Schedule a Consultation: 858.483.9200

Dissecting the Software Licensing Agreement

For those involved in the creation and distribution of software, the software license agreement plays a vital role in protecting the intellectual property rights of the licensor of the software. Failing to have an adequate agreement can, and generally does, lead to infringements into the intellectual property rights of those entitled to those rights, which in turn can lead to protracted and costly trips to the courts. Because of the rapid pace at which the industry advances, it is not sufficient, however, to simply have a template that can be used repeatedly for each new product or even each version of an existing product. An agreement that works for a product on one platform, may not work well for even the same product on a different platform. Before entering into any agreement to license your software, several key points should be considered.

While “

[t]he structure and context of every software license is different depending on the needs of the parties” Fundamentals of Software Licensing, H. Ward Classen, (1996 PTC Research Foundation of Franklin Pierce Law Center), a few of the areas you must consider before agreeing to any software licensing agreement are outlined below:

  • What rights to the software does the licensor expect the licensee to do with its software; how does the licensee intend to use the software; and, most importantly, what is the licensor willing to allow the licensee to do with the software.
  • Will the licensor indemnify the licensee against third parties that the software is an infringement of a competitor’s software?
  • Define the “Key Terms” of the agreement – the agreement should always specifically describe any key terms used in the agreement. For instance, what do the terms “software,” “source code” and “licensed work” mean to the parties?
  • The price to be paid by the licensee for the rights acquired?
  • The period of time the license will continue. Will the term be perpetual or for some other limited period of time?
  • Upon termination of the license, what will happen to the software? If the term is not perpetual, will the licensee return the software at the end of the term or will it be destroyed; and if destroyed, what safeguards will ensure that destruction.
  • The maintenance and support services, if any, the licensor will provide and whether the price paid for the license by the licensee includes the maintenance and support offered, or whether a separate cost will apply
  • The warranties, if any, that will apply to the software.
  • The limits of the warranties the licensor provides for the software.
  • When, and under what circumstances may the licensor terminate the license, if at all.
  • Whether the license is an exclusive or non-exclusive license to use the software.
  • Whether the licensee is permitted to sell or otherwise transfer the license without the licensor’s consent.
  • Whether the licensee may make copies of the software or install the software on only one or multiple devices. If the software is to be installed on multiple devices, how many devices may the licensee install it on?

Whether you are just starting out, or have been developing and licensing software for a number of years, you know that your software is your “bottom line.” Because your software is your bottom line, you don’t’ want to rely on simple handshakes or outdated licensing agreement templates to protect your rights.

If you would like to arrange for a consultation to discuss licensing your software, an existing software agreement, or if you would like to discuss any other employment or business-related matter with a rising star, Michael Leonard, Esq. of San Diego Corporate Law should be your first call. He has the experience and knowledge to ensure all of your business agreements are enforceable in the California courts. He can be contacted by visiting San Diego Corporate Law or by telephone at (858) 483-9200.

Need help with software licensing?


Schedule a Consultation: 858.483.9200