Government Did Not Breach Implied Duties under Software License
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Tuesday, July 31, 2018

Government Did Not Breach Implied Duties under Software License

By Government Contracts Editorial Staff

Claims the government breached a single user software licensing agreement were granted and denied in part by the Armed Services Board of Contract Appeals because, although the government breached two express duties and the government had an implied duty not to unnecessarily the software’s value, the contractor did not prove the government breached the contract’s implied duties. The contractor contended the government breached a contract and licensing agreement for 20 single user bi-directional English/Dari translation software licenses. The board first rejected the government’s contention the licensing agreement was not part of the contract because the contracting officer never saw it, and the government’s point of contact to receive the software was not authorized to revise the contract by accepting the terms of the licensing agreement. It is the government’s policy when licensing commercial software to accept the licensing terms customarily provided by the vendor to other purchasers, provided the license is consistent with federal law and satisfies the government’s needs (FAR 12.212), and the Federal Acquisition Regulation currently recognizes the validity of clickwrap and shrinkwrap licenses. The circumstances supported finding the CO had a duty to inquire as to the licensing terms, and knowledge of the terms was imputed to him.

Duty to Protect Value. As for the alleged breaches, the government’s installation of the same copy of the software on more than one computer and its failure to provide a list of activations breached duties expressly set forth in the license. There were no express duties with regard to the government’s alleged failures to maintain a point of contact during contract performance and to keep the software from being copied and distributed to others. However, in the case of a contract for a single-use software license, there is an implied duty that the licensee will take reasonable measures to protect the software and keep it from being copied indiscriminately, which could have a deleterious effect on the value of the software to the licensor. Nevertheless, the contractor did not prove the government breached the contract’s implied duties. The government’s duty to cooperate did not extend beyond the contract’s one-year performance period, which is when the contractor attempted to contact the CO. In addition, the contractor did not establish the government failed to take reasonable measures to keep the software from being copied. The board remanded the appeal to resolve damages for the government’s two breaches of the terms of the licensing agreement. (CiyaSoft Corp., ASBCA, ¶95,518)

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