Software license agreement

The license agreement is an agreement between the owner of a certain form of intellectual property (such as a patent, a certain copyright or a trademark, etc.) and another party who wants to use this intellectual property under certain conditions.

The software license agreement is a specific license agreement whereby a software supplier makes the software (intellectual property) developed by it available to its customers under certain conditions. Until the rise of software delivery in the Cloud (SaaS), it was very common to deliver software on an on-premise basis. Unlike cloud software, on-premise software is installed locally and run on the computers of the person or organization using the software. Until about 2005, on premise was the most common way of selling software. After that, there has been a huge rise in the provision of software in the cloud. Both methods have advantages and disadvantages. The disadvantage of on premise is that the management and maintenance has to be done by the buyer himself. Important parts of a software license agreement are the granting of the right to use the software. This is the so-called license. This license right can be granted per user, per server, per unit of time or through a combination of these, depending on which revenue model a software vendor chooses.

Usually, the user is not able to make unlimited use of the software, but only, for example, for certain purposes (scope), for a certain period of time or for certain business units. In addition to the license right and the restrictions on it, there are usually also clauses concerning, among other things, warranty, liability, intellectual property, indemnification, maintenance, security, audits and the usual legal clauses, also known as ‘boiler plate language’. As a user of certain software, it is good not to accept the license agreement blindly
since certain clauses might be drafted more advantageous for the seller.

Important questions are for example: “what rights does the user have if the software does not work”, or “how is liability regulated if the software causes damage”, or “does the software comply with the latest security and privacy standards” and “how exactly is the maintenance and support of the software regulated”? A good contract should provide sufficient insight into the above questions. The difference between a master agreement and a regular agreement is that parties only need to enter into a master agreement once. Usually a master agreement applies to the entire company, including subsidiaries and affiliates. However, this must be specifically stated in the contract. If a buyer wants to add new users or buy additional software, this can be done with a simple order form (or purchase order, order form or similar denomination) under the existing contract. A master agreement usually has a long term or even no term.