Software Licensing

1
Software Licensing

• Issues and Outcomes

Mark Pollard
2
Objectives

• To answer the questions raised at the
  Inter-Agency Task Force meeting in Bangkok in
  March 2009
• Is the collection of licenses for the use of
  software goods and software services in a joint
  enterprise survey, a pragmatic approach.
• The feasibility of using pricing to differentiate
  between goods and service license transactions.
• To assess the current understanding among member
  countries and the quality of what falls within
  the data reported in goods and services in the
  area of software and intellectual property.

3
A Joint Enterprise Survey?

• Is the collection of licenses for the use of
  software goods and software services in a joint
  enterprise survey, a pragmatic approach.
• Users describe the collection of this data in a
  single enterprise questionnaire as essential.
• Few would argue that it is not the ideal.
• One questionnaire would reduce the chance of
  double counting.
• One questionnaire would also help consistency and
  give a higher level of confidence when making
  comparisons between goods and services data.
• Logically software and the licensing of the
  software, whether bought as a package or
  separately should be treated in the same way - as
  a cost of using the service but not always the
  case.

4
Issues

• The method of delivery results in allocation to
  either the goods or services account.
• The collection for goods data is through
  cross-border documentation and survey
  questionnaires, administered by customs
  authorities.
• For trade in services, collection is through
  business surveys, administered by NSOs,
  supplemented with the bank settlement system in
  some countries.
• No single national collection agency has overall
  responsibility.
• Different primary purposes for the data
  collection makes their combination rather
  artificial.
• Combination of tax data from potentially
  different collection agencies.
• Significant changes would be required to
  introduce a single questionnaire, irrespective of
  who took responsibility.
• Additional processes would be needed for the
  responsible national agency, including the
  transfer and merger data from a third source
  (extrastat)!

5
The Use of Pricing

• The value of software and its license cannot be
  identified when sold as part of a hardware
  package. For the purpose of coverage this isnt a
  concern as the value of the traded good is
  captured by the goods collections.
• The value of bundled software packages (software
  license) cannot be provided independently.
• The value of non-perpetual licenses could be used
  as a proxy for the license element in the bundled
  package(s), but
• Non-perpetual licenses are not collected under
  BPM5. BPM6 differentiates, but.
• Most software sold in large volume, is sold with
  a perpetual license.
• Most non-perpetual licences are sold for the use
  of more specialist software and intrinsically
  have a higher value.
• However, the BPM definition negates the need as
  it provides a clear distinction about what
  software should be treated as a service and what
  should be treated as a good.

6
Quality of Current Collection

• I contacted a large number of statistical
  agencies.
• How do you define software and software licenses
  and how do contributors respond?.
• Any evidence of mis-reporting of intellectual
  property e.g. reporting services in a 'not
  elsewhere classified category?
• Any other issues with the collection of the these
  data?
• I received responses from ten Member Countries
  Ireland, Spain, Denmark, Switzerland, Finland,
  Canada, Austria, Czech Republic, Germany and UK.
• Little difficulty with interpretation.
  Definitions used were consistent and there was no
  awareness of any serial mis-reporting or other
  quality issues.
• There is clarity about the definitions provided
  by MSITS, which countries can and do apply
  sensibly.
• While a number of distinctions are made in the
  guidance, the idea of mass-produced versus
  customised makes the line of demarcation quite
  clear.
• This pragmatic approach manages the burden,
  minimises the risk of double counting, helps
  consistency and provides confidence when making
  comparisons between goods and services data.

7
Quality of Current Collection

• A further simplification to improve quality would
  be to treat all software and software licensing
  as a service (excluding hardware bundles). This
  was also a finding of the worldwide consultation
  on the IMTS.
• The impact that this would have on tax revenues
  may make this change unwelcome. Although this
  change may occur naturally as electronic delivery
  becomes more frequently the preferred mode of
  software delivery.
• The simplicity of the existing treatment i.e.
  mass-produced versus customised, is a strength.
• Clarification between BPM5 and BPM6 could
  introduce discontinuity over time and between
  national interpretation. BPM6 clarifies that
  non-customised software without a perpetual
  license is a service.

8
Conclusions

• While software and licensing continue to be
  treated as both a service and a good, a single
  enterprise collection is not feasible.
• The pragmatic definition and sensible
  interpretation and treatment of intellectual
  property, software and licensing appears
  consistent, resulting in good quality data.
• There is a risk that the BPM6 clarification on
  the treatment of non-perpetual licenses could
  introduce inconsistency. A decision should be
  made about the interpretation of BPM6.
• The treatment of all software and licenses
  (except hardware bundled) as an access to a
  service, and accepting their combined value in a
  single services category, would improve quality!
  The implications, however, mean that this is not
  feasible.

9
Questions

• and.
• Thank you for your attention
• mark.pollard_at_oecd.org