Understanding Software License Agreements

As a software developer, you`ve probably invested a lot of time and money in developing the software you want to license. You probably also count for it to earn you some income. If you think about all these efforts, you`ll want to make sure there`s a way to protect them. This is where a software license agreement comes in. These are the top five reasons why you should have a software license agreement: Often, lawyers or contract specialists are asked to perform a “quick” check of an incoming software license agreement on behalf of a potential licensee. Below is a checklist and a brief discussion of the main topics that the auditor should consider. The terms of this license are restrictive – known as reciprocal licenses. Under the terms of a Copyleft license, the licensed code may be modified or distributed as part of a software project if the new code is distributed under the same software license. For financial reasons, the licensor may restrict the definition of the lessee. The more advanced the definition of licensee, the more companies or individuals have access to and use the licensed software, which reduces the potential royalties that a licensor can receive. Some license agreements allow licensee`s related companies to use the licensed software. Many such agreements define “related companies” in such a way that they include only the licensee`s parent company and subsidiaries at least 51% owned by the licensee or its parent company, in order to limit the use of the licensed software.

FOSS software licenses – give the customer rights that involve modifying and reusing the software code, and make the actual source code available with the software(s). This open source license gives the user the power to modify software functions and verify software code. If the software is defined as a public domain, everyone is free to use and modify the software without any restrictions. This is a “permissive” license that allows you to take code back into applications or projects and reuse the software as desired. For many reasons, companies should exercise caution in introducing free software into projects or other important applications: the leap from the dense “legalese” can lead to a very costly mistake. It is important to read, understand and (if possible) negotiate warranties, indemnifications and limitations of liability. The licensor can probably design the software license themselves. It offers you only minimal protection, if at all. Your agreement should look at what happens in the event of a problem and the costs to both parties related to these events. Licensors must take care to limit the duration of the guarantee they grant.

Many licensees ask for a one-year warranty. This is a hidden risk for the licensor, as during the guarantee period the licensee may terminate the licence agreement and request a refund in the event of a material breach by the licensor. A shorter warranty, accompanied by a service time provided as part of a duly drafted and separate maintenance contract, can solve this problem. This type of license is one of the most common and popular open source software licenses. With a permissive license – also known as “Apache” or “BSD style” – there are few restrictions or requirements when it comes to distributing or modifying the software. Another variant of a generous software license is the “MIT” license. Many authors of software license agreements confuse indemnification rules with risk allocation rules. Exemption clauses deal with a right or action of third parties against one of the parties….