Creating a Software Licensing Agreements That Work

October 09, 2019 5:57 am.

Creating a Software Licensing Agreements That Work

Software licensing agreements, also known as licensing agreements, are an important part of business and even in our personal lives because of the continued influence that technology has on our lives. Any time a person or a business decides to use software, there’s a licensing agreement. The agreement explains the rights and obligations of the user as well as the company or developer that created the software. Although it may appear that many do not fully read the licensing agreement before accepting it, it’s still an important agreement to have and use. In this article, we’re going to explore some key concepts that help create software licensing agreements that work.

The Importance of Clear Language

When is the last time you actually read a licensing agreement in its entirety? Sure, maybe you scan them or read certain sections. One reason why many don’t bother to read the whole agreement is that the language used is confusing for the reader. Yes, there are times when a bit of vagueness may be required. Take a written law as example. Laws are written quite broad for a specific purposes: to cover as many related circumstances as may be required to fulfill the concept of justice or equitable treatment. When a court hears a matter related to that law, they apply it and narrow down the law. So, in licensing agreements, there may be certain areas that should be a bit more broadly written.

However, to create a software licensing agreement that works, it’s important for the language used within it to be clear. This may encourage more users to read the agreement. It also makes it easier for them to understand. This could lead to fewer inadvertent violations of the agreement as well.

Related: Misuse of Software Licensing Understanding Your Cause of Action

Here’s a simple example. Perhaps you’ve created software that you’re licensing to companies. Are they allowed to build upon your code or software to create their own solutions? If so, are they allowed to sell or license that creation? Will you require them to revert some or all of the licensing to you since you created the base product that enabled them to produce their own innovation?

We know that it’s a lot to consider. Yet, it’s probably the most important part of creating a licensing agreement because of how words can be used and, sometimes, misused (even inadvertently). Clear language protects you and better explains how users can utilize your creation.

Provide Definitions to Certain Words

This is certainly related to using clear language, but providing definitions for certain words at the beginning of the document is essential and often overlooked. Define important terms, including “software,” “proprietary,” and other important terms. Describe specific processes.

Why is this important? Don’t we all know what software is? Sure, we know what software is as a whole, but are you also referring to the underlying code? Here’s an unrelated but simple example to help you understand why definitions and descriptions of processes are important. We’ve all seen a cartoon or comedy where a character is doing laundry. They put clothes into the machine, maybe without sorting them. They add half a bottle of soap. Then, the house is suddenly full of bubbles. Sure, they still technically did or tried to do the laundry, but we can all think of at least one problem with what they did: the soap. Others may also think that doing the laundry involves sorting out clothing by color and maybe even by type. It’s still laundry, but the processes are different. If you wanted someone to wash your favorite outfit, you’d want them to do it your way to protect it as much as you could. That’s why definitions and descriptions are important: to protect your creation.

Restrictions and Duration of License

To create a licensing agreement that works, it’s important to address any restrictions that affect the agreement. For example, the user agreeing to the license may not be allowed to sub-license it, distribute it, or otherwise uses it in certain ways.

The length of the license is also important. Is it a yearly license? Is it a lifetime license? Is it a license that’s only good for use by so many people? Is the license good only in the United States or is it good world-wide? 

Dispute Settlement Related to Agreement Issues

It is our hope that you never have a dispute over your licensing agreement with a user. It is important to keep in mind that it could happen. Because it is a possibility, it is something you can address, at least partially, before it occurs. The best way to do this is to create a dispute settlement clause. You’ll want to consider whether disputes are settled through mandatory arbitration or mediation. Maybe you just want the laws of a certain state used. All of that information can be placed in this section. Again, it needs to be clearly worded.

Name the Jurisdiction That Oversees the Software Licensing Agreement

Related to dispute settlement is the jurisdiction clause. This clause states which jurisdiction will oversee the software licensing agreement. Maybe it is the state where you incorporated because you believe they are more business friendly. Maybe it is the state where you live to make it easier for you to handle any potential issue.

Payments Related to the Software

There are several options to choose from related to payment. You could state that it is a single payment. You could state that there are certain dates on which payments are due. You may have certain criteria that relates to the payment amount. If you’re dealing with royalties, you’ll want to address that separately.

Denver, Colorado Software Licensing Attorney

If you’re ready to create a software licensing agreement that works for your needs, Larsen Law Offices, LLC is an experienced law office ready to help. With advanced degrees in technology and communications in addition to a licensed lawyer practicing in Denver, Susan Larsen has more than 30 years of experience. To learn more about how Larsen Law can help you prepare a licensing agreement that meets your needs, call us today to schedule your consultation: 303-520-6030.