A software licensing guide and checklist prepared from the Licensee perspective. Use this checklist for any software acquisition, but it should be especially valuable for customized software and development projects whose cost and risk elements are always much greater. You are free to use this checklist as you deem appropriate, but please read the Disclaimer that appears below.
Scope of Software License
- Exclusive or non-exclusive license (just you, or others can license)
- Named-entity or enterprise license (affiliate use)
- Transferable or non-transferable license (consider need to transfer internally for tax or other reasons)
- Object code or source code (source code rare outside of open source applications)
- License extends to updates and enhancements
- Number of installed copies (production, test, QA, disaster recovery)
- Licensee modifications (ownership and other issues)
Software License Type
- Perpetual (usually preferred)
- Term (usually avoid)
- Subscription (SaaS and variants – may be preferred)
- Revenue-based (avoid)
- MIPS (avoid)
- Instance (avoid)
- Floating (a/k/a “concurrent license” or “network license”; may be desirable for expensive software with a small and defined user base)
Software Use and Restrictions
- Designated server
- Designated operating system (Windows, etc.)
- Database compatibility (SQL, etc.)
- Physical location
- Users
- Virtualization issues
Software License Warranties
- Conformance (functionality in accordance with documentation and specifications)
- Conformance warranty of unlimited duration
- Material errors or defects
- Integration (third-party software, including middleware)
- Testing and acceptance
- Compliance with all state and federal law, rules and regulations
- Perpetual support
- Flex option (license fees can be applied to new releases or different products)
- Good copy of software (including defective media)
- Bug fixes
- Licensor title
- Infringement
- Copyright registration (infringement and enforceability issues)
- Malware
- Destruction or corruption of system data
- Duration of warranties (may vary by subject matter; commence upon productive use)
- Remedies and exceptions
Software Support and Maintenance
- Support levels
- Remedy for breach of support obligations
- Priority of bug fixes
- Duration of support (current versions, etc.)
- Effect of stopping maintenance (parking, etc.)
- Reverse maintenance options
- Consider no maintenance option
- Virtualization issues
Confidentiality
- Your organization
- No press releases or other publicity (leverage for fee reductions)
- Standard of care (recipient standard but no less than reasonable care)
- Return of confidential information
Ownership Issues
- Base software (typically no transfer by Licensor)
- Custom software (work made for hire)
- Licensor modifications
- Licensee modifications
- Licensee data
- Ideas and suggestions for improvement
Source Code Escrow
- Escrow agent
- Release terms
- Who pays for escrow
- Source code delivery and validation
- Licensee rights upon release event
Dispute Resolution
- Escalation and time frames
- Arbitration and mediation
- Enforceability of arbitration award or mediation decision
- Jurisdiction and venue
- Award of costs
- Services of process by means allowed for notice
General Software License Provisions
- Bind assignors (sale of Licensor or its assets)
- Choice of law and venue
- Notices
- Independent parties (relationship of vendor and vendee)
- No waiver of breach
- Interpretation and construal
Software Implementation Issues
- Detailed CSA and SOWs
- Selection of Licensor or third-party contractor personnel (“A-Team” issues)
- Roles and responsibilities (Licensee versus Licensor)
- Licensee expectations and Licensor or third-party contractor standard of performance
- Phases and time frames
- Deliverables and milestones
- Insurance requirements
- Security requirements
- Right to replace personnel
- Remedies for failed implementation (software buy-back, service fees, etc.)
- Testing and acceptance
- Roll-out strategy (big bang, phased, etc.)
DISCLAIMER: The above checklist is provided for informational purposes only, and you should not rely upon it for any purpose. The checklist is NOT intended to be comprehensive, and other factors and considerations will certainly apply to your acquisition of any software product or any software customization or development effort. Further, the importance of each criterion above will necessarily vary based on the needs and preferences of your organization. You are encouraged to use the checklist in combination with other relevant resources, including when appropriate, the advice and counsel of an attorney with software licensing experience.
Tags: Checklist, Software Acquisitions, Software Attorney, Software Licensing