SAP settles licensing dispute with AB InBev

SAP settles licensing dispute with AB InBev

SAP wanted US$600 million in damages; both companies are keeping quiet about how much AB InBev paid.

Credit: Peter Sayer

SAP has quietly settled its US$600 million software licensing dispute with Anheuser-Busch, the U.S. subsidiary of beverage conglomerate AB InBev.

“The parties settled the dispute on 30 June 2017 and the matter is now closed,” AB InBev said in its 2017 Annual Report, published Tuesday.

The company said SAP had accused it of breaching a September 2010 software license agreement by directly and indirectly accessing SAP systems and data without appropriate licenses, and of underpaying license fees due. SAP wanted damages potentially exceeding US$600 million, and had sought reformation of the contract.

Questioned about the settlement, an SAP spokesman added just one adjective: “There is nothing more to say than ‘There was a dispute and it was resolved amicably,’” he said via email.

That the companies were able to conclude the dispute so amicably and quietly comes down to the framework SAP used to enforce its licensing agreement: the Commercial Arbitration Rules of the American Arbitration Association.

Commercial arbitration proceedings are usually conducted in private, and unlike in U.S. courts, filings and rulings are not matters of public record.

When a licensing dispute goes to court, it’s generally a lot harder to keep quiet, as another alcoholic beverage maker, Diageo, found when SAP sued it for accessing data stored in its SAP system without the appropriate licenses. In February 2017 a U.K. court ruled that Diageo needed named-user licenses for customers and employees to access the SAP system, even when they did so indirectly through a app. The court didn’t immediately rule on how much Diageo had to pay, but SAP was asking for £54,503,578 (around $76 million).

Because the two parties are keeping quiet, it’s not clear how much, if anything, AB InBev paid to settle its dispute with SAP.

Based on figures in the beverage maker’s annual reports, Robin Fry from licensing specialist Cerno Professional Services calculated that the company spent about $1.03 billion on “improving administrative capabilities and purchase of hardware and software” in 2017, the period when the settlement was concluded, an increase of about $270 million on its spend in the previous year.

That probably didn't all go on paperclips, but the increase in AB InBev's spending is a long way short of the $600 million in damages SAP wanted to settle the dispute.

Fry said major software vendors are increasingly reliant on audits of existing customers with legacy systems to prop up revenue.

“When new technologies such as virtualization and robotics are being used, the vendors can often interpret license terms in a partisan and unfair way, leading the way to massive claims such as this one against AB InBev,” he said.

The outcry from SAP customers in response to the U.K. court’s ruling on indirect access in the Diageo case was so loud that SAP was moved to soften its licensing practices -- slightly.

At its annual user conference, Sapphire, last year it promised to simplify licensing with new pricing for scenarios such as order-to-cash, procure-to-pay, and static read.

On Tuesday, the company reiterated an earlier statement, saying: “Since SAPPHIRE, SAP has been working closely with user groups, customers, industry analysts and other stakeholders to fully understand and address indirect access concerns as well as other forms of digital access such as those related to IOT and intelligent systems. Licensing model changes will focus on outcomes related to the use of our SAP software.  We expect to hear the outcome of this effort in the coming months.

In the meantime, Fry warned, enterprises need to face up to their potential licensing liabilities. “They need to confront these early and remediate ahead of audits to avoid very unwelcome impacts to their financial statements.”

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