Scope of Licensing Agt pic

The Scope of the License in Software Licensing Agreements

Licensor’s Perspective

If you are the owner of software and you want to allow other parties the right to use the software while maintaining ownership and control over it, you need a software licensing agreement. As a licensor, you can limit the scope of the license by defining how and for what purpose the licensee is allowed to use the software. A restricted license only allows the licensee to use the object code of the software, not the software’s source code. A licensor may also want to further restrict the license by limiting:

  • Fields of use (for example, for use only at the licensee’s internal business purposes)
  • Geographic use restrictions
  • The number of concurrent users allowed
  • The hardware upon which the licensed software may be used
  • The ability to transfer the software license

A licensor is more likely to seek additional revenue by enforcing the scope restrictions in an economic downturn. Thus, restrictions on the ability to transfer the license can allow the licensor the ability to extract additional fees if the licensee wants to assign the license.

Licensee’s Perspective

A licensee typically seeks to negotiate a broader license to help ensure it has adequate rights to use the software as needed. If a licensee does not sufficiently negotiate the ‘terms of use’ and later discovers it must exceed the restrictions, the licensee will have to renegotiate and likely pay additional fees. Thus, it is important for the licensee to carefully consider what its future needs of the software will be. If this is not a known factor, the licensee may consider including a means for increasing the limits imposed by the licensor in the contract, and specifying the amount to be paid for the changes. Finally, and particularly if the licensee is paying for development of all or a portion of the software, a licensee may wish to negotiate to have the exclusive right to use the licensed software in order to prevent other parties or competitors from being able to use the software.

When parties are negotiating a software licensing agreement, it is imperative that both the licensor and the licensee pay close attention to the provision regarding the scope of the license.

If you have questions regarding business law matters, contact us today to schedule an initial consultation. Leslie S. Marell has been practicing business and commercial law for over 25 years. She is established in private practice and has extensive legal experience counseling companies in the areas of business contracts and transactions, purchasing, sales, marketing, computer and technology law, employment law and day to day legal matters. Let us provide your company the advice and guidance you need.

0 0 0 0 0

Leave a Reply

Your email address will not be published. Required fields are marked *

You may use these HTML tags and attributes: <a href="" title=""> <abbr title=""> <acronym title=""> <b> <blockquote cite=""> <cite> <code> <del datetime=""> <em> <i> <q cite=""> <strike> <strong>