E-Licences and Software
Contracts
Law, Practice and Précédents
Robert Bond
Partner, Hobson Audley
Butterworths
London, Charlottesville, Dublin, Durban, Edinburgh,
Hong Kong, Kuala Lumpur, New Delhi, Singapore, Sydney,
Toronto, Wellington.
Contents
Préface v
Acknowledgments vii Glossary xv
Table of statutes xxvii Table of cases xxix
PART I INTRODUCTION 1
1 Understanding software licence agreements 3
1.1 What is a software licence agreement? 3
1.2 What types of software and databases are distributed under contract and what laws protect them? 5
1.2.1 Mainframe and minicomputer software 5 1.2.2 Microcomputer software 5
1.2.3 Commercially available software 6 1.2.4 Commercially available databases 6 1.2.5 Non-contract protection 6
1.3 General comments 7
1.4 Goals and purposes of parties to a software licence agreement 7 1.4.1 In gênerai 7
1.4.2 Why are software licence agreements required by many software providers? 8
1.5 Some différences between software sale, lease and licence transactions 9 1.5.1 Légal concepts and characteristics 9
1.5.2 Légal concept of sale 9 1.5.3 Légal concept of lease 10 1.5.4 Légal concept of licence 10
1.6 Weaknesses of the software licence concept 11
2 Some gênerai types of software licence agreements 13
2.1 Developer-publisher licence agreements 13 2.2 Publisher-distributor licence agreements 14
2.2.1 Domestic distributors, OEMs and VARs 14 2.2.2 Foreign distributors, OEMs and VARs 15 2.3 User licence agreements 16
2.3.1 Signed licence agreements 16
2.3.2 Shrink-wrap licence agreements 16 2.3.3 Click-wrap licence agreements 18 2.4 Escrow and TTP agreements 18
2.5 Runtime licence agreements 19 2.6 Manufacturing licence 20 2.7 Cross-licensing 20
2.8 Joint venture licensing 21
2.9 Core technology licence agreements 21 2.10 Software conversion agreements 21
2.11 Database and access software licence agreements 22 2.12 Maintenance service licence agreements 22
2.13 Facilities management agreements 23 2.14 Web site agreements 23
2.15 Open source licences 24 2.15.1 Introduction 24
2.15.2 Historical analysis of the open source movement 24 2.15.3 The Open Source Définition 25
2.15.4 Example licences 27
2.15.5 Analysis of licences and their Open Source compliance 27 2.15.6 Choosing a licence 29
2.15.7 The future 30
2.16 Application service provider licences 31
PART II LAWS AND REGULATIONS 33
3 Introduction to laws relevant to software contracts 35
3.1 Overview 35 3.2 Patent law 35 3.3 Copyright 36 3.4 Trade secret law 39 3.5 Trademark law 40 3.6 Contract law 41
4 European Union law 43
4.1 Overview 43 4.2 Compétition law 43
4.3 EC Directive on the légal protection of computer programs 44 4.4 EC Directive on rental and lending rights and certain rights relating to
copyright 45
4.5 EC Directive harmonising the term of protection of copyright and certain related rights 45
4.6 EC Directive on the légal protection of databases 45 4.7 EC Directive on unfair contract terms 46
4.8 EC Directive on electronic signatures 46
4.9 EC Directive on distance selling of goods and services 47 4.10 EC Directive on data protection 48
4.11 EC Directive on certain légal aspects of electronic commerce 50 4.12 Moral rights 51
PART III PREPARING FOR NEGOTIATIONS 53 5 Understanding negotiating principles 55
5.1 Introduction 55
5.2 What is negotiation? 55 5.3 Why negotiate? 56 5.4 The give/get principle 56 5.5 What is a win-win deal? 57 5.6 Negotiating styles and ethics 57 5.7 Negotiating styles 58
6 Preparing for negotiations 61
6.1 Provider préparations 61 6.1.1 In gênerai 61
6.1.2 Sales force training, customer qualification and negotiating expérience 61
6.1.3 Standard charges 62
6.1.4 Standard, printed, protective contracts 62 6.1.5 Pre-negotiation groundwork with customer 63 6.1.6 Internai deal structuring and negotiations 64
6.1.7 Préparation of substantive fallback positions on open points and early concerns 65
6.1.8 Inter-departmental meetings to plan negotiating strategy and tactics 65
6.1.9 Préparation of contracts before negotiations commence 65 6.2 Customer préparations 66
6.2.1 In gênerai 66
6.2.2 In-house needs analysis and procurement décision 66
6.2.3 Consultant-aided needs analysis and procurement décision 67 6.2.4 Consensus need détermination 68
6.2.5 Sélection of acquisition structure and negotiating strategy and tactics 71
6.2.6 Obtain management support 71
6.2.7 Select one team member as leader and interface 71 6.2.8 Know when to hire outside help 71
PART IV PREPARING FOR DRAFTING 73
7 Heads of Agreement and Mémorandum of Understanding 75
7.1 The use of Heads of Agreement 75 7.1.1 Introduction 75
7.1.2 Contract skeleton 75 7.1.3 Drafting the Heads 76 7.1.4 Three golden rules 76
8 Checklist of the contents of a typical software licence agreement 79
8.1 Overview 79 8.1.1 Parties 79 8.1.2 Récitals 80
8.1.3 Définitions 80 8.1.4 Payment(s) 81 8.1.5 Licence grant 83 8.1.6 Delivery 88
8.1.7 Site and host préparation 88 8.1.8 Installation 89
8.1.9 Acceptance tests 89 8.1.10 Term of the agreement 91
8.1.11 Termination or expiration and resuit 93 8.1.12 Service and updates maintenance 94 8.1.13 Enhancements 94
8.1.14 Escrow 94 8.1.15 Training 95
8.1.16 Consulting and development services 95 8.1.17 Warranties in gênerai 96
8.1.18 Limited warranty 96
8.1.19 Ongoing performance obligations 96 8.1.20 Virus and error warranty 97
8.1.21 Year 2000 and multi-date warranty 98 8.1.22 EMU warranty 99
8.1.23 Représentations, warranties and indemnification regarding intellectual property rights 100
8.1.24 Limitation of liability and remedy 100 8.1.25 Limitation on recoverable damages 102
8.1.26 Nature and scope of consequential damages exclusion 103 8.1.27 Most favoured customer 104
8.1.28 Change control 105
8.1.29 Availability of licensee's computer System to licensor for maintenance, training and development purposes 105
8.1.30 Recovery of légal fées by prevailing party 106 8.1.31 Statute of limitations 106
8.1.32 Risk of loss or damage during transit 106 8.1.33 Force majeure 106
8.1.34 Assignment of contract rights and obligations 107 8.1.35 Notice provisions 107
8.1.36 Entire agreement and variations 107 8.1.37 Severability 108
8.1.38 Confidentiality 109
8.1.39 Governing law and jurisdiction 110 9 Necessary licence provisions 113
9.1 Key licence provisions from the provider's viewpoint 113 9.1.1 Introduction 113
9.1.2 What will I provide, when and for how long? 113 9.1.3 What will I receive, when and for how long? 114
9.1.4 What business and légal risks do I face that I should minimise or neutralise? 115
9.1.5 Other provisions 115
9.2 Key licence provisions from the customer's viewpoint 116 9.2.1 Introduction 116
9.2.2 Key questions 116 9.2.3 Other provisions 118 9.2.4 Clarity and précision 120
PARTV NEGOTIATING TACTICS AND TECHNIQUES 121 10 Creative problem solving 123
10.1 Introduction - reduce the issue to économies 123 10.2 Redefining the problem 123
10.3 Other techniques 124
10.3.1 Recognise opportunities 125 10.3.2 Borrowideas 125
10.3.3 Look at the forest, not just the trees 125 10.3.4 Look for patterns 125
10.3.5 Don't ignore the obvious 125 10.3.6 Look at the difficulty differently 126 10.3.7 Ask: What if? 126
10.3.8 What rules can you break? 126 10.3.9 Combine or link ideas 126 10.3.10 Change names 126
10.3.11 Imagine how someone else would solve the problem 126 10.3.12 Notice the positive 127
10.3.13 Expect résistance and sell 127
11 The use of non-verbals in negotiation 129
11.1 Introduction 129
11.2 Silence - negotiating with yourself 129 11.3 Bodylanguage 129
11.3.1 Crossedarms 130
11.3.2 The hand over the mouth 131 11.3.3 Theeyes 131
11.4 Personal space 132 11.5 Seating positions 133
APPENDIX: PRECEDENTS 137
1 Shrink-wrap licence 139
2 Click/web-wrap software évaluation licence 142 3 Sample open source licence 145
4 Licence and service agreement 148
5 Multimedia product licence and distribution agreement 155 6 Software escrow agreement 168
7 Joint software development agreement 175 8 Reciprocal software licence agreement 182
9 Software licence support and maintenance agreement 185 10 Software licence code 199
11 Invitation to tender 202
12 Software sales partner agreement 210
13 Content/member portai partner agreement 218 14 Portai partner subscriber terms and conditions 226 15 Internet linking agreement 230
16 Freeware licence agreement 235 17 On-line publishing agreement 237
18 Agreement for web site software development, licensing and support 243 19 Host services agreement 254
20 Computer games development agreement 258 Bibliography 279
Index 281
