Jordan breaks down how Adobe audits work: the BSA sends letters to small businesses, while big companies face teams from KPMG or Deloitte. Auditors count installed software against your licenses and check for cracked copies. Settlements can hit statutory damages of up to $150,000 per work, but you can negotiate, exclude previously audited software, and hire defense experts to limit what they see.
Questions this video answers
June 23, 2022.
BSA (Business Software Alliance) and SIIA (Software & Information Industry Association).
KPMG, Deloitte, or PwC.
$200 to $30,000 per infringement, with a maximum cap of $150,000 per software title for willful copyright violation.
Chapters
Adobe producer of the Creative Cloud, maker of Photoshop, Illustrator, After Effects, the Experience Cloud and don't forget the notorious Adobe Acrobat. Being such a popular and flashy software choice can cause companies to fall head over heels and implement these software solutions quickly without fully reading into the T's and C's of their licensing agreement. In every one of Adobe's end user licensing agreements eulas, there is an audit provision that allows them to check in to see if you're legally licensed to use their software and that no copyright infringement is happening. Now, if you're an individual user using a pirated version of Photoshop, which we don't condone, you don't have to worry at least as much. However, if you're a small to medium sized business or larger enterprise organization with hundreds of users, have Adobe products running on thousands of work related devices and you make the odd merger or acquisition, you must perform some cleanup to protect yourself from an expensive Adobe audit and even avoid the worst case scenari of being roped into a copyright dispute. Luckily, in this video we will talk about how Adobe audits are conducted, what are they looking for, how Adobe values your audit settlement, and how to defend against an Adobe audit altogether. Adobe audits are complicated enough. Don't let the Adobe product line give you more confusion than it has to. Click the link in the description below to download our Adobe Product Map and Licensing guide. Now let's get back to the show. We know that Adobe reserves the right to audit its customers due to this licensing provision here, but did you know how it actually happens? What steps and processes Adobe takes to initiate the audit in the first place? Let's take a look. There are two ways in which Adobe kicks off an audit of a company, and this is dependent largely on the size of the business they're targeting. For example, for small to medium sized businesses, they will receive a letter from either the BSA Business Software alliance or the SIIA Software Information Industry association stating that Adobe would like to verify their license compliance. However, if you do get this letter, be alarmed. It's actually an audit letter in disguise. This happens because both the BSA and SIIA have anonymous tip lines that employees, insiders, and generally anyone who has information on software piracy, crack codes being used in a certain environment, or just people using licensing the wrong way can submit that information to them and these entities will request a license verification in this letter on behalf of Adobe stating that audit clause in the agreement which you've signed on to uphold for large to enterprise sized organizations, Adobe's Internal licensing reps will team up with larger third party auditing firms like KPMG, Deloitte or PwC, who will send you a letter stating that they believe you owe them a certain amount of money or simply that they would like to request an audit to verify your Adobe product compliance. Now that you know how it all starts, let's look at what they're actually looking for. The auditors are looking for two things. Firstly, they're checking to see if the number of Adobe products installed on your company's computers matches the amount of licensing you're entitled to on paper or with their records. Secondly, and more lucratively, they will use these audit verification letters as a gateway to check if you are compliant with the Digital Millennial Copyright act, also known as the dmca. That means making sure there are no crack codes being used in your environment. And most of all, no one's using any pirated Adobe software for financial gain either unknowingly or knowingly. Adobe likes to go fishing for DMCA based liabilities in your organization because they carry stricter legal and cost based penalties. Since the DMCA is a robust act that can carry civil and criminal penalties for anyone involved in breaking it, these penalties can implicate business owners, managers and the business entity themselves, which is sometimes used as leverage to get an organization to resolve the settlement on terms favorable to Adobe. DMCA infringements are very lucrative and can result in numerous costs per infringement. While usually settled out of court, sometimes negotiations can break down and you could land your company in actual court defending against Adobe. Let's take a look at how Adobe calculates one of these audit settlements and how DMCA copyright infringements are calculated in the court. You may be wondering for a friend of course, how much you'd be on the hook for if you did have an Adobe copyright infringement in your business. Let's break it down. Firstly, to value your audit settlement, first thing you need to do is check your Adobe audit licensing clause to see what exactly the penalties are that you've agreed upon in case they do find you're out of compliance just by a couple percentages here and there. Oftentimes Adobe will just say you'll have to buy the remaining licenses for you to become compliant at market rate and that's that. However, sometimes negotiations can break down and in case of a non resolution, the publisher could elect the Copyright act which opens you up to paying out damage penalties. Copyright damage penalties can get expensive and include two types of actual damages and statutory damages. Actual damages which are derived from a percentage of the profit made by illegally using your software. This also must be proven in court. For example, if a video editing agency had revenues of $20 million with Cracked Adobe software on their devices, they would have to pay out a percentage of that revenue to Adobe. Depending on the judge's opinion, actual damages are hard to prove in the court, which means that when it comes to an audit settlement, they'll likely go for statutory damages. Statutory damages, if proven can charge, can range from a charge from $200 to up to 30,000 per infringement with a max cap of $150,000 per software title if it was proved to be willful copyright abuse, however, that range from 200 to $150,000 per infringement is set by the judge and based on a numerous amount of things such as the seriousness of the case, the judge, the net worth of the client and or business. If the copyright infringement was innocent, unintentional, intentional, had malicious intent, and if the defendant can show if it's innocent if it was willful infringement, if the people had knowledge of the infringement, or reckless disregard of the infringement if it was directly targeted at Adobe and cost them a lot of missed money in licensing revenue, meaning the organization either ignored it happening or had even helped it occur in their environment, the judge could go as low as $250 per infringement with no knowledge and no will to infringe and also up to 150,000 on the high end with with willful and malicious intent to infringe. Of course, software publishers like Adobe will always take the worst case scenario and calculate that in to their accusation of how much they think you owe them for your copyright infringement. So you may get a seemingly scary looking claim from Adobe. But don't worry as most cases don't result in litigation, but usually settle to pay the full retail price for the missing software. So there's a lot on the line. And this brings us back to why it's important to keep a cordial and professional relationship with your software vendors so that you can solve this legal matter with the least amount of friction possible. So now that you know the dangers involved in an Adobe software audit, whether you're a small to medium sized business or a ginormous enterprise sized organization, it's time to look at how you can defend yourself from one of these if it happens to you. So let's look at how to defend against an Adobe audit together. Step number one Narrow the Audit Scope it's essential to narrow your audit scope from the outset of receiving your audit notice. This includes reducing the number of software titles in under investigation, which departments in your business they are allowed to look into, what data and tools they're allowed to use in your environment, and even increasing the time required for you to hand over the data. Audits are costly for both the auditor and the auditee, so you can ask for things like extended periods of time to hand over the data, the period of time in which the audit occurs, for example moving it away from holidays or Christmas season, and also removing the use of the auditor's tools in your environment to make sure that your data stays secure. Secondly is to remove any software that has been audited before out of the scope of the current audit you're going through now. It's no secret that companies have been audited in the past and went through the whole procedure that become audit targets soon after, once again making sure that as soon as you finish an audit, the terms are clear enough to make sure your previously audited software is completely off limits for the next audit. Thirdly, using confidentiality agreements with your employees. A confidentiality agreement will protect the business from employees leaking information on the state of your Adobe infrastructure. Information such as where it's installed, how employees are using licenses and purchasing habits, which could all be interpreted wrongly by auditors, would benefit from being protected under a confidentiality or NDA. 4. Getting expert help or an outside consultation or expert opinion if you'd like to experience the feeling of professionally, elegantly and figuratively beating up your software vendors, we suggest you look into hiring outside help to help assist with your internal team dealing with this audit matter. This can come in a range of things. For example, you could hire on some software audit defense experts who will help dig into your data and show you your entitlements and where you can push back on the auditor findings, or negotiation experts who will negotiate with your vendors on your behalf, or a managed service offering that can help with everything. If you'd like to talk to one of our Adobe experts, feel free to click the link in the description below and they will reach out to you in 24 hours to help you sail through your Adobe audit with ease. As always, friends, don't download any cracked Adobe Acrobat onto your work servers. Make sure to get your Adobe software from safe sources and always keep your software assets managed. I'm Jordan and thanks for watching in this video. I'll see you in the next one. Sam.
