ABSTRACT
Initial Matters ☐ Customer executes mutual NDA ☐ NDA only addresses confidentiality ☐ Use company’s standard license agreement ☐ Give customer proposed agreement early ☐ Customer should return redline of agreement before negotiation begins
☐ No calls to “talk over the agreement” before redlines ☐ Respond to customer’s redline with company’s redline ☐ Accept customer’s revisions or propose alternative language ☐ Show customer’s form to legal counsel ☐ No negotiating revisions without legal counsel ☐ No discussion of agreement with customer’s attorneys ☐ Create basic term sheet ☐ Never rely on redlines produced by customer or third party ☐ Require editable Word documents ☐ Be cautious in mailing documents outside company ☐ Defer negotiation of open provisions ☐ Negotiate telephonically ☐ Business and legal teams need e-mail access during negotiations ☐ Defer negotiation for questions requiring internal consideration
License/Ownership Scope ☐ Non-exclusive
☐ Nontransferable ☐ Nonsublicensable ☐ No irrevocable licenses ☐ Required development activities? ☐ No access to source code ☐ Customer must use standard end user license agreement ☐ Licensee has no ownership interest in company’s software
Pricing ☐ Commensurate with scope of license granted ☐ No single-price broad licenses ☐ Specify uses for software in fixed-price license ☐ Annual maintenance fee ☐ Major new versions and new software products ☐ Company retains audit rights
Limitations of Liability ☐ Includes exclusion of consequential damages and cap on direct damages
☐ If mutual, exclude customer misuse of company software and IP ☐ Cap on company’s overall damages ☐ Breaches of confidentiality and willful misconduct exclusions
Warranties ☐ Requires material compliance with company’s documentation ☐ No longer than 90 days ☐ Exclusive remedy for breach is repair ☐ Implied warranties ☐ Written warranties not included in agreement
Support and Maintenance ☐ Support vs. maintenance ☐ No new versions or new functionality in support ☐ No material alterations to standard support program ☐ Priced annually ☐ Automatic renewal of support term ☐ No commitment to support after five years ☐ No agreements to provide “free” professional services ☐ Initial fixed fees become “then current rates”
Payment ☐ Based on objective and easily identifiable event ☐ Testing/acceptance language reviewed by legal counsel ☐ License fees not subject to refund
☐ Monthly invoices ☐ No fixed-fee arrangements
Term and Termination ☐ Consistency between license type and term of support ☐ Initial term with automatic year-to-year renewal ☐ Licenses immediately terminate ☐ Licenses to end users do not terminate with customer agreement ☐ Misuse terminates perpetual license ☐ Opportunity to cure before termination for cause
Infringement Indemnification ☐ Company liability unlimited ☐ Legal counsel drafts indemnification ☐ Company controls defense/settlement ☐ “Standing alone” ☐ Approved list of countries/jurisdictions
This chapter discusses the different topics and issues that should be considered in negotiating a customer (i.e., outbound) software license or OEM agreement. The summary is designed to minimize the time required to negotiate these types of agreements, make the process proceed more smoothly, and ensure your company’s business and legal objectives are achieved.
