Software License Agreement Breach and Company Liability

What is the legal responsibility of companies in case of software license breach? License breaches under the Turkish Copyright Law (FSEK) and the Turkish Code of Obligations (TBK), including triple compensation, damages, penalty risks, employee actions, and the litigation process, are explained in this comprehensive guide.

In the digital economy, software is no longer a mere auxiliary tool; it is the very backbone of commercial activity. A significant portion of processes such as accounting, production planning, architecture, engineering, design, data analysis, customer relations, and human resources are conducted through software. Therefore, a software license agreement breach cannot be viewed solely as a technical incompatibility or a purchasing error. In Turkish law, computer programs are protected as intellectual and artistic works; this protection directly concerns not only the software developer but also the companies using the software. The current consolidated version of the Law on Intellectual and Artistic Works No. 5846 came into effect on December 25, 2021, and explicitly includes computer programs within its scope of protection.

Software license breaches shouldn't be limited to just pirated installations. Extending a single-user license to numerous devices, continuing use after a license has expired, using a trial or educational version for commercial purposes, distributing license keys to affiliates or branches, unauthorized server access, or bypassing security mechanisms can all create the same legal problem. This is because what is protected is not just the software itself, but also the financial rights granted to the copyright holder within the limits of the license. The Ministry of Culture and Tourism also explicitly states that both civil and criminal proceedings can be initiated in cases of copyright infringement, and that actions such as unauthorized reproduction, distribution, public dissemination, and commercial storage can result in sanctions.

What is a software license agreement?

In its most basic sense, a software license agreement is a contract in which the rights holder or authorized licensor grants another party the financial rights to use a computer program within a specific scope, duration, location, user, and usage model. In the Copyright Law, this relationship is regulated as a "license." According to the law, financial rights can be transferred with or without limitations in terms of duration, location, and content; the authority to use financial rights can also be granted to another person. However, the critical point here is that a license is not an inherently unlimited freedom, but rather a defined scope of authority established by contract.

In Turkish law, formal requirements are also important for such contracts. According to Article 52 of the Copyright Law, contracts and transactions concerning financial rights must be in writing, and the rights in question must be clearly indicated. Therefore, vague permissions such as "you can use the program" or abstract arrangements that do not specify which right is being transferred may lead to serious disputes regarding proof and validity in the future. Especially in corporate use, the contract must clearly state headings such as reproduction, distribution, server setup, remote access, number of sub-users, maintenance, updates, and sublicensing rights.

The law also distinguishes between types of licenses. According to Article 56 of the Copyright Law, a license is considered a simple license if it does not prevent the rights holder from granting the same license to others; it is considered a full license if it is exclusively granted to one person. Unless otherwise stipulated by law or contract, every license is considered a simple license. This distinction reveals a significant mistake that companies often make: a license they believe to be exclusive may actually be a simple license if it is not explicitly stated in the contract. Similarly, the transfer of ownership of a copy or carrier of software does not mean the transfer of intellectual property rights; Article 57 of the Copyright Law explicitly regulates this. A company's purchase of a device, media copy, or installation file containing the program does not mean it has acquired broad usage rights in terms of copyright.

Why does a computer program have a special protection area?

Article 1/B of the Turkish Copyright Law defines a computer program as a sequence of commands and preparatory work designed to enable a computer system to perform a specific operation or task. Article 2 of the same law also considers computer programs and, under certain conditions, their preparatory designs as works of science and literature. However, the underlying ideas and principles of the program are not protected as works. In other words, what is legally protected is not the abstract idea, but the form in which that idea is expressed at the code and program level. This distinction determines the limits of defense in cases of licensing agreement breaches: "a program that performs the same function" and "the program itself or its protected form of expression" are not the same thing.

The scope of reproduction rights in computer programs is also broad. According to Article 22 of the Turkish Copyright Law, reproduction rights encompass the installation, viewing, execution, transmission, and storage of the program, to the extent that it necessitates temporary reproduction. Therefore, breach of a software license agreement often goes beyond mere breach of contract; it also constitutes copyright infringement. A company's defense of "we only installed the program" or "we didn't sell it, we only used it" is not always protective, as even the technical use of the software can fall within the scope of reproduction.

Under what circumstances is a license agreement considered breached?

Software license agreement breaches often manifest in three main forms. First, there is a quantitative exceeding of the license scope. Examples include extending a single-user license to a large number of users, spreading a license granted for a specific number of devices across a wider range, or using authorization granted for a single location across different branches. Second, there is a qualitative exceeding of the license scope. This includes using an educational version for commercial production, keeping a test license on a live system, or transferring a desktop usage license to server infrastructure. Third, there is blatant unauthorized use; examples include cracking, keygens, fake license keys, or using tools that bypass security measures. This last group carries a greater risk of penalties in addition to copyright infringement.

Sometimes, breaches also arise from a misreading of the contract text. For example, a company may believe it has acquired the right to use a specific version of software, but in reality, it may only have purchased a subscription for a limited time. Or, new versions may continue to run on the system even after the maintenance and update rights have expired. According to Article 55 of the Turkish Copyright Law, unless otherwise agreed, the transfer or licensing of a financial right does not extend to translations or other adaptations of the work. This shows that a narrow interpretation of the scope of the license is the rule, while a broad interpretation is the exception. For corporate firms, the conclusion is clear: assumptions of broad usage not explicitly stated in the contract carry high risks.

On what legal grounds is the liability of companies based?

Company liability does not arise solely from the Turkish Copyright Law; the Turkish Code of Obligations also comes into play. According to Article 112 of the Turkish Code of Obligations, if a debt is not performed at all or properly, the debtor is obligated to compensate the creditor for the damages unless they prove that no fault can be attributed to them. In the context of software license agreements, this rule applies when the company acts contrary to the license terms and this breach constitutes a failure to properly perform the contractual obligation. Article 113 of the same Code stipulates that in cases of obligations to perform or not to perform, the creditor may request permission for the performance of the obligation by themselves or another party, and that the consequences of the breach be remedied. Therefore, in cases of breach of license agreement, claims are not limited to monetary compensation; the cessation of the inappropriate use and the reinstatement of compliance with the contract may also be requested.

For companies, an even more critical provision is Article 116 of the Turkish Code of Obligations. According to this article, even if the debtor has entrusted the performance of the obligation or the exercise of a right arising from a debt relationship to auxiliary personnel, they are still liable for the damages caused by these auxiliary personnel while carrying out the work. In practice, this means that defenses such as "the IT supplier installed it," "an external support firm installed it," or "the employee did it on their own" are not always sufficient. Even if the action violating the license terms in a contractual relationship is carried out by an auxiliary person, the company may not be able to evade its own contractual responsibility.

The Copyright Law also strengthens corporate liability. According to Article 66 of the law, a person whose moral and financial rights have been infringed can sue the infringer for the cessation of the infringement. The same article explicitly states that if the infringement is committed by the company's representatives or employees while performing their services, a lawsuit can also be filed against the business owner, and fault is not a requirement. Therefore, when a software license agreement breach also constitutes copyright infringement, the company's defense of "the manager was unaware" or "the installation was done on a departmental basis" alone will not suffice.

What legal and financial consequences do companies face?

The first consequence is the cessation of unlicensed use. Article 69 of the Turkish Copyright Law states that the copyright holder, whose financial or moral rights are threatened with infringement, can sue to prevent the potential infringement; and that the same avenue remains open if the infringement is likely to continue or recur. This means that in case of license infringement, the rights holder can not only demand compensation for the past period but also request the cessation of current use. If the company's main operation depends on this software, legal pressure can very quickly translate into operational pressure.

The second major consequence is the demand for triple compensation. According to Article 68 of the Law on Intellectual and Artistic Works, those who process, reproduce, distribute, represent, or publicly transmit a work or program without obtaining written permission in accordance with the Law may be liable by the rights holders for up to three times the amount they could have demanded if a contract had been made, or the current market value. This regulation elevates license infringement beyond a simple "missing license fee." Especially with expensive corporate software, this risk often creates a much heavier financial burden than the company anticipates. The same article also allows for the destruction of unauthorized copies, their return to the rights holder at a reasonable price, or similar alternative demands.

The third consequence is compensation and profit transfer. According to Article 70 of the Turkish Copyright Law, a person whose moral rights have been violated may claim moral damages; a person whose financial rights have been violated may claim compensation under the provisions of tort law if the infringer is at fault. The same article stipulates that, in addition to compensation, the infringer may also request that the profits obtained be given to them. For companies, this means that the commercial benefit obtained from unlicensed software can also be a subject of dispute. For example, if project production has been accelerated, costs reduced, or certain tasks have been carried out thanks to the software, this economic advantage can be evaluated in the lawsuit.

The fourth consequence is contractual ancillary sanctions. The parties may have included penalty clauses, audit obligations, reporting requirements, license completion mechanisms, or grounds for termination in the license agreement. According to Article 179 of the Turkish Code of Obligations, if a penalty has been agreed upon for non-performance or improper performance of the contract, the creditor may demand performance of the debt or penalty unless otherwise agreed; under certain conditions, the penalty may be demanded along with the principal debt. Therefore, a breach of a software license agreement can trigger the contract's own internal sanction mechanism, in addition to the copyright risk under the Turkish Copyright Law.

When does the risk of punishment arise?

Violation of a software license agreement does not automatically result in criminal conviction in every case; however, certain actions clearly fall within the scope of criminal law. Article 71 of the Turkish Copyright Law stipulates imprisonment for one to five years or a judicial fine for anyone who, without the written permission of the rights holder, processes, represents, reproduces, modifies, distributes, publicly transmits, publishes, or commercially purchases, imports, or exports illegally reproduced works, or possesses or stores them for purposes other than personal use. Since unlicensed installations in a corporate environment often go beyond "personal use," the risk is more pronounced in corporate settings.

Article 72 of the FSEK (Law on Intellectual and Artistic Works) targets preparatory actions aimed at rendering protective software ineffective. It prescribes imprisonment for six months to two years for anyone who produces, sells, or possesses, for purposes other than personal use, technical equipment or programs designed to disable additional software created to prevent the unlawful reproduction of the software. If cracks, activation breakers, or keygens have been used in the company's systems, the license violation case will not remain solely a matter of private law.

The process for these crimes is complaint-based. According to Article 75 of the Law on Intellectual and Artistic Works, investigation and prosecution for the crimes in Articles 71 and 72 are subject to complaint; rights holders or the professional associations they belong to must provide documents and evidence proving their rights to the Chief Public Prosecutor's Office. The same article stipulates that, upon complaint, the public prosecutor may carry out seizure procedures in accordance with the Code of Criminal Procedure regarding the subject matter of the crime and, if necessary, may decide to suspend the activity limited to the reproduction of the works alleged to have been illegally reproduced.

Why is proof so crucial in a legal case?

In software license agreement breach cases, technical records and contract documents are evaluated together. According to Article 76 of the Law on Intellectual and Artistic Works (FSEK), if the court provides sufficient evidence to establish a strong conviction regarding the validity of the plaintiff's claim, it may request documents proving that those using the protected works obtained the permissions and authorizations stipulated in the Law, or lists of the works used. Failure to provide these documents constitutes a presumption of unlawful use. This provision is extremely critical for companies, as a scattered license archive, incomplete invoice sets, or unclear user records seriously weaken the defense.

In criminal law, the digital evidence regime comes to the forefront. According to Article 134 of the Code of Criminal Procedure, in cases of strong suspicion based on concrete evidence and the impossibility of obtaining evidence by other means, searching, copying, and, if necessary, temporarily seizing computers, programs, and files is possible. Devices can be seized if the password cannot be decrypted or if the process will take a long time; however, a backup of the data is made, and a copy is given to the relevant party. Therefore, a software license dispute can turn into a complex case requiring digital examination and expert opinions.

How should companies manage this risk?

The most correct approach is not to build defenses after a breach occurs, but to ensure license compliance from the outset. Every company should maintain an up-to-date software inventory in terms of devices, users, servers, and cloud access points; document which installation is based on which license; track renewal and subscription dates; and prevent employees from using personal or trial versions on commercial systems. Given the centralized written permission and documentation requirements in the Turkish Copyright Law, leaving software management solely to the IT department is legally insufficient.

If a violation is suspected, the company's first task is not to destroy the evidence, but to calmly assess the situation. Which software, which version, how many devices, how many users, and which contract it is based on – without clarifying these points, neither a settlement strategy nor a defense strategy can be properly established. If necessary, the role of the external IT supplier, the employee instruction chain, and the contractual warranty provisions should also be examined. Because even if the company is liable to the rights holder, it may still have the right to recourse against its employee or supplier in internal relations. This stage is important both under Article 116 of the Turkish Code of Obligations and Article 66 of the Turkish Copyright Law.

Conclusion

Software license agreement breaches and company liability are not a narrow issue that can be resolved in Turkish law simply by asking "how many licenses are missing?". The matter involves the copyright protection granted to computer programs by the Turkish Copyright Law (FSEK), the written form requirement, license types, scope of rights, triple compensation and damages claims, penal provisions, and the breach of contract regime of the Turkish Code of Obligations (TBK). A company's misinterpretation of the contract text, failure to supervise the actions of its auxiliary personnel, or inability to maintain a proper license inventory can escalate into a much larger legal and financial problem.

In short, software license breach is not just a technological issue for companies; it's a direct matter of compliance, risk management, and litigation strategy. Owning a copy of software does not mean purchasing copyright or broad usage rights. Without a written, explicit, and clearly defined license relationship, consequences such as cessation of use, triple damages, compensation, penalty complaints, and digital surveillance can all arise. In this area, the cheapest mistake often turns into the most expensive dispute.

Frequently Asked Questions

Can a software license agreement be made orally?
According to Article 52 of the Turkish Copyright Law, agreements and transactions concerning financial rights must be in writing, and the rights in question must be clearly indicated. Therefore, oral or vague permissions carry significant risks regarding validity and proof.

Does purchasing a copy of a program automatically grant licensing rights?
No. According to Article 57 of the Turkish Copyright Law, the transfer of ownership of the original or a reproduced copy does not include the transfer of intellectual property rights unless otherwise agreed.

If an employee violates their license, will the company still be held liable?
Yes, it can. Article 116 of the Turkish Code of Obligations regulates liability for the actions of auxiliary persons; Article 66 of the Turkish Copyright Law states that a lawsuit can be filed against the business owner for violations committed by representatives or employees during the performance of their duties.

Does the rights holder only request the license fee?
No. Under Article 68 of the Copyright Law, the fee that could have been requested if a contract had been made, or the market value, can be requested up to three times; claims for compensation and profit transfer may also arise.

Can such violations lead to criminal prosecution?
Under certain conditions, yes. Criminal liability may arise for actions covered by Articles 71 and 72 of the Law on Intellectual and Artistic Works; investigation and prosecution, however, are subject to complaint according to Article 75.