Software licences

Which software licence?

The end user licence agreement (EULA) is quite different from the other licence agreements available on this site. A EULA regulates the relationship between a software licensor and an end user, whereas a regular software licence regulates the relationship between the licensor and a customer. Accordingly, you may need both a regular software licence agreement and a EULA for licensing a particular piece of software.

In a B2B situation, the software licence agreement would typically be signed by both the licensor and the customer, while the EULA would be attached to the main agreement as a schedule or exhibit, and also included with the software so that the end users (e.g. employees of the customer) have to each accept the EULA before using the software. The idea of using such a two-tier structure is to give the licensor rights against both the customer and the end user in the event that the software is misused.

The software licence agreements and software licence and maintenance agreements come in two forms: standard and premium. The standard versions were created by removing some of the more optional provisions from the premium versions. In addition to those clauses in the standard versions, the premium versions include clauses covering the escrow of source code, indemnities, the protection of confidential information, non-solicitation, and the security of materials licensed under the agreements.

Each software licence and maintenance agreement is identical to the equivalent version of the software licence agreement, but with added support and maintenance provisions.

Key clauses of software licences

In this section, we analyse some of the most important sections of the software licence agreement, and consider the differences between the standard and premium versions. See, also, details of our software support and maintenance agreements.

Licence

The most important clause in a software licence is of course the licensing clause itself. The licence included with these agreements is designed to be flexible and easy to adapt, whilst offering a good level of protection to the licensor.

The licence would usually be non-exclusive, although there are circumstances where limited or even general exclusivity will be appropriate. Again, the licence would usually be granted for the entire world, although there may be circumstances where it would be appropriate to limit the licence geographically.

The suggested licence covers the installation of the software, the use of the software in accordance with its documentation, and the backing up of the software. The premium version of the agreement also includes an optional right to alter the software.

The licensing limitations clause specifies the commercial limits on the licence. How many machines may the software be installed on? Can the software only be used at specified premises? Can the software only be used by named users and their replacements from time to time? Is there a limit on the number of concurrent users of the software? What classes of person will be permitted to use the software? Typically, use might be limited to the employees and officers of a company, although in other cases it might extent to sub-contractors and others. The right mix of licensing limitations will be depend upon the nature of the software, the marketplace, and the vendor's business model.

The licensing restrictions clause may be used to prohibit specific types of action in relation to the software. The licensee would, for example, usually be prohibited from sub-licensing, reselling, redistributing and reverse engineering the software (subject to the requirements of applicable law).

An audit clause is included in both versions of the software licence agreement.

Charges

Different software vendors charge for licences in very different ways. The substance of the charges is set out in these agreements in a schedule. The suggested provision covers the licensing of the software for a fixed amount per specified period (e.g. £1 per month), for a fixed amount per licensed user per specified period, or for a fixed amount per installation per specified period.

A variation clause is also included, which provides that the licensor may alter the charges by giving a set period of written notice to the licensee. The right to alter the charges may be limit by reference to the the growth in the the Retail Prices Index.

Warranties

The licensor warranties included in the software licence templates are as follows:

• a warranty that the licensor has the right to enter into the agreement and perform its obligations under the agreement;
• a warranty that the software will perform (or perform substantially) in accordance with the software documentation (either generally or as at the time of deliver);
• a warranty that the software will not cause legal difficulties, whether as a result of infringing someone's IP rights or otherwise;
• a warranty that the media upon which the software is provided will be defect-free; and
• a warranty that no malware will be bundled with the software.

Not all of the warranties will be appropriate for every licence.