- → Broadcom (VMware) is suing Siemens for Copyright Infringement, NOT breach of contract
- → This bypasses ALL contractual liability caps—exposing companies to unlimited damages
- → Vendors can now demand disgorgement of profits made while using their software
- → Cases are forced into US Federal Court regardless of where you're headquartered
- → Expect Oracle, IBM, SAP, and others to follow this playbook
1 The Rules Have Changed
If you're a CIO, CFO, or IT Director, you need to understand something immediately: the era of the "friendly" software audit is over.
Broadcom's lawsuit against Siemens isn't just another licensing dispute—it's a strategic shift in how enterprise software vendors will pursue non-compliance going forward. And it sets a precedent that every major vendor is watching.
The critical change? Broadcom chose to sue for Copyright Infringement under US federal law rather than pursuing a standard "Breach of Contract" claim. This isn't a minor legal technicality. This is a fundamental change in the rules of engagement that removes virtually all of your negotiating leverage and legal protections.
"This case is the canary in the coal mine. Every enterprise software vendor's legal team is studying this approach. If Broadcom succeeds, expect Oracle, IBM, SAP, and Microsoft to adopt similar strategies for high-value non-compliance cases."
— Industry Legal Analyst
2 Why Copyright Law Changes Everything
To understand why this shift is so dangerous, you need to understand the difference between contract law and copyright law in vendor disputes:
Contract Law (Traditional Approach)
When vendors pursue breach of contract claims, your exposure is typically limited by the terms negotiated in your Enterprise License Agreement (ELA). Most contracts include:
- Liability caps (often 1x or 2x annual license fees)
- Dispute resolution clauses specifying arbitration or local courts
- Cure periods allowing you to remedy non-compliance before penalties
- Limitation of remedies restricting what damages can be sought
Copyright Law (The New Playbook)
By framing the dispute as copyright infringement—a federal tort—Broadcom bypasses ALL of these protections:
Standard contract caps (1x or 2x fees) do not apply to copyright torts. Your exposure becomes effectively unlimited.
Vendors can demand a share of the profits your company made while using the software non-compliantly. For large enterprises, this could be billions.
Cases are forced into US Federal Courts—with their broad discovery rules and potential for massive damages—regardless of where you're headquartered.
Copyright law allows for statutory damages of $150,000+ per willful infringement—and each software installation could count as a separate violation.
The Siemens case demonstrates this perfectly. Siemens is a German company, yet they now face litigation in US Federal Court under US Copyright law. The contractual protections they negotiated? Irrelevant.
3 What This Means For Your Organization
If your organization has any uncertainty about its VMware licensing position—or frankly, any enterprise software licensing position—you need to treat this as an immediate risk:
You Are At Risk If:
- ✗ You've received an audit letter from any major software vendor
- ✗ You're in active license negotiations or ELA renewal discussions
- ✗ You've deployed software beyond contracted entitlements (even unknowingly)
- ✗ You've virtualized environments in ways that may exceed license grants
- ✗ You've migrated workloads to cloud without verifying license portability
- ✗ You have subsidiaries or acquired companies with unclear license positions
The traditional mindset—"we'll negotiate down any audit finding"—no longer applies. If a vendor chooses to pursue copyright claims, your negotiating leverage evaporates and your financial exposure becomes catastrophic.
4 Immediate Actions Required
Based on our analysis of this legal shift, we recommend every enterprise take the following steps immediately:
1. Conduct an Internal Risk Assessment
Before any vendor contact, understand your actual deployment versus entitlements. This is not optional. You cannot defend a position you don't understand.
2. Engage Legal Counsel BEFORE Responding to Any Audit
CRITICAL: Handling a software audit without qualified legal counsel is now financial malpractice. This is not about being adversarial—it's about protecting your organization from existential risk.
3. US IP Counsel is Now Mandatory
Because this involves US Copyright Law and US Federal Courts, your local general counsel or even your regional law firm may not be sufficient. You need attorneys who specialize in:
- US Intellectual Property litigation
- Software licensing disputes
- Copyright infringement defense
- Enterprise technology contract negotiations
4. Review All Pending Renewals and Negotiations
Any renewal or negotiation currently in progress should be reviewed through this new legal lens. Contract language that seemed adequate six months ago may leave you completely exposed now.
5 How Costif.AI Can Help
At Costif.AI, we help organizations understand and minimize their software licensing risk exposure. In this new legal environment, our services are more critical than ever:
We provide detailed analysis of your actual deployments versus entitlements, identifying risk areas before vendors do.
We ensure you enter negotiations with complete visibility into your position and leverage points.
We help you develop a defensible position and coordinate with legal counsel on optimal response strategies.
We identify opportunities to reduce exposure through license optimization, harvesting, and deployment restructuring.
6 Our Recommendation: Qualified Legal Counsel
We want to be explicit about something: Costif.AI is not a law firm, and we do not provide legal advice.
However, given the stakes involved, we can recommend top-tier specialist attorneys who have the specific expertise needed for these situations. These are firms with proven track records in:
- Enterprise software licensing disputes
- US Copyright litigation defense
- Vendor audit negotiations
- Technology IP strategy
Important: Costif.AI takes NO referral fees for legal counsel recommendations. Our only interest is ensuring our clients are properly protected. This is about your organization's survival, not our revenue.
Don't Wait Until You're in Court
The time to assess your risk is now—before you receive that audit letter. Contact Costif.AI for a confidential discussion of your licensing position and exposure.
Disclaimer
Costif.AI is an IT cost optimization and asset management consultancy, not a law firm. The information provided in this article is for educational and strategic planning purposes only and does not constitute legal advice. Every audit situation is unique. We strongly recommend engaging qualified intellectual property counsel to review your specific circumstances before responding to any vendor audit claims.