RR&A’s team is well versed in a variety of commercial contracts, from the more common Master Service Agreement to less common agreements like Licensing Agreements and ISDAs.
When obtaining software, our clients often negotiate a Licensing Agreement. The Licensing Agreement may stand alone or complement a Master Service Agreement (“MSA”), under which the MSA governs liabilities for personnel and any hardware and equipment that is installed on-site to run the software, and the Licensing Agreement regulates the parameters of the use of intellectual property, or the software itself. As the intellectual property being marketed often makes up a large part of a company’s value, the terms of the Licensing Agreement surrounding it are key.
Fundamentally, a License Agreement grants a licensee the use of software, usually with limits on the duration of time and the number of users within a company who may have concurrent access. A licensee may be granted access to only specific software or functions, which may or may not include updates and continued technical support. The licensee can generally expect to pay higher fees for more expansive access and support. The agreement will also likely include a strict prohibition on reverse engineering or re-creating the software for the licensee’s use or resale. It will also include clear language that the licensor retains intellectual property ownership. Aside from the scope of the service, limitations on liability and warranties are frequently negotiated provisions. Licensors typically prefer to offer only limited warranties, such as guaranteeing that their software will meet the agreed-upon specifications and not contain harmful viruses or code that may harm the licensee’s hardware. Additionally, as licensee data is likely utilized within the software, licensors must limit their liability for damages, usually to the fees collected under the agreement. Licensing Agreements typically include mutual indemnities for the benefit and protection of both parties.
An ISDA is an agreement that governs hedging, swaps, and other similar transactions. Although we use the term ISDA, the letters actually stand for the organization that created the agreement, not the agreement itself. The International Swaps and Derivatives Association created a Master Agreement to govern these transactions. The Master Agreement contains all the general terms and conditions needed to effectuate these types of transactions. The parties do not alter the Master Agreement itself. Instead, they modify it through the use of a Schedule, which calls out the specific changes they want to make to the Master Agreement to govern their transactions.
This may seem fairly straightforward, but be careful. Both the Master Agreement and the changes you make in the Schedule can have consequences you may not have considered. A great example is Section 5(a)(vi) – Cross Default, which can put your hedging transaction into default if you, your credit provider, or another entity that the parties specify defaults on a different agreement with the other party. If not properly negotiated, this could lead to the disastrous result of your company missing out on the benefit of well-placed hedge because of a breach under an agreement that you had no control over.
The team at RR&A knows what pitfalls to look out for in these and other commercial contracts. Before you sign your next ISDA or Licensing Agreement, contact Matt Reynolds for his expert opinion to get you the best results for your company.
Disclaimer: The information and material on this website is general information about our practice and firm. This information does not offer specific legal advice and the use of this information does not create an attorney-client relationship with RR&A or any of its attorneys. The information on this website should not be used for legal advice, and persons should not act upon the information on this website without engaging professional legal counsel.