Since launching our firm in June of 2020, we have closely observed, tracked, and written about a chilling market phenomenon we dubbed ‘software licensing trolls.’ From webinars to podcasts, blog posts and articles, we have sounded the alarms about this stealth market phenomenon, which largely flew under the radar before Beeman & Muchmore began writing about it.
In 2022, we published an article in Westlaw Today offering our insights. In the article, we pointed out that private equity firms are snatching up software license portfolios to reap the financial rewards that come from the abrupt weaponization of the software audit process.
We christened companies ‘software licensing trolls’ due to their strikingly similar behavior to the so-called ‘patent trolls’ that became notorious for snapping up patent portfolios and indiscriminately asserting them for cost of defense /nuisance settlements. Today, targeted legislation and court decisions have lessened the pervasiveness and impact of patent trolls.
In our Westlaw Today article, we explained to our readers what constitutes a software licensing troll:
While it may not be history repeating itself, there is a certain rhyme and reason to a new trolling phenomenon in the business world — the software license troll. With the ubiquity of software licensing and the uncertainty caused by new technology, many software vendors are devising troll-like auditing and licensing scripts that borrow heavily from the opportunistic blueprint forged by their patent troll forefathers.
Often backed by venture capital and cloaked by arcane mergers and acquisitions, software license trolls are weaponizing the software audit process and squeezing millions out of unprepared targets. Because they operate almost entirely outside of the court system and under strict confidentiality provisions, the risks presented by the software license troll are often undetectable to the public. These risks coupled with a plentitude of targets makes the impact of the software license troll much more dangerous.
Now, there’s a new kid on the block.
At this stage, Apryse is best viewed and understood as a software licensing troll.
Consider the following:
In May of 2019, PDFTron, a provider of document processing tools for software developers, received a $71M investment from Silversmith Capital Partners, a Boston-based growth equity firm that at that time had $1.1 billion of capital under management. Since the start of 2018, PDFTron has experienced substantial growth and more than doubled its workforce.
Per the 2019 announcement in Business Wire:
The investment will be used to support PDFTron’s significant R&D and product development resources, and to pursue acquisitions in both North America and Europe.
In May of 2021, PDFTron received a “strategic growth investment” from Thoma Bravo, a private equity investment firm focused on the software sector and with over $76 billion in assets under management at that time. The amount of the investment was undisclosed. Silversmith Capital Partners and the PDFTron management team remained significant shareholders.
Orlando Bravo, founder and managing partner of Thoma Bravo, later referred to the May 2021 investment as an “acquisition” in an interview on the Thoma Bravo podcast Behind the Deal with operating partner Kristin Weston and Apryse CEO Cassidy Smirnow.
In 2022, PDFTron acquired iText, a library for creating and manipulating PDF files in Java and .NET. This substantial purchase, also later referred to in the interview as an “acquisition that would really be a merger of equals,” was probably the most significant direct result of the Thoma Bravo “strategic growth investment.” iText was one of many purchases in the same software space during this period (including BCL Technologies, PDFlib, eversign, and ActivePDF).
Finally, in February 2023, PDFTron rebranded itself as “Apryse.” By this time, with Apryse over 50% staffed by employees of acquired companies, it desperately needed to integrate disparate business operations after so many acquisitions in such a short amount of time.
In our experience, once software companies are controlled by venture capital, their primary goal is to increase short-term profits. In the previously mentioned podcast interview with Kristin Weston, titled “How Apryse Achieves Fast Growth and High Margins,” Weston proudly touts this very aspiration. From where we sit, it looks as if companies consider the shakedown of current licensees as the quickest and easiest path to rapid, low-margin growth. To that end, publicly-available information on LinkedIn suggests that Apryse went on a hiring blitz in their license compliance department in or around the time of the February 2023 rebranding.
At its most basic, iText is a library used for the creation and altering of PDF files. iText is nominally open source and has been licensed for free pursuant to the GNU Affero General Public License (“AGPL”) since approximately 2009. Apryse also offers iText pursuant to a commercial model for companies that, in their words, “cannot comply with the AGPLv3 terms.”
And what exactly are these terms? In sum, don’t be duped by notions of “open source” and “freely available.” As Apryse will be the first to tell you, “free” means free of charge, not free of obligation. Among other things, the AGPL mandates that users who “modify” the program “must prominently offer all users interacting with it remotely through a computer network (if your version supports such interaction) an opportunity to receive the Corresponding Source of your version by providing access to the Corresponding Source from a network server at no charge, through some standard or customary means of facilitating copying of software.”
Confused? The Free Software Foundation offers a sprawling FAQ that gives some murky guidance on the strictures of the AGPL, including the requirement to publish modified code. According to Apryse, the strictures are near-absolute. For example, Apryse asserts that “You may not deploy [iText] on a network without disclosing the full source code of your own applications under the AGPL license. You must distribute all source code, including your own product and web-based applications.” Further, Apryse claims that “It’s a legal violation to use iText Core/Community and our open source add-ons in a non-AGPL environment.”
A lot remains to be resolved regarding licensing pursuant to the AGPL. For example, what constitutes a “modification”? If there is a modification, how much proprietary code must be published to meet the terms of the AGPL? (Licensees should consider whether they concur with Apryse’s position that “all” source code “including your own product and web-based applications” must be made publicly available.) What are the legal consequences, if any, for breach of a “free” license? What is the status of Apryse’s copyrights in the historic iterations of iText?
If your company uses iText, we recommend looking into these questions now, before your company is targeted by Apryse.
When dealing with a software licensing troll, bear the following in mind:
And, as always, secure the guidance of experienced licensing counsel. Please do not hesitate to contact us for further guidance on Apryse/iText and software licensing trolls in general.
Software licensors are known for vague contracts—they’ve made a business of it.
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