Software licensing: how to handle a client with outsourced IT supplier?

Question

I work for a software supplier that licenses commercial software to clients. The license has various conditions - don't copy it, only use it for licensed purposes, etc.

A lawyer has reviewed the agreement and identified a risk where a client has an outsourced IT provider. In this case, the software would be running on computers owned by the IT provider. Potentially the IT provider could copy the software. However, they are not signatories of the license agreement, so it would be more difficult to enforce against them.

The lawyer has suggested making it a tripartite agreement (software supplier, customer, IT provider). This would fix the issue, but introduces other complexity.

This must be an extremely common issue for commercial software. What other approaches can be used to deal with outsourced IT providers?

Jurisdiction is England & Wales, but interested in general approaches.

Answer 1

There are two common approaches.

The first approach is simply to let copyright law apply. Under the default terms, the IT provider has no rights to copy your software. Running software is allowed, of course, and not a problem that you need to deal with vis-a-vis the IT provider. You still can sue them if they copy your software, even in the absence of a contract. That is the chief function of copyright, after all!

The second approach is to allow the customer to subcontract third parties to act on behalf of them, while acknowledging that such subcontracting does not dissolve them from any responsibilities towards you. In other words, if the 3rd party would do something unauthorized, you have a claim towards the customer and they have a distinct but related claim towards their IT supplier.