February/March 2010 / Intellectual Property
Eight Pitfalls in Software Licensing Agreements
A company licensing software from a vendor should not accept the boilerplate agreement that is typically provided. Instead, the authors write, it should look carefully at the contract and be ready to negotiate. Doing so can avoid long and expensive disputes that might otherwise arise.
The authors list eight common pitfalls to watch out for. Lack of warranty protection is number one. Number two has to do with maintenance and support: Before signing off on the terms presented, consider such details as employee training and the possible need for and potential cost of on-site visits.
The third item pertains to software support and upgrades; the fourth addresses potential issues from third party lawsuits that target the licensee for alleged infringement based on the purchased product. Number five concerns relocation and copies, and six pertains to the right to transfer the license (for example, to a subsidiary or merger partner). Number seven pertains to whether the company will have proprietary rights to what is created through the use of the software, and the last item addresses the possible need for source code escrow, in case the vendor declares bankruptcy or ceases operations.