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How often do big companies violate End-User License Agreements?

We are about to sell our software product to a big company. For technical reasons, the product will have to be copied in its entirety to the client's computers, including at least some of the source code in plain text. Of course, the client will have to sign an agreement that prevents him from sharing, re-selling, reverse-engineering, or otherwise abusing the product.
I'm pretty sure a big company wouldn't bother taking a risk and "stealing" our product, because they'll have to update and maintain the product themselves (which is more costly than paying for it), and if they try selling it, they'd get a lawsuit and reputation damage (for starters). But our CEO is afraid that wouldn't stop them, so he wants some kind of "bulletproof" technological protection for the product, which I think is impossible under the circumstances.

My question is - has anyone encountered or heard of a case where a big company buys a startup's product and then steals it or otherwise violates the EULA?

P.S. While we're at it, can you think of another way of protecting the product from being abused like that (unfortunately, web-based application is out of the question for security reasons)?

2 Replies

Rob Gropper
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Rob Gropper Entrepreneur
Director at PetHero, SPC - Member at Eastside Incubator - Principal at Tuxedo Technologies Group
Dimitry; in my experience big companies are less likely than small companies or individuals to steal you code or violate a EULA. Just to clarify, you say "we are about to SELL our software product....". Are you selling or licensing? Big companies tend to have systems and structures in place to prevent theft or abuse as the risks to them are significant (law suits). On the other hand i have known large software companies who are users/licensors who have reverse engineered applications and developed their own application for both internal use and licensing. If this customer is a software company your relationship with them will be complicated. Suing one's customers is always a sticky proposition, but something you should account for in your license agreements. Some licensing provisions (contract provisions) to consider (among many) are: 1) the right to conduct occasional audits and 2) a provision for an injunction and damages for violation of the license agreement. Instrumenting the application to facilitate audits might be more work than it is worth at this point, but something to consider.
Michael Barnathan
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Michael Barnathan Entrepreneur • Advisor
Co-Founder of The Mountaintop Program, Google Alum
Large companies will often engineer products that do the same things as
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