A whistleblower has successfully used the American False Claims Act to tap a software publisher and reap a $17.3 million reward.  The actual federal settlement of $98.5 million (USD) was the result of (alleged?) sharp practices on the part of Peoplesoft from 1997 to 2005—prior to the Oracle takeover.  Let’s take a look at the ways that this type of activity can apply to your company.

First & foremost, thanks a bunch to the Department of Justice for the handy press release (located – here)—it’s nice to see you guys delivering a genuine wrist slap as well as sharing the reward.  And how can this impact your company?

Problem: The software industry has managed to convince all of us that license agreements & transactions are some type of ultra-secret cosmic… Well—you get the idea.  Here is the problem: All of this secrecy allows the software publishers to play fast & loose with their agreements & pricing because there are no effective checks & balances. Each of us sits high on a conveniently isolated negotiations island from which we attempt to “get the best deal”—usually through the licensing equivalent of reading tea leaves.  Hey!  Guess what?  You could lower costs as well as improve Ts & Cs if we all worked together to standardize agreements & price structures.

Potential Solution: Business software consumers absolutely have to start talking with one another about the terms & conditions—yes, even the price breaks—of licenses & agreements.  As long as we are isolated from one another, publishers can engage in sharp practices—as in pricing “boo-boos” and onerous contractual agreements—with little or no threat of exposure.

Problem: Oracle definitely wound up with the sharp end of the stick on this event.  Here is how this applies to you:  When you acquire another company, you also inherit their entire history.  In this instance, Oracle itself evidently didn’t play with pricing.  Instead, according to the DOJ, Peoplesoft did the deeds before Oracle bought them.  The same holds true if your company acquires another and that former company didn’t correctly license its software or other copyrighted products.  The same also holds true if you acquire a computer loaded with an illegal operating system, software or other copyrighted product.  You may not have committed the crime, but you will find yourself paying the fine.

Potential Solution: Be absolutely certain that you perform all possible due diligence prior to closing an acquisition.  Do you suppose that, during the buyout, Oracle executives would have been mighty upset at their due diligence team for investing too much time looking for problems?  Do you suppose those same executives are now frantically kicking themselves for not checking into this specific matter back then? 

Questions:  How many kicks in the collective executive behind compensate for $98.5 million in fines?  What were all the other costs of this event as well as the costs of the adverse publicity?  How many front line employees will lose their jobs over this little “oops”?  How much will our software, support & maintenance costs increase to pay all this off?

Why do I call these "potential solutions"?  Because it is going to take a while and a great deal of business cultural change before we can begin challenging copyright holders for sharp practices.  In the meantime, we'll all just keep paying more, and more, and more...

Have you been a victim of vendor or publisher sharp practices?  Let us know.  We'll follow up.