Software license

What is the name of your state? California

This is an excerpt from a license for a software package that we use as a service provider:

"10.1 Liquidated Damages. Licensee agrees and acknowledges that the damages suffered by Company for unauthorized copying, downloading or transmission of the Software and/or disclosure of and loss of trade secrets embodied in the Software licensed hereunder would be difficult to ascertain and are incapable of being calculated. Licensee therefore agrees that if, as a result of its action or inaction, the Software is made publicly available in violation of this Agreement or said trade secrets are disclosed, infringed, or otherwise diminished in value, Licensee will pay to Company the sum of five hundred thousand dollars ($500,000)."

What I want to know is, if this is enforceable. Basically, we will never give out the software to anyone, but we are concerned about someone hacking into the server and using a malicious means to get ahold of the software from one of our systems. I asked the owner of this company if that would apply, and he says it would and that we would owe $500,000 if a hacker got the software from our system. I don't think it could ever be proven anyways, but I still want to protect my business. Is this license enforceable?

I may have put the wrong state in the post, I am in Caliornia, but the license agreement is for the State of Illinois.

What I want to know is, if this is enforceable.

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Absolutely.

Basically, we will never give out the software to anyone, but we are concerned about someone hacking into the server and using a malicious means to get ahold of the software from one of our systems.

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Then use port scanners and detection intrusion software (or write it yourself utilizing WMI) and cover yourself.

I asked the owner of this company if that would apply, and he says it would and that we would owe $500,000 if a hacker got the software from our system.

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Bull Crap. The owner of the company is not an attorney nor a judge. This is a question of fact, not of law. IF something happens and you have taken all reasonable precautions, a judge would most likely find in your favor or that you mitigated damages and levy a lesser amount. But then, you MUST mitigate.

Is this license enforceable?

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You asked that question already.

Listen, this license is nothing more than a contract. Now, would you sign a contract for anything else that you did not feel completely comfortable with? If the answer is no, why now?

either use the software, design your own system or keep looking.