correct judgement? And “Is it a fair judgement?”
Udsen considered the judgement to be basically legally correct although he was not certain that the ruling would be the same in other jurisdictions and also, he was not sure if the calculation of the payment to SAP would have been the same in other jurisdictions.
For the question if it was a fair judgement well, the problem of the case is the use of software not taken into account when the license agreement was entered into. Basically this leaves 3 outcomes of the case:

1. Full payment to SAP (the result of the judgement)
2. No additional payment to SAP
3. A smaller additional payment
And in that context he personally believed that the full payment to SAP based on the current price list may seem not quite fair.

Implications and lessons learned
Knowing that the SAP license terms are used broadly the judgement is of course of interest to quite many SAP customers. The lessons learned from the case is that it is crucial to be aware of the potential clash between old license terms and new types of usages (“over-deployment”) and how the license agreement regulates unauthorized use of the software (payment calculation).
The judgement has been appealed and SAP’s Eben van Heerden made it clear during the armchair session that any customer in doubt about what use their current SAP license agreement includes should initiate a dialogue with SAP. A dialogue SAP is happy to engage in.