Software license agreements guarantee the rights and liabilities held by each party (the provider of the software and the end-user).
The license is of utmost importance and has very frequently led to million-dollar lawsuits in the recent past.
Creating one such license does require very advanced legal as well as technical knowledge. You can always hire professionals for the job which makes things easy.
Here’s a preliminary, basic guide that anyone can understand. I’m keeping it basic because if you’re here, you clearly are not a legal professional. Hence, let’s keep things light, shouldn’t we?
Table of Contents
Primary elements that must be present in a software license agreement
Creating a software license agreement manually is definitely not an everyday task. It’s very technical and every single word may have massive financial and legal implications.
However, allow me to discuss in the simplest of words, without confusing you with technical jargon what generally is included in these licenses::
1. Extent of allowed usage
Just because someone pays for software, does not give them unlimited access and usage rights. Basically, it’s the section that tells the user what they can and can’t do with it. It also defines the validity of the license, its transferability or exclusivity.
It also generally includes permissions for installations and clauses that specify when copying/backing it up or sharing is allowed or not allowed. The number of devices it can be used on, the number of users who can use it, the exact purpose of the usage (commercial /private) etc. are what can be detailed here.
2. Establish Intellectual Property Rights
In layman’s terms, this is the “ownership” section. Who owns the software and to what extent. The software creator/distributor or anyone creating the license generally retains the rights to the code, design, trademarks, and other elements of the software. If that’s not the case, this too is mentioned in the IPR section.
This section also often underlines the fact that the software hasn’t been “sold” and is rather on a sort of “rental” and the permissions acquired by the buyer are limited.
3. Warranties and the software creator’s liabilities
This is the section that helps manage expectations. It covers what’s promised, and what’s NOT promised. Yes, the latter is important too.
The warranties cover the software’s guarantee to function, or a clause that may state that there’s no such guarantee.
They also cover clauses regarding what happens if the software doesn’t function. Similarly, the liabilities section will cover exactly how much the developer can be held responsible for. E.g. compatibility, data loss, indirect damages, etc. are generally disclaimed and the software can not be termed “defective” for these reasons. In simpler words, it helps limit legal consequences for the developer in case something doesn’t go as expected.
4. Termination
For any license or legal agreement, it’s of utmost importance to define the termination clauses. What ends the licence? Who can revoke the license? What are the conditions under which a license can be revoked? This ensures that both parties have adequate rights to get out of a contract if need be.
5. Some other optional clauses
I’ve often seen licenses include a few other clauses depending on the exact type of software I’m using and the parties involved.
- Data collection/handling: A software may outline clauses that define how, what, and how much data it collects. It also sometimes outlines how that data is stored, processed, or deleted (if ever).
- Third-party agreements: At times, a software may ask you to read other third-party agreements. This is true for those software that use codes/design or other elements from third parties and do not have the right to define their T&C in their own licenses.
- Jurisdiction: You may also often find clauses defining the jurisdiction under which the license is valid, or any disputes may be settled.
Final words- 5 Key Elements to Consider in a Software Licence Agreement
That’s about it folks. Do note that the elements discussed here are the most basic and common. This does not mean that these are the only elements present in a software license agreement.
The exact agreement will depend on the exact software as well as what the developer wants. Some developers offer more liberty to the end users, others may be more conservative. Many other clauses for severability, resolution of disputes, sub-licensing etc. can be included as well.
I’d also recommend using specialized talent and platforms when creating these agreements. This would ensure you use the proper words as the legalities of words can very easily be twisted to mean things you may not want them to mean.
Always remember that the end goal of a software license is not to give the developer unchecked benefits but rather justified benefits to both the involved parties.
