Geoscan, Inc. of Texas v. Geotrace Technologies, Inc. is a 2000 decision of the United States Court of Appeals for the Fifth Circuit on a software vendor’s claim that a customer had used its plotting software on more computers and at more locations than it had paid for. The vendor demanded USD 1,140,000, and the court found the licence ambiguous on the central question, so the claim went back for trial, while the vendor’s other claims failed.[1]
Background
Geoscan sold software for plotting seismic data in oil and gas exploration, made up of five components. Geotrace processed seismic data with its own program, ANSER, which embedded Geoscan’s plotting software. In 1991 the parties signed a licence for two of the components, to be used on “designated” CPUs at the facility locations listed in an Exhibit A. Exhibit A was left blank. Geotrace then bought three licences at USD 15,000 each, installed in three offices. After a 1994 proposal it bought further licences, including one for USD 15,000 of related components, and site licences for other components at USD 5,000 each. The proposal described a corporate licence as allowing “unlimited use”.[1]
The dispute
In April 1998 Geoscan sent a demand letter saying the software was installed on 76 unauthorised computers and demanding USD 1,140,000. In July 1998 it sued in Texas state court for breach of contract, copyright infringement and unfair trade practices. The case was removed to federal court, and the district court granted summary judgment to Geotrace on every claim.[1]
Decision or outcome
On 2000-09-14 the Fifth Circuit reversed in part. The 1991 licence limited use to designated CPUs at designated facilities, but because Exhibit A was never completed the court held it was reasonably open to two readings, Geoscan’s (limited to the CPUs in the individual purchases) and Geotrace’s (no limit), and therefore ambiguous; summary judgment on that claim was reversed and remanded for trial. The court affirmed on the other contract claims: the 1991 agreement did not cover three later components, which Geotrace had bought under the 1994 proposal, and giving access to a Nigerian office half-owned and run by Geotrace, a Canadian company testing modifications, and contract programmers did not breach the ban on making the software available to third parties, because the licence permitted use “by and on behalf of” Geotrace. It also affirmed on copyright, holding that Geoscan had not completed registration when it sued because the deposit it submitted was not a complete copy of the original source code.[1]
Significance for software licensing and SAM practice
The decision shows how an incomplete licence schedule and a mix of purchase documents over several years can make it hard for either side to prove how many installations were licensed. It also records one court’s reading of “by and on behalf of” wording, which later decisions distinguished where the licence contained no such wording, as in Compliance Source v. GreenPoint.[1]
Lessons learned
- An uncompleted licence schedule can make the licence ambiguous about machines and sites. The court sent the CPU and location claim to trial because Exhibit A was blank.[1]
- Keep every order, quote and invoice. The court relied on the 1994 proposal and later invoices to decide which components were licensed and in what quantity.[1]
- Check the exact wording on contractors and affiliates. Use “by and on behalf of” the licensee covered a partly owned office and contractors working on the licensee’s own product.[1]
- Treat a vendor’s demand figure as a claim to be checked against your own installation records. The USD 1,140,000 demand rested on an alleged 76 unauthorised computers, and the court ordered trial on only part of the dispute.[1]