Thryv, Inc. Hits Micro Focus With Texas DJ and Breach of Contract Action over ULA Type Certification
By Pam Fulmer
Those readers who follow the software industry and our blog know that Micro Focus has areputation for its brass knuckles audit tactics deployed against its customers to increase revenues. On a new twist to the Micro Focus audit playbook, Plaintiff Thryv, Inc. ("Thryv") alleges in a new suit that Micro Focus has breached the parties' license agreement and seeks a declaration from the Texas court that it owns certain perpetual licenses arising out of an unlimited license agreement certification process. According to the Complaint Thryv seeks a declaratory judgement "finding that Micro Focus has conveyed perpetual licenses to Thryv under the Agreement consistent with the certification it provided in July 2016, and that Thryv has no further payment obligations under the Agreement." Oracle customers certifying off Unlimited License Agreements ("ULA") may also find this case instructive.
Thryv is a "print and digital marketing company that delivers cloud-based business
software on a subscription basis as well as a host of marketing products to over 400,000 small businesses in the United States." Thryv contends that in late 2014 it "requested a proposal from Micro Focus to supply software for a specific project known as kGen/Monarch." Not knowing the exact configurations for the system, Micro Focus "proposed a "Volume License Addendum (“VLA”), whereby Thryv would be licensed to deploy and use an unlimited amount of specific types of Micro Focus software for a specified period of time." The parties agreed that at the end of the time frame "Thryv was to certify the deployment of the software and Micro Focus would then grant a perpetual license for the actual quantities of software deployed at that time (the “Certification Date”)."
Thryv contends that as the Certification Date approached, and as the contract was vague as to what information would be required, it requested a certification template from Micro Focus. After some delays Micro Focus provided such a template. Thryv claims that "the template was vague and requested information that was not required by the Agreement," and that "Micro Focus did not provide any other information to Thryv on how to complete the certification." The request for information not required by the Agreement is something we see frequently in Oracle ULA certifications. According to the Complaint, "Thryv timely and accurately listed all user counts and core counts that were deployed as of the Certification Date and provided the required certification under the Agreement to Micro Focus. Micro Focus acknowledged receipt of the certification document and indicated in writing that it would contact Thryv when the certification had been reviewed, if it had any questions. Micro Focus did not verify the certification as required by the Agreement. In fact, Micro Focus never contacted Thryv regarding the certification." Thryv alleges that under the Agreement the number of core and user counts specified by Thryv "as of the Certification Date became the maximum entitlement under the perpetual license going forward." Again this is very similar to an Oracle ULA certification.
Thryv contends that in November of 2018, over two years after it completed the certification form, Micro Focus commenced an audit. The Complaint alleges that only In mid-2020, nearly eighteen months after the audit began, "Micro Focus for the first time provided documentation indicating that it had not granted license entitlements for all items listed in the certification." Now Micro Focus claims that it disagrees with Thryv's interpretation of the certification requirements under the contract with Thryv's claimed license entitlement, and that Thryv owes it millions of dollars in licensing fees and back support. Specifically Thryv seeks a "declaratory judgment finding that Micro Focus has conveyed perpetual licenses to Thryv under the Agreement consistent with the certification Thryv provided in July 2016, and that Thryv has no further payment obligations under the Agreement." Thryv also seeks damages of between $200,000 to $1 million, dollars and the recovery of its attorneys' fees pursuant to the license agreement and Texas law.
Certainly a bad fact for Micro Focus is that it never responded to the Certification and apparently gave no indication to Thryv that it did not agree with the user and core count that Thryv had provided, and did not follow-up with any questions concerning the certification. Thryv will no doubt argue that Micro Focus is estopped from changing position now and that it has an express or at least an implied license to use the software given the conduct of Micro Focus.
This is a cautionary tale that American businesses using enterprise software should take note of. Customers certifying off unlimited license agreements involving Oracle, Micro Focus or other software vendors should consider retaining experienced legal counsel to advise them on what the contract requires, and potential risks and how to mitigate those risks involved in the certification process.
Tactical Law will be monitoring the case for further developments. Check our blog for periodic updates about the case. The case is Thryv, Inc. Vs. Micro Focus (Us), Inc., TX District & County - Tarrant District (141st District Court), Case No. 141-319074.
By Tactical Law Attorneys and From Time to Time Their Guests