Software Licensing Agreements and the Clauses Covered Under it

By: Subham Saurabh

A software license agreement is an agreement/contract between a company and the user of that software who has the rights to use. It laydowns details for the users how to exactly run and use the particular software. The agreement tells a user how the software can be installed and what is the procedure to install it also how many times a user can install it. It additionally has clauses for the intellectual property rights (IPR) through which users know the copying, modifying and redistributing policy of the software. Thus, to prevent any kind of infringement of IPR a software owner needs to have a software license agreement with their customers.

The software license agreement does not have any particular format, the agreement differs as much as the software if there is a change in the software the agreement has to be changed. There is novation in the contract as soon as there is a software change. A software license agreement is important for both the licensor and the licensees along with the other stakeholders who have interest in the software as it lay downs the important clauses, jurisdiction, rights, modification, transferability etc. As an owner, a lot of money and time is being invested in developing the software and it is always in the mind of the developer that he could derive some monetary benefits out of it. If one individual is putting so much effort, he or she must put an effort to protect his or her IPR and other related rights. Here a software license agreement comes in the picture. Below are the reasons why to have a license agreement.

  1. It limits the liability: It is one of the most important parts of the agreement since if an owner did not limit his liability as to the software developer, then he is exposing himself for a lawsuit, people all the times are ready to file frivolous lawsuits and demand compensations for no real reason. Such lawsuits not only waste the money but also precious time. If a developer limits his liability though an agreement, he is ensuring the others from filing frivolous lawsuits as they have agreed to the software terms as soon as they buy it or in some case download it. Limiting liability can be from both sides.
  2. The agreement prevents others to sell it: Such an agreement with the customers restrict them to copy the software and redistribute it to others. There is also a huge difference between the developer licensing the software and not selling it. When the owner sells the software to a user, the owner still has all the rights also the owner can restrict the use. By this way, the developer/ owner has more control over the software in contract to the actual user of the software. For the long run and to derive more monitory benefit from the software the owner should not sell the rights of software rather license it.
  3. The license agreement allows the developer to terminate at any time: The owners have an extra advantage clause at their rescue which may state that owner can terminate the license at any period of use. The clause may also provide the owner to terminate it without providing any explanation. This is another important clause which helps the owners to maintain comprehensive control over the software at all times. At any time if licensor wishes to revoke the license and institute a suit instead, he can refer the licensee this particular clause.
  4. It avoids misappropriation of software: The hackers and such person who are always ready to make a replicate or a copy an individual’s intellect are always at the hurry to do it if the owner fails to have an agreement with the users. There is very less probability that others can sell the software however if a pirated version is circulated it would be a huge loss. A person would not buy the software if he is getting it for free and it will be unfair to the developer and owners.
  5. License agreement permits to disclaim warranties: Nothing can be in software, no matter what a developer do there is always an error with the technology it may be a bug, crash or downtime etc. and such errors allows a user to dissatisfactions. The license agreement may have clauses which would contain a disclaimer from such errors for which the user would eventually escape the liability.

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Main Section included in the Software License Agreement

Fundamentally, there are four primary sections for software license agreement and these four sections provide key information which is essential to the accomplishment of a software license agreement which is as follows:

  1. General Information – In the first section, we will get information about the execution of the agreement that when it will go into effect, for what duration of time the software will be active and what is the type of this agreement. This is the key part of any agreement although it provides general information because it sets the tone for the whole agreement.
  2. Parties Involved – This particular section provides information about the parties who are going to agree. When any person or company enters with the developer company or owner company of software the agreement must detail both the company or individual’s details. The full name and complete addresses and other key information should also be included in such agreement. Also, it is essential to state whether the party who is forming the agreement is a company or an individual.
  3. Terms of the agreement – This section includes all the other primary information regarding the terms of the agreement. Information such as price to be paid for using the software, information about the maintenance, support, warranty if any etc. will be listed which are offered by the software company. The other information that “whether you will be including the code along with the license and if it is a site license or not” is included.
  4. Fine details – The last section included all the miscellaneous details which are missed out in above three sections of the software license agreement. This section is drafted more carefully and according to the specific situation instead of wide clauses. At last, where the agreement is signed along with the dates are mentioned.

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Important Clauses of Software License Agreements

The above four-section provides the overview in brief of what features a user can assume from any general software license agreement. However, the company or developer to exclude its unsolicited liability and frivolous suits should include other key clauses which will guarantee their protection from liability in future also. It is important to include such clauses in the license agreement as the future is unpredictable and anything can happen, and from this unpredictable situation, the agreement must guarantee protection. Below is the list of such clauses:

  • Limitation of liability – It is one of the important clauses as it limits the software owner’s liability form uncertain future events. This clause laid down that the fact that the user should accept the software without any changes from the third party and they will not be able to claim any injury compensation, also it may be stated that no warranty could be claimed from the software and the usage.
  • Non-exclusivity –When a licensor wants to license the software to an individual or a company, he should make sure that the agreement has the clause that does not leave details that the rights of the licensee are non-exclusive. By providing such a clause in the agreement the software will the developers to stay longer in the market with the product and make a profit from the software.
  • Non-transferability – This is another important clause from the point of view of earning the profit. The non-transferability clause helps to restrict if the developer did not want the license to be transferred to another third party. If not restricted it will allow the licensee to transfer the software to any other person or even business that will amount to a loss of profit and future clients. Lastly, developers will not like to come in force in a situation where they have to deal with the agreement with such a party with whom they have not contracted with.
  • Rights – Every information that the right to the software will remain the property of the licensor even after execution of understanding will be included in this clause. This clause also includes the original programming, the name, the copyright, the trademarks rights, and all other intellectual property rights. Licensor does not want somebody else buying a permit to then steals any crucial information regarding the software and creates its monetary benefit. This is a significant consideration since it secures owner item from its users.
  • Modification Clause– If the developer does not permit the software to be novated in any capacity toward the back, then it should make that reasonable with a provision which states as much and subtleties what the expression ” modification ” signifies for this agreement. Except if this is what the software owner wants to occur, it will probably just purpose issues for them afterwards. The best option available is to the limit any modification, if not limit them. Because this is a software license agreement, this isn’t typically normal. Your users will probably comprehend that the product is made in that manner in which it is and will remain that way.
  • Breach of agreement – The owner has to incorporate a provision which expresses that on the off chance that any terms are not followed, at that point it will bring about a breach of agreement where a developer can renounce the agreement, therefore. The user does not want that breach of an agreement to happen, yet for the situation that it does, it ought to have this set up so it can assume back responsibility for the software product and better ensure it.
  • Number of Device-Based upon how the developer permits the software if the developer incorporates that the licensee is permitted to utilize the software on one single PC or numerous PCs in a similar area, for example, the corporate area. This keeps organizations from exploiting the software and attempt to need more at the price they paid. It is not common that all licensee will attempt to find a sneaky tricky path around, however in the case that they do, it is ensured that developer has this point by point so there is no doubt.
  • Terms of the end – this clause must be included in the agreement as if the developer or user need to end the understanding, this provision will detail the moves that must be made by the licensee or otherwise. This is by and large something like terminating the software on-site or uninstalling it from the gadget. Also, it to likewise incorporate that the software can be ended or terminated whenever and, in any capacity, whatsoever with no consequences.
  • Governing law – The last important clause which should be included in the details about the administering law for settling any disputes. No one wants to wind up in the Court that is far away from his state of location or is in another jurisdiction. Also, the last thing important is to ensure that this recorded as a written so that any court procedures will just occur in you’re the choice of jurisdiction.

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