Software licences are essentially legally binding contracts which dictate how parties can and cannot use/redistribute software. Software licences are crucial for protecting your software. A good software licence is crucial if you are the buyer – it needs to be clear, flexible and keep you out of legal hot water. However, at LegalVision we see many common mistakes with software licences.

Here we have made a list of the most common mistakes people make when it comes to software licences, with the hope you don’t do it as well!

They are outdated

Technology is obviously changing very rapidly and yet many companies continue to use old templates. Update them.

Vague terms

It can be extremely difficult to find someone who has both technical and legal knowledge – for this reason terms are often drafted in a vague way, which leads to problems further down the track. At LegalVision we have lawyers who specialise in software licence agreements and have both the legal and the technological knowledge to draft the licence agreement you need.

No Planning

When businesses enter into a software licence they often enter into them in a chaotic, ad hoc manner. Consider getting a volume purchase agreement – as this can be much cheaper in the long run.

Not keeping track of changes in licence rules

If there is one thing you can be sure about – its change. The rules and regulations around licensing change constantly.  If you are not on top of these then you may be heading for a costly oversight.  The online and virtual environment is increasingly dynamic, particularly with the growth in new technologies and cloud computing. Make sure you keep abreast of all regulatory changes.

Ill-defined rights clauses

Make sure the agreement accurately covers the rights of the person the software is licensed to – for instance do you want to include rights to?

  • Execute and load
  • Enhance, modify and adapt
  • Create back-up copies
  • Distribute
  • Sub-licence
  • Remote access
  • Bureau service to third parties

Alternatively, many agreements fail to specify limitation or restrictions on use, such as:

  • No leasing or subleasing
  • No distribution
  • No decompiling disassembly
  • Copy restrictions
  • No alteration of patents

Warranties

Getting the warranties right is an essential part of the software licence agreement. Remember first and foremost that if the consumer holds a licence they are given a number of implied warranties under the law.

Often software licence disputes start because the warranties section does not adequately cover enough events or excludes too many events from protection.

As a general rule a software licence agreement should include warranties on:

  • Merchantability
  • Fitness
  • For the software to be free of certain defects
  • Future releases and performance
  • On the software having no viruses and time bombs

Each of these warranties should have a specified time period and a start date as well.

Warranty exclusions and liability limitations

Conversely, the licence should also include a section which explains that the warranty will be excluded when certain events take a place, including:

  • If the user misuses the software
  • If someone else modifies the software
  • Failure to update
  • Any hardware malfunction

Conclusion

If you need assistance interpreting or writing your software licence – please contact an IT lawyer or get online legal advice.

Lachlan McKnight

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