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How Software License Agreements Protect Your
A software license agreement offer a contractual remedy against
the user for failing to comply with any provision in the
agreement . This is in addition to any other legal remedies
that may be available, such as those under copyright law.
Also, the agreement can determine the venue for any litigation
which can save future costs if disputes arise. For beta software
or evaluation software, the agreement should include slightly
different terms most are similar to the below.
Permitted Uses of the Software
A license agreement should state how the software may or
may not be used:
Depending on whether the software is customized or off-the-shelf,
the agreement may have a provision stating what steps are
necessary for acceptance and installation. As acceptance
can be a tricky legal concept, agreeing to the procedures
for testing and acceptance up front can often be very helpful.
Maintenance of the Software
Some licensors of software have maintenance programs available
for annual purchase which provide bug fixes, updates and
technical support paid at the beginning of each year. While
the prices vary, typical annual fees are fifteen to twenty
percent of the cost of the software license.
If maintenance is purchased, it can be helpful to describe
in the agreement exactly what is provided. Such descriptions
may include what types of software problems are given what
priority of resolution, how long resolutions of problems
may take, remedies if a problem cannot be fixed, user responsibilities
in the process, who may contact the licensor's technical
support team, and other items.
Customization of the Software
Projects for development or customization of software are
very legally complex and you should always retain an attorney
with knowledge of software development agreements for such
a project. If any customizations, interfaces or integration
of the software are to occur, they should be carefully set
forth in an exhibit to the agreement, including description
of the final software functionality, deadlines, testing,
acceptance and installation.
Ownership of the Software
The agreement should state that the user agrees that the
licensing entity owns the software, customizations and updates.
This serves both to give notice of the ownership to the user
and also gain the user's legal agreement up front to this
The agreement should set forth procedures, timelines and
amounts for the software license and maintenance fees to
avoid confusion and ensure prompt payment and performance
Most software includes a warranty of at least thirty days.
Good warranty provisions includes specific conditions and
exceptions to the warranty which protect the licensor.
It is vital for the licensor that the agreement include the
correct language as required by law, in the correct point
font size (no, I'm not joking) to waive other legal warranties
which are implied under the Uniform Commercial Code to the
sale of products, which includes software. Despite its name,
the uniform commercial code varies by state, but generally
is uniform nonetheless. The UCC implied warranties include
a warranty that the item will do what it is intended to do,
that it may be fit for a particular promise if so stated,
that it does not infringe third party rights and that the
seller has proper title to sell the item.
Under what circumstances, either the user or the licensor
can terminate the software license and/or maintenance, and
procedures and results of doing so should be included so
that both parties have notice and agreement of their rights.
The license agreement should also limit the liability of
the licensor for damages of all kinds regarding use of the
software, errors or viruses in the software and other items.
This wording should be drafted by an to be effective. Properly
drafted, this is an extremely beneficial provision to lower
risk in your software business.
In software licensing involving large sums of money, the
licensor will typically be asked to provide an indemnification
of the user for the software's infringement of any third
party rights. This means that if the user is sued because
the software included materials which infringed the rights
of another party, the licensor must reimburse the user for
all costs and expenses of this litigation.
A software license agreement can offer tremendous legal benefit
both in lower risk and ensuring protection of your software
and legal rights.
1 Readers are cautioned not to rely
on this article as legal advice as it is
no substitution for a consultation with an attorney in your
on jurisdiction and time, the law varies and changes.