IT Procurement – Key legal issues

People are usually so focussed on the price and functionality issues when procuring software, hardware or IT services that they ignore the legal issues that are key to risk management and continuity of service.

Simon Halberstam, head of the weblaw group  and legal advisor to the IBM CUA, Socitm and many IT suppliers and users provides an overview of some of the key legal issues.  For further information contact Simon. He will provide a free outline review of prospective suppliers’ terms and conditions if required.

  • Transfer of Intellectual Property Rights (“IPR”)
  • Flexibility
  • Service Level Agreement (SLA)
  • IPR Indemnity
  • Liability
  • Source Code Escrow

Transfer of Intellectual Property Rights (“IPR”)

If the software (or a website) is being developed or customised for you, make sure you get the IPR assigned to you. You will additionally need to verify that the party purporting to assign the rights to you is the actual owner.

Flexibility

Sofware licences are prescriptive. You are only allowed to do what they expressly permit. You need to make sure that you can move the software to a different server and location, that a third party e.g. an outsource can use it on your behalf and that you can transfer the licence to a third party.

Service Level Agreement (SLA)

Nowadays, software is often provide as a service. There are many modalities including Software as a Service (SAAS) , Cloud Computing and ASP.  Each of these will depend on the internet as a backbone.  The internet is subject to glitches. To protect yourself, you will  need to agree an SLA which provides the appropriate guarantees in terms of uptime, backups, disaster recovery and business continuity and may provide service credits to you in the event of breach. An SLA would also

IPR Indemnity

If a third party alleges that the software that has been provided to you is actually wholly or partly theirs, you may well face a large claim for unlicensed use or copyright infringement. Furthermore, you may be precluded from making any further use of the software. With this in mind, you need to ensure that the contract contains a comprehensive IPR indemnity from the provider.

Liability

Most standard software licences and development contracts contain draconian exclusions and limitations of liability. This may mean that even if the provider is in breach of the contract, your recourse is very limited.  These clauses need to be negotiated carefully so that you are not left in the proverbial lurch.

Source Code Escrow

You need to secure access to the source code of the software if the developer goes bust or fails to maintain it properly. To protect your position, demand that the source code be put in escrow with an independent third party.

For further information, please call Simon Halberstam on 020 3206 2781 or via email to [email protected].