Software Licensing

1. Software Licensing Issues and Outcomes Mark Pollard WPTGS 16th – 18th November 2009, Paris

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. WPTGS 16th – 18th November 2009, Paris

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. WPTGS 16th – 18th November 2009, Paris

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)! WPTGS 16th – 18th November 2009, Paris

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 isn’t 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. WPTGS 16th – 18th November 2009, Paris

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. WPTGS 16th – 18th November 2009, Paris

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. WPTGS 16th – 18th November 2009, Paris

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. WPTGS 16th – 18th November 2009, Paris

9. Questions and…. Thank you for your attention mark.pollard@oecd.org WPTGS 16th – 18th November 2009, Paris