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May 1999

After lawsuits, HP sets license rules

Systems can’t exchange licenses; customers must pay upgrade fees to correct user counts

After years of licensing policy that left resellers and brokers puzzled, HP has started to define HP 3000 sales transfer procedures — although the division is still waiting to publish the policies for all to see.

HP 3000 division general manager Harry Sterling defined license transfers in the aftermath of lawsuits HP filed against three brokers and two of its own former employees. In the weeks that followed HP’s civil allegations against Hardwarehouse, Abtech and Diablo Equipment Technology, Sterling said that his customers understood the rules of buying and selling HP 3000s better than some parts of the broker community.

“It’s really not the customers that need to understand it,” Sterling said. "It’s really what the resellers and brokers need to understand. I think it’s pretty clear to them, and we are now taking direct responsibility for the license transfers.”

What’s being made clear is that HP 3000 software licenses cannot be transferred between systems. The five-figure license fees paid for MPE/iX expire when the physical hardware linked to the license is retired. Sterling said the license is as indelible as a tattoo on an automobile’s engine block.

“[When you want to sell a 3000], the license goes with it, Sterling said. “It’s like license plates on California cars. When you sell your car, the license goes with it.”

Despite Sterling’s views of customer understanding about licensing, talk about ownership rights over MPE releases is easy to find. In the days following HP’s press announcement about its lawsuits, several customers on the 3000 newsgroup debated rights of ownership if they were to purchase a copy of MPE/iX at a swap meet.

Using the rules of transfer outlined by HP, any such software cannot be legal without hardware to accompany it. The HP 3000 (CSY) Division has set up a License Transfer Information phone line in California to answer questions surrounding sale of HP 3000s: 408.447.4185.

Sterling said CSY is adding staffing to handle the license transfers inside the division, a process that brokers reported could take weeks under the old system.

“As part of our investigations we’re working to understand what issues existed in the past, and to tighten up the procedures,” Sterling said. He acknowledged that HP’s job is “to communicate them not only to internal HP entities, but also to our resellers when they have confusion around this.

Confusion was as rampant as sales of used HP 3000s. “There’s been a lot of confusion among our resellers about if can you transfer a license from one system to another,” Sterling said. “The answer is no. Some of the resellers in the past have thought that’s the case. There’s been some communication deficit, in that we haven’t communicated this widely. I think the people who needed to know this knew, because they used the programs for license transfers — at least some of them did.”

Customers purchase a 3000 with an established user count, and must pay to upgrade it if necessary. “[When another customer purchases the 3000], they get whatever the license was on the previous system,” Sterling said. “And if they need a higher user license, then they have to buy that from us. Bottom line is: that’s the way it has always worked.”

A new broker market

One remedy CSY is executing in its license business is to appoint the first factory-authorized HP 3000 reseller, one with the legal power and technical ability to reset user license limits and convert hardware from HP 9000 to HP 3000 status. These kinds of activities require the use of SS_CONFIG, the HP-proprietary software authorized for use only by HP and its legitimate distributors.

Sterling said CSY recognizes many brokers have operated completely legally, and that brokers are a needed player in a market with so much useful older hardware.

“The brokers who are above board used the program quite well, and very effectively. We’re in the process of actually authorizing a broker reseller. We’ll start with one, and if other people want to come forward and work with us in putting together the necessary processes, procedures and contracts, we’ll open it up to anyone who would like to do that.” Sterling expected the announcement of the first HP 3000 authorized broker to come in the month of May.

Anticipating the new broker status would be desirable, Sterling said existing brokers are invited to apply for it. “All they need to do is contact is, and we’ll talk them through the process they need to go though to become an authorized broker,” Sterling said. “This is something we’re just starting. We’ve never had this before, and we recognize as part of our investigations that this is a need.”

Sterling said HP’s aim was to give the customers a resale point that would assure them of legitimate license transfers. “There’s still a lot of value in some of the old 3000 systems,” he said. “We want customers to have a way to sell those systems on the broker market — to have a way to have transfers to occur the way they should. We want to put the right processes and criteria in place so we can actually certify a broker.”

HP’s had a company-authorized resale arm for many years. But the Equipment Management and Remarketing Division (EMRD) included an employee who’s now being sued by HP for allegedly creating bogus paperwork on sales and funneling all used 3000s to Hardwarehouse. The auction process was abused by the HP employee and another co-worker at HP, according to allegations in an HP civil suit filed against Deborah Balon and Marc Loriau.

The new broker authorization won’t make sales outside of the HP arrangement any less legal. But CSY plans to establish a channel for used equipment that it has more control over, operating the activity under the division’s oversight. EMRD handles HP equipment across all HP hardware lines.

Avoiding trouble in ownership

Sterling said his division is in an ongoing investigation over the equipment sold through Abtech and Hardwarehouse, and CSY doesn’t know how it would run the recall of illegal 3000s demanded in its civil suit. “We’re trying to first of all understand how widespread this problem is,” he said, “and deciding if we need to deal with this on a generic basis or if we need to deal with it on an individual customer basis. We just don’t have the answer to that yet.”

HP doesn’t have any idea yet of how widespread illegal system sales have become in the marketplace. “We’re continuing our investigation internally — primarily to determine which customers are affected, and it’s not clear that we can, because not all customers buy support contracts from us — and then deciding how we’re going to deal with it.”

“Clearly we don’t want to do anything to jeopardize the customers,” he added. “On the other hand, we’ve effectively lost a substantial amount of revenue and we don’t want that to continue. But we don’t know what we’re going to do about the systems that are already out there and how we’re going to get them back under legal contract — because we don’t know how big the problem is.”

Qualifying a system for HP support is a separate matter from ensuring an owner has a valid license for MPE/iX. HP 3000s have a physical license certificate that travels with the system. If a customer is in possession of this certificate, HP considers the customer to be the legal owner of the system. “That’s the way it’s supposed to work,” Sterling said. “There’s also supposed to be an inspection by the HP CE when the system comes under support contract, so there’s two parts to it.”

“They should make sure they receive a valid license, and it is a document,” Sterling said, “and they should have a system inspected by an HP CE. If they want to be able to resell that system in the future, it would be worthwhile to do that.

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Ron Seybold, Editor In Chief


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