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.