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ARTICLE · 13 JANUARY 2015

IBM’s Audit Rights Take A Turn For The Worse

Scott & Scott LLP
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The software-audit language contained in IBM’s standard license agreements never has been anything that anyone would mistake for customer-focused or even very fair contract terms.

United StatesAccounting and Audit
Christopher Barnett
Christopher Barnett
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The software-audit language contained in IBM's standard license agreements never has been anything that anyone would mistake for customer-focused or even very fair contract terms. However, in August 2014, IBM released a new version of its Passport Advantage Agreement (PAA) that applied immediately to all new business that now is in the process of being incorporated into IBM's legacy relationships by virtue of the rights that IBM conveniently retains to implement unilateral contract changes. While IBM has characterized the PAA changes as "enhancements" in its announcement letters, the changes made to the audit clause are decidedly not in licensees' best interests, as follows:

  • More Wiggle Room. Older PAAs included an objective "fence" around the scope of IBM's auditors' inquiries, in that licensees were required to provide information "sufficient to provide auditable verification that Customer's use of all Eligible Products is in compliance with the Passport

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