SOFTWARE LICENSE AGREEMENT

What is Software License Agreement?

To put it simply, a software license agreement is an agreement between your company and your customers for use of the software you have the rights to. It allows your customers to use your software and details exactly how they can use it. Within the software license agreement, it will detail where customers can install it as well as how and how often it can be installed. Additionally, it should answer questions your customers may have about their ability to copy it, modify it, or redistribute it. The software's price and licensing fees may also be detailed in this agreement. A software license agreement is something you want to have in place to prevent or protect you from infringement of copyright law.

Types Of Software Licenses-Software licenses can generally be fit into the following categories: proprietary licenses, free software license, open source licenses. The features that distinguish them are significant in terms of the effect they have on the end-user's rights.

1. Proprietary software License- It is computer software which is the legal property of one party. The terms of use for other parties is defined by contracts or licensing agreements. These terms may include various privileges to share, alter, dissemble, and use the software and its code.
2. Free software License- It is a software license which grants recipients rights to modify and redistribute the software which would otherwise be prohibited by copyright law. A free software license grants, to the recipients, freedoms in the form of permissions to modify or distribute copyrighted work.
3. Open source software- It refers to any program whose source code is made available for use or modification by users and is made freely available. Open Source enables the users to view and modify the source code.

Among the three types of licenses the Open source software license had a major hue and cry in the market:-

• The typical open source project contains contributions from many people. It is almost impossible to audit the entire code base for violations of previous license conditions. This creates many opportunities for contributors to introduce infringing code.
• Some open source software projects, such as the Linux initiative, have one or more stewards who monitor code quality and track bugs. Other initiatives, however, are the product of hobbyists and do not enjoy the same code quality and rigorous testing protocol.
• As mentioned above, some open-source licenses, such as the GPL, require licensees to provide royalty-free copies of their derivative works in source code form for others to use, modify and redistribute in accordance with the terms of the parent license agreement or in other words Copyleft licensing.

Classification Of Software Licensing Agreements:There are various kinds of software licensing agreements but most commonly used agreements are
1. Click wrap agreements
2. Shrink wrap agreements
3. Browse wrap agreements
4. Network licensing agreements

Click wrap agreements - Click-wrap agreements are those whereby a party after going through the terms and conditions provided in the website or program has to typically indicate his assent to the same, by way of clicking on an "I Agree" icon or decline the same by clicking "I Disagree". These types of contracts are extensively used on the Internet, whether it be granting of a permission to access a site or downloading of software or selling something by way of a website.
Shrink-wrap agreements- Shrink-wrap agreements have derived their name from the "shrink-wrap" packaging that generally contains the CD Rom of Software’s. The terms and conditions of accessing the particular software are printed on the shrink-wrap cover of the CD and the purchaser after going through the same tears the cover to access the CD Rom. Sometimes additional terms are also imposed in such licenses which appear on the screen only when the CD is loaded to the computer The user always has the option of returning the software if the new terms are not to his liking for a full refund.
Browse wrap agreements- There are many contracts posted on internet websites that do not require any affirmative act or assent before the licensed use of the software.
Network licensing agreements- License agreements and related pricing must be consistent with current network environments. The proliferation of networks is causing licensing practices to evolve even faster to accommodate both users' and vendors' needs. Current primary network licenses are applicable for concurrent use, site, enterprise, and nodes. Concurrent use licenses authorize a specified number of users to access and execute licensed software at any time. Site licenses authorize use at a single site but are losing favour to enterprise licenses that cover all sites within a corporation because of more virtual computing environments. Node licenses are becoming less appropriate in the client/server environment, since the licensed software may be used only on a specified workstation which a user must log on to in order to access and execute the application.
Measurement software ("license manager") is allowing vendors to be more flexible in licensing arrangements. This management software monitors and restricts the number of users or clients who may access and execute the application software at any one time. This is important as a user pays only for needed use and a vendor can monitor such use to protect intellectual property.

Advantages of Software License Agreement:-

1. It prevents abuses of your software – If you fail to have one of these agreements signed by one of your customers, there is nothing stopping them from trying to replicate it or copy it for their own benefit. This does not mean that they will sell it, but it would be a possibility. More than likely, you will have customers who will copy it for their own business and get it on all of their computers for the cost of one copy. This can cost you a lot of money in profits and it is not fair to you as the developer. If you want to protect your business in this manner, you need to make sure you have a software license agreement in place.
2. It allows you to license it and not sell it – This is a big distinction. When you allow users to purchase a license of your software, you still retain all rights to it. This allows you to license it to others and also allows you to place restrictions on its use. You can keep more control of the usage as well as the distribution of it in this way. Instead of selling the software and the rights, you will be keeping them so you can continue to license it to others and make more money in the long run.
3. It allows you to disclaim warranties – No matter what you do, a customer who installs your software will have expectations that cannot be met all the time. This can be something such as a guarantee of no software bugs, no downtime, or other such expectations. You can include terms in your software license agreement that will include a disclaimer of warranties which will require the user to accept it as is or as available. This puts the risk back into their hands. This disclaimer can come in handy if the software servers go down and your users cannot use it for some time as it will prevent them from trying to blame you for their lost data.
4. It can limit your liability – This is a very important component because if you do not limit your liability as a software developer, then you could potentially be exposing yourself to lawsuits. These lawsuits not only take up your valuable time, but they also can create some financial issues for you. The last thing you want is for one of your customers to attempt to sue you because the device they tried to install it on crashed after installation. By limiting your liability, you are essentially preventing them from suing you because they agreed to your terms before they gained access to even download it. However, make sure the liability clause is fair to both parties.
5. It can allow you to terminate use at any time with no problems – There should be a portion of the agreement that states that you can revoke licenses at any time. This also gives you the freedom to do so for any reason. Not only can you terminate them, but you can also suspend them if you need to. This is part of being able to maintain complete control over the software at all times. If you do have to revoke a license and your customers try to start a dispute, all you will need to do is refer them to this clause.

Important Clauses of Software License Agreements:-

1. Non-exclusivity – If you want to license your software to other companies, you will want to make sure that the software license agreement does not leave out a clause that details that the rights are non-exclusive. This will allow you to license your software to other parties so you can continue to make a profit from it.
2. Non-transferability – This is a clause that you will want to include if you are not allowing the license to be transferred to another party. You do not want the license to transfer to another person or business because that will essentially take a customer away from you. That is the main reason why you will want this clause. Additionally, you do not want to end up in the situation where you do not have an enforceable agreement with the party the software is transferred to.
3. Rights – You should detail that the rights to the software will remain your property even after execution of the agreement. This includes the actual software, the name, the copyright, the distribution rights, and even the intellectual property rights. You do not want someone purchasing a license to then steal components of it from you for their own financial gain. This is a very important inclusion because it essentially protects your product for you.
4. Modification – If you are not allowing the software to be modified in any way on the back end, you should make that clear with a clause that says so and also details what the term "modification" means for this agreement. Unless this is something you want to happen, it will likely only cause issues for you later on. Your best bet is to limit any modifications, if not completely restrict them, in all cases. Since this is a license agreement, this is not usually something that is expected. Your customers will likely understand that the software is created the way it is and will remain that way.
5. Breach of contract – You need to include a clause that states that if any terms are not followed then it will result in a breach of contract where you can revoke the license as a result. You do not want a breach of contract to occur, but in the case that it does, you should have this in place so you can take back control of your software and better protect it.
6. Device usage – Depending on how you license the software, you will want to include whether the licensee is allowed to use the software on one single computer or on multiple computers in the same location, such as the business location. This prevents companies from taking advantage of your software and trying to get more for the price they paid. Not all companies will try to find a sneaky way around, but if they do, you should make sure that you have this detailed so there is no question.
7. Limitation of liability We previously discussed how important limitation of liability was for your agreement and company. To enjoy the benefits of this, however, you will need to include this clause in your agreement. This will detail the fact that the licensee will be accepting the software as is, will not be able to sue for damages, and that you make no warranty for the software and the usage.
8. Terms of termination – In case you ever do need to terminate the agreement, this clause will detail the actions that must be taken by the licensee. This is generally something like destroying the software on site or uninstalling it from the device. You should also include that you can terminate or revoke the software at any time and for any reason without any repercussions.
9. Governing law – This section will detail the governing law for settling any disputes. You will want to make sure that this is set for your state and jurisdiction. You do not want to wind up in court in another state because the user lives there. Make sure you get this in writing so any court proceedings will only take place in your area.