Software License Agreement

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  A Software License Agreement is a contract by which a copyright owner (licensor) licenses the use of a particular piece of software to another (licensee). It can be useful to think of a Software License Agreement in a spectrum from an End User License Agreement (EULA) to a Software Development Agreement . EULAs apply to common, commercial software, such as an operating system for a personal computer, a video game, or other personal computer application. On the opposite end of the spectrum is a Software Development Agreement, under which a customer contracts a developer to develop a unique piece of software, tailored to the precise needs of the customer’s business.

  Between the EULA and Software Development Agreement is the Software License Agreement, which is a license for software that is more complicated than that available at a commercial retailer, but not a unique piece of software developed specifically for the licensee. For example, enterprise software, point-of-sale systems, and internal human resources systems would typically be licensed under a Software License Agreement, rather than an EULA, so long it was not uniquely-developed under a Software Development Agreement. The differences between an EULA and Software License are subtle, but a Software License typically has more robust maintenance and support provisions that guarantee the licensor will train the licensee’s employees to use the software, and provide maintenance and other support through the life of the software.

  Software is copyrightable as a literary work under 17 U.S.C. § 107(a)(1) . Thus, the basis of a Software License Agreement is a grant of copyright license to the licensee; use of the software is conditioned upon the licensee accepting and complying with the terms of the Software License Agreement, and the license will sometimes include limited rights to reproduce the software for the licensee’s internal use.

  Key issues in a Software License Agreement

  • Upgrades and Enhancements . A common issue is how upgrade and new versions of the licensed software are handled under the agreement. For example, if during the life of the license agreement for version 1.0 of the Licensed Software the licensor releases a 2.0 version, does the original license provide for the ability to switch to the new version? Can the licensee license the new version for a discounted rate? Or does the agreement have nothing to do with future versions of the software? Minor patches and routine upgrades should be provided free of charge to the licensee. Often the agreement sets a time period (say one year) within which upgrades are provided to the licensee for free, but after which the licensee must obtain upgrades at a price either specified by the licensor, or specified in the agreement itself.
  • Support and Maintenance . A key difference between a EULA and Software License Agreement is the amount of support and maintenance provided by the licensor. Because the importance and complexity of software licensed under a software license agreement it more common to include robust support and maintenance clauses, in which the licensor agrees to provide support and maintenance services to the licensee. The services can be guaranteed for the life of the agreement, or could initially last a single year, with options to renew for or below cost.
  • Installation, Training, and Bug Fixes . Software License Agreements commonly include requirements for the licensor to initially instal the licensed software, train the licensee and the licensee’s employees in using the software, and fix simple bugs in the software free-of-charge. These guarantees are very important for a licensee in a Software License Agreement, and thus the agreement should cover each of these explicitly.
  • Installation . The license should make clear whether installation by the licensor is included in the price. Often the licensor will want to state the minimum hardware requirements (and any third-party software requirements) that the user must satisfy to run the software.
  • Training . Like the initial installation, the agreement should specify which, if any, trainings are included in the license fee. It is not unusual for the parties to agree upon initial trainings , for the licensee and current employees, that are covered by the license fee, and agree on a price and method for arranging future trainings .
  • Bug Fixes . Handling bug fixes is very important to the licensee, but also an area which could see substantial push from the licensor. Of course the licensee wants provisions that bugs will be fixed at no charge. However, no software is ever bug-free and the licensor will not want to limit its obligation to fix bugs to those that have a significant effect on using the software. Defining this can be tricky.
  • Limitations on Bug Fixes. Often the licensor will want to restrict fixes to bugs that prevent the software from materially accomplishing the tasks it is supposed to (often as set out in the brochures), with the licensor having the right to make determine this in its sole discretion. The licensee probably will want the right to take the issue to arbitration if it disagrees with the licensor’s decision.
  • Categorization of Bugs. Sometimes bugs are divided into categories based on how important they are, with the licensor required to fix a given bug within a specified period of time depending on the criticality of the bug.
  • Warranties . The warranties under a software license agreement may range from none (or "as-is") in the case of a free or low-cost EULA to comprehensive guarantees. When given, the warranties may include:
    
    • Media . A warranty may simply cover the media on which the software is delivered.
    • Performance . A warranty may assure that the software operates in conformity with its documentation.
    • Support . A warranty may cover support services.
    In each case, the warranties may be limited for a period of time.