IT lawyer series: What clauses should I look out for when reviewing a software license agreement?

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Table of Contents

• Software and license
• Fees and payment terms
• Termination of license
• Intellectual property
• Prohibited uses
• To conclude

If you are being given a license to use software, there are usually terms and conditions of that license, which forms a legally binding software license agreement between you and the owner of the software. There are several clauses which you should look out for when reviewing a software license agreement and these have been set out below.

You should note that software license agreements can be quite complex and if possible, and if there are any terms which you do not understand, it is best to have them explained to you by an IT lawyer.

Software and license

One of the very first clauses in a software license agreement should be about the software and the license. The clause should indicate the software that the license applies to, and also what type of license is being granted to you. This could be exclusive (for your personal use only) or non-exclusive, revocable or irrevocable, worldwide or country specific, transferable or non-transferable, and with or without a right to sub-license. You need to know what type of license you have been granted by the licensor to ensure that you are not using your license in a way which could result in a breach.

Fees and payment terms

Is the licensor charging you a fee to use the software? If so, then you need to know what the fees are and the payment terms. If it is a one-off payment, you need to know how much this is and when it is due. If you are expected to make regular payments, then the agreement should set out when payments are due and how these payments are to be made. The clause should also state the consequences of non-payment, which may include penalty fees or suspension of your license or account to access the software.

Termination of license

The software license agreement should have provisions for terminating your license. The clause should indicate how the license can be terminated e.g. through the site or software, or by contacting the licensor directly. Generally, the licensor will reserve the right to terminate your license and/or account immediately without notice to you under certain circumstances. You should read the clause carefully and ensure that you do not commit any acts which may result in immediate termination as it could cause you to lose any information or data that you have inputted into the software.

Intellectual property

The intellectual property in the software is of high value to the licensor. You should read this clause properly to ensure that you understand what rights you are being given to use the intellectual property and what you must not do with the intellectual property. On the other hand, if the software requires your input of data, you need to ensure that you are able to retain the ownership of this data as it is your intellectual property and may be extremely valuable to you and your business. If there are any concerns or disputes regarding intellectual property throughout the duration of the agreement, you should contact an IT lawyer and seek assistance immediately.

Prohibited uses

In most software license agreements, the licensor will have set out a detailed listed of prohibited uses of the software. You need to read this clause carefully and understand each prohibition to ensure that you do not accidentally commit a prohibited act which results in immediate termination of your license and possibly legal action against you.

To conclude

Software license agreements can be lengthy and complicated. If you are uncomfortable or unsure about any of the terms of the agreement, you should consult with an IT lawyer. If you are in a position to negotiate, a good IT lawyer will be able to assist you with making amendments or drafting a letter of suggested amendments to be negotiated with the licensor.