Software and SaaS Distributor and Reseller Law

Short answer: Yes. The US Supreme Court’s 2007 Leegin decision overturned 96 years of law, so software and SaaS vendors can now influence the resale prices their distributors and resellers charge in certain situations.

Did You Know the US Supreme Court Changed Software and SaaS Distributor and Reseller Law in 2007?

I bet you missed it, but I always look for the software law perspective of these cases (how does this apply to software/SaaS reseller agreement, software/SaaS distribution agreements, and software/SaaS OEM agreements). The law used to be that when someone resells your product you could not tell them they could not resell it below a certain floor price. You could suggest they hold to a price but you could not mandate the floor. In legal jargon, this is called Resale Price Maintenance. To cut a long story short, 96 years of law was changed by the US Supreme Court in the 2007 Leegin decision.

Manufacturers Can Now Influence Resale Prices.

Essentially, manufacturers can now influence resale prices in certain situations. The legal standard changed to “Rule of Reason” from “Per Se Rule.” It depends on the facts and circumstances, effect on competition, competition within the channel, etc.

What This Means for Software Vendors.

Bringing this down to the software world: I have often heard about software resellers free-loading and not providing the value-added services they are supposed to provide. Then at the last minute one of these resellers underbids a project that one of your other resellers has been working on for months. Prior to this decision, there was not much a software vendor could do. As a general matter, if you are selling software that requires significant services or well-trained value-add resellers, then under the change in the law you could mandate that the free-riding resellers cannot bid below a certain price.

Talk to an Antitrust Attorney First.

This area of the law is pretty tricky, so I would not institute any kind of pricing plan without talking to an attorney who specializes in antitrust matters first. I hope this helps.

A few related reads from the litigation cluster. Oracle v. Google: What Software Vendors Learned About API Copyright covers the appellate API-copyright decision. Combination Exception to Infringement Indemnities walks through AFLAC v. Intervoice on indemnity scope. 3 Things to Know About Exclusive Software Licensing covers HyperQuest v. N’Site Solutions. Can an IM Conversation Change a Written Contract? covers a case that said yes. 3 Things Software Companies Should Learn from 358 Trade Secret Cases is the statistical analysis. What You Should Not Do to Your Competitor (Oracle v. SAP) covers the $1.3B SAP/TomorrowNow judgment. Departing Employees GONE WILD (Starwood v. Hilton) covers trade-secret enforcement when employees move. And What Can You Learn from the Justice Department Suing Oracle? covers government-contract pricing disputes.

Resources:

Oracle v. Google: What Software Vendors Learned About API Copyright

3 Things to Know About Exclusive Software Licensing

Disclaimer:

This post is for informational and educational purposes only, and is not legal advice. You should hire an attorney if you need legal advice, which should be provided only after review of all relevant facts and applicable law.