A U.S.-based software vendor, which provides financial analytics tools licensed its proprietary API to a local fintech startup. The API enabled the fintech company to integrate real-time financial data into its app for end users. A dispute arose when the software vendor alleged that (a) the local fintech start-up had exceeded the agreed-upon usage limits in the licensing agreement and; (b) the local fintech start-up was sharing data with unauthorized third parties. The fintech company countered by claiming that the agreement terms were unclear and that the vendor had unfairly terminated access, causing operational disruptions and customer complaints.
Approach & Outcome
In resolving the API licensing dispute, we (a) conducted a comprehensive review of the API licensing agreement to identify the relevant clauses on usage limits, fees, and data-sharing restrictions (b) advised on the need to engage forensic IT experts to analyze API logs to establish the claims of the software vendor, on a cost-shifting cost basis (c) Based on the outcome of the forensic audit, we engaged in mediation with the counterparty and presented objective evidence of unauthorised data sharing activities and excess usage. On the foregoing basis, the parties agreed to clarify the licensing agreement with regards to usage gaps, data sharing permissions and specific monetary penalties for breaches. The parties also agreed on updated terms reflecting a transparent and time-bound escalation mechanism before access termination.
Key Takeaways
The key takeaways for us on this instruction are that:
1. Clear Contracts Are Crucial
Ambiguities in licensing agreements can lead to costly disputes. It is essential to define usage terms, pricing, and penalties in detail and in such a way to recognise the jurisdictional and legal peculiarities of a customer in another jurisdiction.
2. Forensic Evidence Strengthens Cases
Leveraging IT forensics to verify breaches can be decisive in resolving technology disputes.
3. Strategic Mediation Prevents Avoidable EscalationEarly-stage negotiations and settlements can save time, costs, and reputational damage for all parties involved.
4. Legal Review and Negotiation of API Agreements are Crucial
API Agreements are often critical to the success and competitiveness of start-ups. It’s often important to engage experienced legal counsel to review and provide strategic legal advice, as necessary. In this case, the local fintech start-up simply signed on to the standard license agreement provided by the software vendor.
This publication is not intended to provide legal advice and is not prepared with a specific client in mind. Kindly seek professional advice specific to your situation. You may also reach out to your usual Balogun Harold contact or contact us via support@balogunharold.com for support.