Checklist of Issues in Drafting and Negotiating Software License Agreements

CHECKLIST OF ISSUES IN DRAFTING AND NEGOTIATING
SOFTWARE LICENSE AGREEMENTS

I. Rights Granted under the License

A. Exclusive vs. non-exclusive - primarily an issue for custom-made software

B. Revocable vs. irrevocable - more a breach issue

C. Right to use the user manual and related documentation

II. Term of License

A. Perpetual or defined time period?

B. Renewal rights and terms

III. Scope of License

A. Licensee internal operations only?

B. Number of users - named users/concurrent users and variations

C. Number of sites/number of computers ("boxes")

D. Copying rights/backup - copyright rights

E. Use by subsidiaries and affiliates

F. Right to modify and combine with other products/who owns modifications?/Copyright issues

G. Prohibited uses

IV. Transferability and Sublicensing Restrictions

A. Typically, license may not be assigned, transferred, sublicensed, or pledged

B. Typically, licensee may not use the software for third party training, commercial time sharing, rental, or service bureau use

C. Restrictions on use at a particular location?

V. Right to Source Code

A. Does licensee need to obtain or have access to source code? How practical even if obtained?

B. Stability of licensor

C. Source code escrow and alternatives

D. Limitations on when source code could be accessed or used

E. Updating the source code available to the licensee

VI. Ownership of the Software

A. Express statement that licensor owns and retains all title, copyright, and other proprietary rights in the software and documentation

B. Trade secret acknowledgement

C. Limiting access of employees, consultants, or third party

D. Representation of licensor as to ownership of the software

E. Ownership issues with respect to licensee modifications

F. Ownership of user-created copies

VII. Payment Provisions

A. Schedule of payments

B. Discounts

C. Payments linked to licensee accepting test of the software

D. Late fees

E. Shipping charges

F. Sales, use, property, value added or other...