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WHY DO YOU NEED A SOFTWARE LICENSING AGREEMENT?

By Lawfarm Team December 23, 2021


By: - Pragati Sengar

 

WHAT IS A SOFTWARE LICENSING AGREEMENT?

A software license agreement is a legal contract between the software's owner and the buyer of the product. The primary goal of a software licensing agreement is to safeguard the interests of both the firm providing the program and the buyer. The agreement serves as a complete package for the buyer, covering information such as where, how, and how many times it can be installed, the price of the software, and limits on its use. The agreement also states that the customer has the right to copy, alter, or redistribute it.

Company X ltd, for example, is a tech company that sells voice modulation software, and Y, a young musician, is interested in buying it. After X ltd and Y sign a licensing agreement, Y is granted a limited, nonexclusive, and nontransferable license to use the voice modulation software in exchange for the payment of the required fees. The agreement license may also place restrictions on Y, such as not allowing him to share the program with others or not allowing him to change, copy, or reproduce it.

 

WHY DO YOU NEED A SOFTWARE LICENSING?

You must have invested a significant amount of time, money, and effort in the development of your software as a software developer. All your efforts must be protected for them to be worthwhile and yield financial benefits. The agreement safeguards copyrighted software against many types of fraud and infringement. The five most important reasons why every software developer should get into a software licensing agreement before selling their program are outlined below: -

  1. Prevents the software from being abused: - If the vendor and the buyer do not have a licensing agreement, the seller can easily sell or replicate the program without the owner's consent. This makes your product widely available in the market, but you, as the developer, are neither compensated nor recognized. You have no recourse if your product is misappropriated if you don't have a licensing agreement in place. As a result, a licensing agreement prohibits the business and software from being abused.
     
  2. Allows the software to be licensed:- You don't have to sell your product to make it available on the market; you can license it instead. Licensing software is preferable since it allows you to keep all rights and place restrictions on its use. Furthermore, it allows you to license the software to multiple customers and earn money in the long run. An Ltd company's voice modulation software, for example, is unique and in high demand. If A sells his product to just one consumer, he forfeits all his rights and is unable to profit from his invention. They may license their program instead of selling it, which would allow them to not only impose limits but also license it to a larger number of clients, allowing them to make more money.
     
  3. Allows for warranty disclaimers:- Every customer will have distinct expectations from the software you provide, and these expectations can occasionally be unreasonable. A disclaimer of warranties clause might be included in the contract to avoid such scenarios. For example, B, a customer of A Ltd, purchased their voice modulation software and lost his data owing to software issues. He subsequently filed a lawsuit against A ltd, alleging damages and requesting restitution. An Ltd. could now argue that there was no guarantee in their agreement that the program would be bug-free, and that A Ltd. has no duty because B agreed to accept the software as is.
     
  4. Your obligation is reduced:- Failure to minimize liabilities exposes a corporation to multiple lawsuits. These lawsuits tarnish the company's name, take up time, and necessitate financial help. As a result, having a licensing agreement that restricts your liability and discourages customers from filing lawsuits is critical. The liability clause, on the other hand, should be reasonable and equitable to both parties.
     
  5. Allows termination of usage:- A software license agreement allows the owners to cancel or suspend the agreement at any time if the terms of the agreement are not followed, allowing them to always maintain complete control over the software. For example, when B bought software from A Ltd, he agreed to only install it on allowed devices or his contract would be terminated. As a result of B's breach of contract, A Ltd. is free to terminate it.

 

CONCLUSION

The software license agreement protects the rights of the owner by preventing misuse of the software, allowing licensing of the software, allowing disclaimers of warranties, limiting the owner's responsibilities, and allowing termination of usage. Non-exclusivity provisions, non-transferability clauses, rights clauses, modification clauses, breach of contract clauses, limitation of liability clauses, and governing law clauses are all critical clauses to include in any software license.

 

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