LETTER TO LEGAL COUNSEL

Dear Attorney,

I am writing on behalf of a certain Philippine-based entity to seek your professional guidance regarding a pressing concern involving alleged unauthorized use of licensed engineering software. Sometime in 2021, our organization purchased a single-user subscription to specialized structural analysis software for a particular client project. After project completion, the subscription was not renewed because our subsequent engagements did not require further use of the program.

Recently, we received multiple emails and formal demand letters from a law firm claiming that our company has been using “illegal/pirated/unauthorized” versions of the software. They have cited logs purportedly gathered from our server, referencing dates from the same period in 2021. This raises concerns about whether they obtained our IP address or internal usage data without our knowledge or consent. Notably, our team recalls that we were offered a limited free trial during our initial purchase—an arrangement intended to familiarize our engineers with the software’s features.

We are now faced with a substantial monetary demand on the basis of these alleged infringements. We wish to clarify our rights and responsibilities, both under our prior license agreement and under relevant Philippine laws protecting intellectual property. Our main objective is to resolve this matter in a fair manner and to avoid baseless or excessive claims. With that in mind, we respectfully request your legal opinion and advice on the following:

Validity of Alleged Claims: Whether the cited usage logs from 2021 constitute sufficient evidence of unauthorized or unlawful software usage, particularly given the free trial arrangement at that time.
Data Privacy and Evidence Gathering: Whether there are potential violations of Philippine law in the way the law firm allegedly acquired or processed our company’s server logs and IP address.
Applicable IP Laws and Remedies: What provisions of Philippine law, including the Intellectual Property Code, would govern any alleged infringement, and what remedies or defenses might be available.
Recommended Course of Action: Steps to take in responding to these demand letters, negotiating with the claimant, and either refuting or settling their claims.
Risk Mitigation: Strategies to mitigate the risk of similar allegations, including best practices for license compliance and recordkeeping.

We appreciate any guidance you can provide, including whether we should prepare formal responses, gather additional evidence, or engage in settlement discussions. Your insights on how to proceed under Philippine law would be invaluable. Thank you for your attention to this matter, and we look forward to your prompt advice.

Respectfully,

A Concerned Corporate Representative
On Behalf of a Philippine-Based Entity

LEGAL ARTICLE: INTELLECTUAL PROPERTY AND SOFTWARE LICENSING ISSUES UNDER PHILIPPINE LAW

I. Introduction
Software licensing disputes and demand letters alleging unauthorized use of intellectual property are not uncommon in the Philippines. Such disputes typically involve questions about whether a particular organization has validly acquired, installed, or continuously used licensed software. In instances where the licensor or its authorized representatives discover or suspect that an entity’s usage exceeded or violated license terms, they may issue cease-and-desist orders or monetary claims. This article provides a meticulous examination of Philippine legal frameworks governing software infringement claims, data privacy implications, and practical strategies to respond to demand letters.

II. Overview of Intellectual Property Protection in the Philippines

Primary Legislation
- Republic Act (R.A.) No. 8293, known as the Intellectual Property Code of the Philippines (“IP Code”), provides the main statutory backbone for protecting copyright, trademarks, patents, and other forms of intellectual property.
- The IP Code recognizes software as a work protected under copyright law, offering exclusive rights to software owners for reproduction, distribution, rental, and other commercial uses.
Scope of Copyright in Software
- Software programs, including structural analysis or engineering software, are typically considered literary works for the purpose of copyright protection.
- Copyright owners can pursue legal remedies if they discover unauthorized copying, distribution, or usage of their software.
Relevant Penalties and Remedies
- Civil remedies under the IP Code may include injunctions, damages (actual or statutory), and the impoundment or destruction of infringing articles.
- Criminal liability may also attach in cases of willful infringement. Punitive measures may include fines or imprisonment, depending on the severity and scale of the infringement.

III. Software Licensing and Compliance

Nature of Software Licenses
- A software license is a contractual right granted by the owner of the software to the user, specifying how, when, and for how long the software can be used.
- In many cases, users purchase subscriptions or perpetual licenses subject to specific terms. A subscription license usually grants time-limited usage rights, while a perpetual license requires one-time purchase fees with optional renewal or maintenance fees.
Free Trial Periods and Renewal Options
- Some software providers allow free trial periods to help potential users evaluate the product. However, once the trial period or subscription term ends, the license to use the software likewise terminates unless renewed or extended.
- If an organization continues to utilize the software beyond these agreed-upon terms, that usage may be deemed unauthorized.
Recordkeeping and Proof of Compliance
- It is vital for any company to maintain accurate records of software purchases, license keys, and subscription terms.
- Logs or usage reports may be crucial in validating whether software was used within the bounds of a valid license or if usage extended beyond licensed parameters.

IV. Unauthorized Use of Software: Core Considerations

Defining Unauthorized Use
- Unauthorized use entails downloading, installing, or running software without a valid license or after the license has expired. This includes copying software for additional users or multiple workstations beyond what the license permits.
- Because software is intangible, unauthorized use can occur even when no physical copies are produced; it suffices that the software is installed or run.
Potential Liability for Organizations
- Employers may be held directly liable for employees’ unlicensed software usage if it can be shown that the organization, as a whole, condoned or facilitated such use.
- Corporate officials or directors may also face personal liability if the infringement was committed under their direct control or supervision.

V. Demand Letters Alleging Software Infringement

Nature and Purpose
- Demand letters from the software owner or authorized law firms usually list the alleged acts of infringement and demand monetary compensation or cessation of use.
- They frequently threaten legal action if the targeted organization does not comply with the claims, potentially putting pressure on businesses to settle quickly.
Evaluating Evidence
- The claimants may present server logs, IP addresses, or internal usage data to substantiate alleged overuse or unlicensed installations.
- Questions may arise regarding how the logs were obtained and whether the acquisition or processing of such data complied with privacy laws and the Data Privacy Act of 2012 (R.A. No. 10173).
Common Defenses
- Expired Claim or Lack of Evidence: If the demand relies on outdated data or logs that do not clearly prove continued unlicensed usage.
- Trial Period or Permissible Use: Demonstrating that usage occurred during a valid free trial or within a legitimate subscription term.
- Data Privacy and Evidence Collection Violations: Challenging the admissibility of evidence if it was improperly obtained or processed without consent.

VI. The Data Privacy Act and Evidence Gathering Concerns

Overview of R.A. No. 10173
- The Data Privacy Act of 2012 sets standards for collecting, processing, and storing personal and sensitive information. It applies to both public and private entities in the Philippines.
- While IP addresses and server logs may be considered non-sensitive personal information, any form of unauthorized access or transfer of such data may give rise to privacy violations.
Relevance to Software Infringement Cases
- Law firms or software owners should, in principle, follow lawful processes to obtain logs. If an entity believes its data was unlawfully acquired or processed, it may raise potential violations of the Data Privacy Act or question the manner in which evidence was gathered.
- However, if the data came from the organization’s own systems, claimants might argue that they secured the logs through legitimate means, such as cooperation from third-party service providers or by analyzing known open-source IP data.
Consent and Reasonable Expectation of Privacy
- If the organization or user had agreed to certain data-collection policies during the software installation or usage, the law firm may argue that the logs were obtained in accordance with those policies.
- A thorough review of end-user license agreements (EULAs) is crucial to assess whether the user had implicitly consented to data collection.

VII. Responding to Demand Letters: Practical Steps

Legal Consultation
- Upon receiving a demand letter, the first step is to consult an attorney experienced in intellectual property and IT law. Legal counsel can evaluate the claim’s basis, available defenses, and potential liabilities.
- Immediate, well-informed responses help avoid escalations or admissions that may later compromise the organization’s position.
Document Review
- Gather all relevant contracts, including the purchase or subscription agreements, invoices, and any trial period offers.
- Compile usage logs from internal IT systems to verify whether actual usage extended beyond the authorized periods.
Formal Response
- Draft a carefully worded letter addressing each of the points raised by the claimant, disputing any inflated or baseless accusations.
- If there is evidence supporting authorized usage or compliance (e.g., usage limited to a free trial period), present these details firmly but politely.
Negotiation and Settlement
- If the facts show some unintentional overuse, the best approach might be an amicable settlement, potentially including the purchase of additional licenses.
- Where the claims are groundless, assert a robust defense to deter further unfounded demands.
Potential Litigation
- Although most software infringement disputes in the Philippines are resolved via settlements, litigation remains a possibility.
- The claimant may file a complaint with the proper courts or before the Bureau of Legal Affairs at the Intellectual Property Office of the Philippines. Careful preparation of evidence and robust legal strategy become essential in such scenarios.

VIII. Mitigating Future Risks

Strengthening Software Asset Management
- Implementing strong internal policies to track software licenses and usage helps ensure compliance.
- Conduct periodic audits to verify that only licensed software is installed on company devices.
Comprehensive IT Policies
- Draft and enforce clear IT usage policies for employees, specifying the procedures for acquiring and renewing software licenses.
- Provide regular trainings to reduce the risk of unintended or unauthorized installations, which could expose the organization to liability.
Maintaining Transparent Records
- Keep detailed purchase and renewal records for software. These records are essential in disputing potential allegations of unauthorized usage.
- Where logs are maintained, ensure they reflect the legitimate duration of any trial or subscription period.

IX. Conclusion
Dealing with software infringement claims in the Philippines requires a careful blend of legal awareness, factual clarity, and proactive risk management. The Intellectual Property Code offers potent enforcement tools for software owners, but it also provides structured avenues for defense and dispute resolution. Organizations served with demand letters alleging unauthorized use must promptly consult legal counsel, gather all relevant documentation, and develop a coherent strategy to address or refute the claims. Equally important is to remain vigilant about data privacy concerns, as improper evidence collection or IP tracing can raise questions about the legality of the claimant’s methods.

Looking ahead, building robust internal controls—ranging from dedicated license management to clear IT protocols—can significantly reduce the risk of inadvertent software infringements and attendant legal complications. Ultimately, combining diligent internal oversight with prompt, methodical legal responses is the most reliable way to navigate allegations of unauthorized software use in the Philippines.

Disclaimer: The information provided herein is for general guidance only and does not constitute formal legal advice. Parties facing software infringement claims should consult legal counsel to obtain advice specific to their unique circumstances.