What is important when licensing your software application

Negotiation points on software licenses

  • Exclusivity – is the licence limited to certain parties, industries or territories and has this been affected by Brexit? ‘Exclusivity’ is not a strict legal term so you must be clear what you mean
  • Description – detail the technology/app/software being licensed/developed and if there are multiple elements or modules be clear what this user/customer can use
  • Scope – what are the parties allowed to do with the product?  Are there limits on use in terms limit on the number of users or sharing log-ins and or passwords; does any limit refer to a total number of users or concurrent users.
  • Duration – fixed term, rolling renewal, extensions, early termination (and consequences); bear in mind if you are selling to a large organisation they may want a right to benchmark the cost as opposed to comparable products during the term of the licence to demonstrate they are getting value for money and/or the service levels they and to terminate if this can be shown not to be the case.  Some licenses have a minimum period so that the supplier can recover the costs for the development and so charge a termination fee if the user wants to terminate within this period.
  • Payments/License fees – one off, annual or monthly (particularly if the app is part of a subscription service) or royalty-based?
  • Warranties – what is appropriate will depend on the nature of the application and the term of the licence.  For higher value software which is to fulfil a specific brief, there will typically be a warranty period where issues will be fixed free of charge within a warranty period (typically 3 or 6 months) for other apps provided for wider general use and for a lower fee the application may be provided “as is”.
  • Confidentiality and Data Protection – what needs to be included will depend on the app and how it is being used but as a minimum it will need to address issues relating to the use, storage and processing of personal data to comply with GDPR
  • Indemnities – what happens if the user tries to copy the software or infringes your rights and what happens if a third party claims your software infringes their IP rights?  These issues need to be addressed.
  • Updates, upgrades and support more generally – what will be provided and does the user/customer have to upgrade? What if they don’t – will there be a point beyond which support will not be available if the customer does not upgrade a more recent version of the application?
  • Quality control and information sharing provisions to monitor sales and data visibility
  • Improvements – who owns enhancements or customisations if you allow the user to make any of these?
  • Sub-licencing – There is no automatic right so express provisions are needed if the user is allowed to sub-licence to others for their use (for example, to their contractors or group companies)
  • Assignment – Will there be conditions or restrictions? This often comes us if a business is being sold – can the licence be sold with the business or would you want to be consulted so you could refuse if the sale was to a competing business.
  • Governing Law – If you are based in the UK you will want the contract to be governed by the laws here and for our courts to have exclusive jurisdiction

Register your Intellectual Property Rights where you can do so

In the UK you cannot currently register copyright in software in the UK (as you can in the US).

However, other rights such as Patents, trademarks, patents and registered designs often need to be registered with the relevant registry. Failure to register leaves your business vulnerable.   It is a relatively simple step but hugely important.

We are experienced in tailoring license agreements and negotiating technology development contracts to meet your commercial needs, so if you would like to discuss any help you need please contact us. 

Pia Dalziel

An accomplished and experienced commercial solicitor. Specialist in running corporate transactions and reviewing commercial agreements.

Let us take it from here

Call us on 020 7438 1060 or complete the form and one of our team will be in touch.