As opposed to a Software as a Service (“SAAS”) Agreement (see https://www.weblaw.co.uk/it-contract-templates/software-as-a-service/) , which offers a customer access and use of a seller’s software on a subscription basis via the internet i.e. “the cloud”, licence agreements are used when software is being licensed by the licensor to a licensee for a fixed term or in perpetuity and often for a fixed one-off price.
Licensing agreements cover a wide range of instances and not just technical solutions. The scenarios include fintech, medtech, edtech, AI and ML as well as many other technology subsets and domains.
Given the myriad permutations licence agreements can cover, licence agreements can become extremely complex and intricate. Amongst other things, it is important clearly to define the scope of use, number of permitted users (where applicable), renewal options, fees and royalties, intellectual property rights, limitation of liability and indemnities in the agreement.
One of the most important elements will be the financial arrangements.
Besides the frequency and incidence, notably whether the fees are one-off or recurring, licensors should also consider if there ought to be a mechanism in place that deals with increases in the fees to reflect updates or upgrades or the provision of installation, maintenance and support services.
In some arrangements, a royalty payment may be payable to a third party brand, sports team, celebrity or TV personality in respect of each sale of the product if it incorporates a trademark, logo or image.
Intellectual Property Rights
Licensing agreements must also deal with the legalities and ownership of intellectual property rights, notably copyright, patents and trademarks. Licensees may insist on a guarantee that the licensor owns the rights to the intellectual property in the software or has the appropriate licences in place for such use.
A licensee should also demand protection against any third party claims in the form of warranties and indemnities lest the product infringes intellectual property rights belonging to a third party.
If you are in the process of drafting or negotiating a licence agreement please contact us using the contact form.
For further information, please contact Simon Halberstam at Simon.Halberstam@smab.co.uk