Software Licenses in Light of Cincom Case Newsletter

by Jonathan Hustis
What you need to know about the 2009 Cincom case

The software user was liable for damages of $459,530, the same amount it already had paid to license the software.

In Cincom Systems, Inc. v. Novelis Corp., a federal Court of Appeals ruled that the software user Novelis was liable to pay the software vendor Cincom $459,530.00, effectively paying the vendor twice for the same software. Novelis thought that the licenses had been fully paid when it bought them in 1989. But the software vendor Cincom sued Novelis anyway.

Cincom claimed that restructuring several commonly owned Novelis companies triggered a new license fee requirement. The federal Court of Appeals agreed with Cincom, that Novelis would have to pay the license fees again, because of the internal restructuring.

Here are some key facts, and some ideas about what to think about as a result of the Cincom case.


1989 License Installation and Terms

In 1989, the vendor Cincom licensed its software to Alcan Ohio, who installed it in a New York plant. The agreement prohibited a transfer of the license without Cincom’s prior approval.