10/13/2020 Software License Agreement Template | LegalNature

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Help Guide
For a business, its software is intellectual property and a valued business asset. It deserves certain protections and
defined terms and conditions when the software is being used by a customer. LegalNature's software license
agreement helps articulate how the licensor and licensee want the software to be used and help the parties
establish a sound business relationship based on the benefits the software offers.

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Important: This software license agreement is appropriate for situations where the software owner (the licensor)
Software
permits License the
or licenses software "as is" to the user (the licensee) for their use. It does not provideGet
Agreement anyStarted
additional
development, customization, or servicing by the licensor. This is not a software development contract to customize
the software to the licensee's unique specifications. This agreement is also not a "Software as a Service" (SaaS)
agreement where the software is generally hosted by the licensor and made available to the licensee for access on
a pay-per-use or subscription basis.

Definitions

The definitions section of LegalNature's agreement contains a list of words or concepts that have very specific
meaning within this agreement alone. For example, the word "Documentation" in the context of this agreement
does not mean any information or records, but rather manuals and documents specifically relating to the
software's functionality, components, features, or requirements. When reading through the agreement, remember
to consult this section for any defined terms to understand their specific significance and effect within this
software license agreement.

License Details and Grant

This section contains the main details about the scope of the license granted using the answers you supply
regarding the license's access and use parameters.

Exclusive or Non-Exclusive License

An exclusive license gives the licensee exclusive right to use the software. No one else will have the right to use the
software during the time frame that the licensee has the right to the software as its sole user. This type of license
generally garners a higher fee from the licensor since the licensor cannot generate additional profits by licensing
the same software to other customers. A non-exclusive license can be used by many unrelated users so long as the
licensor grants permission for their use.

Sublicense
Sublicensing concerns how the licensee can use the software in relation to third parties not included in this
contract. Software sublicensing is the concept that a third party may use part or all of the software through their
relationship with the licensee alone. For example, if sublicensing is allowed, the licensee may allow a non-related
third party to use the licensor's software and even receive payment for the third party's use of the licensor's
software.

Licensors generally want control over the distribution of their software and may prefer to grant licenses that do
not allow sublicensing. In making this license non-sublicensable, any third party that wants to use the software will
need to obtain a license directly from the licensor instead of going around the licensor.

License Assignment or Unilateral Transfer of Rights

An assignment is different from sublicensing in that it transfers all the licensee's rights and responsibilities
contained in this agreement on to a third party. This is a major change to any agreement and essentially changes
who the licensor is contracting with. Customarily, such a change to the parties in a contract would require the
consent of all parties. However, if the licensor is comfortable with contracting with any third party as long as they
accept all the terms in this agreement just as the licensee did, then you will indicate that the license may be
transferred unilaterally by the licensee. If the licensor wants full control and the opportunity to vet who uses their
software, then you will not want to allow unilateral transfer.

Access and Use

Software access and use is particularly important in a software license agreement because, unlike a traditional
business asset like a physical computer or machine, software can be extremely easy to copy, duplicate, or transfer.
To control the value of the asset, licensors can place contractual limitations on the license granted to the licensee.
For example, this software could be limited for use 1) on only 10 of the licensee's computers, or 2) for 30 of
licensee's employees, or 3) on an unlimited number of computers and users but only at the licensee's offices, or 4)
on two of the licensee's computers and keep one copy as backup for disaster recovery only. LegalNature allows

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you to customize the software's access and use criteria and create your unique license grant. If the license grant
Software
does License
not have Agreementon the number of copies or locations of access, then you will needGet
any restrictions
Started
to allow the
licensee to use unlimited copies of the software from any location.

Open Source Licenses

Some software contains open source code or technology that is widely available for a variety of uses. However,
such use of open source code or technology actually comes with its own open source license or public license. The
licensor should be aware that if any part of their software contains open source components, the open source or
public license information often requires the components to be readily identifiable and documented.

License Restrictions

Beyond the number of copies or location access for the software, there are some general prohibitions that the
licensee must comply with. This section articulates these prohibitions. The prohibitions generally protect the
intellectual property of the licensor and include common sense restrictions. For instance, the licensee may not
copy the software, lend out the software without the licensor's permission, reverse engineer the software, bypass
the software's security measures, misappropriate the licensor's intellectual property in any part of the software, use
the license in applications that could result in injury or death, or use the software outside of the limitations of the
license grant in general.

Term

The term establishes for how long the licensee can use the software under the parameters set by this agreement. If
the parties want to continue the software license agreement indefinitely until one party decides the relationship is
no longer suitable, then you may enter "Perpetual" for the term duration. If the parties know in advance exactly
when the licensee will stop using the software under the terms of the agreement, then you may input that specific
date. If the parties want to establish the duration of the contract in terms of a period basis such as "five years" or
"18 months," then enter the duration.

Delivery

Software may be delivered to the licensee in a variety of ways. The traditional method is a physical delivery on a
tangible storage media such as CD, DVD, USB, external hard drive, and the like. This may add physical delivery time
through the post or require coordination between the licensor and licensee to meet and receive the physical
storage media. It has also become commonplace to deliver software electronically via email, through private
networks, downloaded from hosted websites, and more. This method could make the delivery time more
instantaneous but may require a certain degree of technological sophistication from both the licensor and licensee.
The licensor and licensee should consider and select the delivery method, time frame, and location that suits both
parties' needs.

Installation

Some licensors offer installation services as an added bonus for the licensee's convenience and to ensure their
software is installed properly. Other licensors prefer to leave the installation to the licensee and avoid any liability
that may arise from using the licensee's computers or network systems. The details regarding installation service, if
any, should be decided in this agreement so both parties have the same expectations about who will set up the
software.

Fees and Taxes

The license fee is basically the cost of licensing the software. It can be measured by different metrics. Some
companies prefer a lump sum total for unlimited use restrictions; others prefer to pay for their exact use, such as
having a fixed fee per user, per computer used, per installation, or per location used. LegalNature allows you to
choose from all these options to decide the appropriate pricing basis for your agreement.

While the license fee is the most common type of fee in a software license agreement, your agreement may
include other fee types and structures such as an installation fee and training fee for the licensor to teach the
licensee and their employees or representatives how to make the most of the software. Taxes are not included in
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this contract, so the licensee should be aware that it is responsible for any taxes that may be assessed in this
Software License Agreement Get Started
agreement.

Payment

In addition to the manner in which the software is used and the fee structure considerations, payment for the fee is
often dependent on the business relationship between the licensor and licensee. When deciding on what kind of
payment structure to use, the licensor may wish to take into consideration the duration of the agreement, the
creditworthiness of the licensee, and how the licensee will use the software and then evaluate what is commercially
reasonable based on all these factors.

This agreement also includes a standard late payment term that provides some remedy options for the licensor if
the licensee is late on payment. These remedies include the ability to charge interest or obtain reimbursement for
the licensor's costs, such as the cost of using a collection agency, disabling the software technically, or suspending
or terminating this software license agreement altogether.

Acceptance

This section affords the licensee the ability to reject the software or make sure the software works properly before
the licensor is deemed to have completed their obligation of delivering on the software. It sets out a process by
which the licensee determines the criteria of what it means for the software to be working properly. For example, a
test for a spreadsheet-like software function could be to calculate the appropriate numbers in a formula with
expected results. The licensor will carry out the test with the licensee or its representative present and both parties
can witness the software being tested.

Ideally, the software test will succeed and the licensee will accept that the software is working properly. However, if
the software should fail and generate unacceptable or unexpected results, the licensor has the opportunity to
correct the software error. Additionally, if the licensor is unable to address the software error, the licensee has the
opportunity to reject the software and terminate the agreement.

Acceptance testing may be appropriate if the licensor and licensee both want a process that assures the software
functions as described. It is a quality test for the licensee and documentation of properly functioning software for
the licensor. This is an optional process available in this form to help both the licensor and licensee establish a fair
way to test the software.

Maintenance and New Version 

From time to time, the licensor may release updates on the software that does not substantially change the
software's functions but enhances the software in minute but helpful ways. This is a maintenance release and is
offered at no cost to the licensee. It is vastly different from a new version of the software that contains many more
changes and upgrades.

LegalNature's software license agreement grants the licensee the right to receive any maintenance releases that
may be released at the licensor's sole discretion during the term of this agreement. However, the licensee does not
have any rights to new versions of the software. If the licensee wishes to use a new version of the software, the
licensee must enter into a separate negotiation and software license agreement with the licensor.

Title, Intellectual Property Rights, and Infringement

This section affirms that the licensor is the proper owner of the software and no part of the software is sold to the
licensee. This is purely a license, or permission, to use the software. The licensee also agrees to cooperate with the
licensor to protect the intellectual property that is this software during the duration of this agreement. This
includes safeguarding the software, informing the licensor of suspected or known intellectual property
infringement, and assisting the licensor in any claims or actions where the licensor tries to prosecute third parties
for infringing on the licensor's rights over this software.

Security Measures and Usage Tracking Disclosure

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If this software contains any mechanisms that detect unauthorized use that includes a certain degree of the
Software License Get Started
licensor's control or Agreement
monitoring of the licensee's use, then indicate that the licensor can control or monitor the
licensee's access. This disclosure is included to ensure transparency to the licensee that their information may be
collected or viewed incidental to their ordinary software use.

Verification (On-Site Compliance Monitoring)

The licensor may, from time to time, request verification from the licensee that the software is being used
according to this software license agreement. If the licensee agrees, this agreement can also include a right for the
licensor to conduct a non-intrusive on-site audit. If the verification or audit indicates that the licensee is using the
software beyond the scope agreed upon in this agreement, additional fees would be negotiated at that time.

Confidentiality

As with any business relationship, confidential information and trade secrets may be disclosed and exchanged.
Both parties must determine and agree on how long to keep such confidential information private and only to
disclose such information when compelled to do so by law. The duration of confidentiality may be the same as the
duration of the license or much longer.

Termination and Effects

This section outlines all the ways in which this agreement could be terminated and which party can seek to
terminate this agreement under the described circumstances. Upon termination of this agreement, it is important
that the licensee immediately stops using the software, returns or destroys the software and any confidential
information, and pays all amounts due under this agreement.

Mutual Representations and Warranties

In order to enter into a commercially reasonable agreement, the licensor and licensee affirm and assure each other
in this section that they are legally constituted entities that can do business, either under their own personal name
or as an LLC or corporation, and have the full right, power, and capacity to enter into such a contract.

Licensor's Limited Warranty

LegalNature's agreement provides a limited warranty of the software for six months or for the duration of the
agreement, whichever is less. The warranty assures the licensee that the software and any maintenance release
operate as described when properly installed, and if the software is provided on a separate media, that media is
not defective. Everything else, if not included specifically in this section, is not warranted and is to be accepted "as
is" by the licensee. The limited warranty is additionally limited and not applicable if the software is improperly used,
damaged, or modified by the licensee, or in error because of causes outside of the licensor's reasonable control.

The licensee's remedies under the limited warranty include the licensor replacing the software, the licensor
repairing the software, or either the licensor or licensee terminating this agreement early with appropriate pro rata
refund by the licensor of any prepaid license fee.

Indemnification

Indemnification is a concept for securing another party against loss or damage. In the case of the licensor's
indemnification, the licensor agrees to secure the licensee and its representatives against actual losses from
actions where a third party claims the licensor's software is an infringement of the third party's intellectual
property rights.

In the case of the licensee's indemnification, the licensee agrees to indemnify the licensor and its representatives
against actual losses from actions from a third party that somehow relates to this agreement.

Limitation of Liability

Limitation of liability is a standard contract provision that protects both the licensor and licensee from the amount
of exposure they each face if any action is filed against either party in relation to this agreement. It caps the
amount of potential damage the parties may seek from each other and should always be read carefully so all

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contracting parties understand their risk exposures.

Software License Agreement Get Started
Export Regulation

Software, like other commercial objects, may be subject to export control rules and regulations such as the United
States Export Administration Act. For example, there is sensitive software that cannot be exported to certain
restricted countries. If the licensee seeks to export the software, the licensee must conduct its own due diligence
regarding applicable export laws and affirm their compliance with all applicable laws.

Force Majeure

On rare occasions, there may be events or circumstances out of the licensor's or licensee's reasonable control that
prevents this agreement from operating as intended for a period of time. For example, the licensee may be late on
payment when their bank's server experienced a severe weather-induced power outage. In such uncontrollable and
unpredictable circumstances where no party is intentionally at fault, this term provides an allowance for the breach
if it is under 30 days and the ability for either party to cancel this agreement if the event continues for longer than
30 days.

Governing Law and Dispute Resolution Options

The choice of law that governs this agreement is an important selection. Often, parties select the law of the state
where they are located because of familiarity. This form allows the parties to select the agreed-upon state law that
will dictate how this agreement will be interpreted if any conflict should arise in the future.

Furthermore, LegalNature's document allows the parties to decide whether conflict should be resolved in a public
court of law or in private arbitration. If the licensor and licensee wish to litigate in public court, select "No" when
asked if arbitration is required. If the parties wish to resolve any issues privately as decided by an independent
arbitrator, select "Yes" for the same question.

Ready To Get Started? Create a Software License Agreement

Frequently Asked Questions

What is a software license?
Who is a licensor? Who is a licensee?
How is a license different from ownership?
What are some examples of software license agreement provisions?
What is an “exclusive license”?
What is software documentation?
How can I limit the licensee’s use of my software?
What is “open source” software?
What is an “open source” license?
What intellectual property rights should I be concerned about when licensing my software?

What is a software license?

A software license allows a person or business (the licensee) to use software developed by another party (the
licensor). The license itself is a legally binding document that allows the licensee to use the software without
violating the intellectual property rights of the licensor.

It is similar to a product or service agreement in that it sets out the rights and obligations of both parties with
regard to the software. The parties should have an opportunity to negotiate their rights before entering into the
agreement.

A software license is not the same as an end-user agreement that you would see on websites or apps where the
user must accept the terms before using the software. It is also not the same as development software, which
involves a customization process for the end user’s specific needs.

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Keep in mind that a software license agreement also differs from a technology services contract in that a
Software License Get Started
technology servicesAgreement
contract sets up an ongoing services agreement between an IT contractor and its client, but
does not involve licensing and downloading specific software to a computer or other device.

Who is a licensor? Who is a licensee?

In a software license agreement, there are usually two parties: the licensor and the licensee. The licensee is the
individual or entity in the relationship that receives the license, and the licensor is the person or entity that
provides the license.

The licensor is often a creator or inventor whereas the licensee can be a variety of individuals or entities, including
end users, manufacturers, other businesses, etc. As a software license agreement can be extremely flexible, it is
often a good option for a variety of relationships and circumstances.

How is a license different from ownership?

When you own something outright, the manufacturer or designer often has little control over what you do with the
product post-sale. In most circumstances, you can manipulate the product however you want and even reproduce
it and sell it. Consider an example of a physical product. If you bought a chair, you could copy how the chair was
made and create another one for your home. You could also paint the chair or change certain features of it. You
could even resell it if you wanted to do so.

In contrast, having a license only allows you to use the product. You often cannot change it, copy it, or resell it
unless you have specific permission to do so. In our chair example, you could use the chair, but you may not be
able to do anything else with it. You could not sell it to someone else or change it in any way.

You will usually see licenses in the context of software or design and specifications. In the software context, the
license will usually restrict users from altering, copying, or selling it to another person. Software developers use
licenses, as opposed to an outright transfer, to help decrease potential problems associated with over-sharing that
can reduce demand and limit profits.

A license will describe how a product can be used. That is, copying or distributing may be allowed according to the
software license agreement, but it must be specifically stated to be permitted.

What are some examples of software license agreement provisions?

Software license agreements are extremely flexible, so they can include a variety of unique terms and conditions.
The following example provisions may be addressed in the agreement:

Whether the software can be downloaded on more than one computer

How the software can be used (such as for personal or business use)
Information about the requirements to use the software (such as system requirements)
Whether the end user is to modify the software or view the coding
Whether the software provider will provide any training or additional information regarding the software
Whether the software is subject to a warranty
Whether the licensee is permitted to copy or mimic the software
How long the agreement will remain in effect

How the agreement will terminate

Remedies available if the licensee violates the license
Which state’s laws may govern the agreement
Like any contract, you can adjust the software license agreement to suit your unique needs. These agreements can
even vary between the individuals or entities using the software. For example, you may want to prohibit one user
from engaging in specific activities that another user is permitted to undertake.

What is an “exclusive license”?

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Contrary to popular belief, an exclusive license is not a license that is only granted to one person or entity. Instead,
Software Get Started
the licensorLicense Agreement
agrees not to give the same license to others on the same terms. Such an agreement essentially
prohibits a second level of licensing with the same rights to a third party. However, it does not prohibit granting a
license to another entity or individual with different rights. The person holding the exclusive license is considered
the owner of that particular right, which means that he or she can often take more action with the exclusive license
compared to those holding only general licenses.

Exclusive licenses are limited to a specific scope or field, which usually involves a certain context, territory, or time
period. For example, someone may be granted an exclusive right to manufacture a particular product in the United
States while another entity may have an exclusive right to produce the same product in Europe.

What is software documentation?

For end users, software documentation includes the documents and instructions that come with the software. It is
often referred to as the technical manual or user’s manual. It helps end users understand how to implement and
use their software. This documentation details the capabilities of the software as well as certain limitations or
system requirements necessary to run it. It may be included with the software as a booklet or it may be built into
the program, delivered on a USB drive, or downloaded online.

Software documentation can also be much more technical and may even include source code and other
information. It provides enough information so that the user or someone who wants to build on the software can
do so without having to start from scratch each time. It may also include information regarding error codes and
troubleshooting.

Software documentation sometimes includes information on how to market the product or information related to
the design of the software as well. Depending on how the software is used or licensed, the documentation that
accompanies it can vary significantly.

How can I limit the licensee’s use of my software?

The best way to limit or restrict someone’s use of your software is to have them enter into a software license
agreement with you. The agreement should set out how the licensee can and cannot use the software. It should
also set out what will happen if the agreement is violated. Negotiation is a powerful tool in the context of software
licensing.

Software licensing agreements may also contain the following additional provisions:

Restrictions on remedies if the software is defective or does not comply with specific requirements
Limitations on liability (damage caps) if losses occur

Liability exclusions
Limitations on warranties

Alternative dispute resolution options

Information on copyright and ownership protections

The governing law if a conflict arises

Like any contract, you and the other party can include provisions that will work for your unique situation. You can
be creative about limitations regarding the use and sale of your software. Just be sure that your creativity does not
morph into making the agreement unreasonable or impractical.

What is “open source” software?

Not every type of software will include a restrictive license. “Open source” software is any software that can be
accessed, changed, used, and shared without charge. Open source software is the same as “free software.”

There is no need to obtain an individual license because the developers of the software have chosen to share it
with the world without restrictions. Nonetheless, open source software still technically has a license; it is simply not
very restrictive.

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Open source software can be developed by anyone and must meet 10 specific criteria for it to be labelled “open
Software License Agreement Get Started
source.”

Free redistribution

The program must include the source code

Derivative work must be permitted (modification and alterations to the original software)

Restrictions on distribution of the source code is allowed if the software is modified, but only if patch
files can be distributed as well

No discrimination against any group or person

No discrimination against any particular field

Rights associated with the license must apply to everyone that receives a redistribution of the software
The license cannot be specific to a product

The license cannot restrict the use of other software

The license must not be predicated on any style of interface or individual technology

Open source software allows developers the ability to learn and continue developing their own software by
collaborating with others. Software sometimes starts out as open source in its early phases of development.

Open source software can be used for commercial purposes, and there is no way to restrict the utilization of the
software. Developers also cannot control who uses the software and for what purpose, which is often a concern for
those who may be using the software for illegal or unethical reasons.

What is an “open source” license?

Open source licenses comply with the requirements of open source software. Just because the software is open
source, it does not mean that it does not have a license at all; the license simply meets the 10 requirements set out
by the Open Source Initiative (OSI).

OSI reviews every license for software that would like to be listed as open source through a review process. Once
the license is approved, then the software can be included in the open source resources.

While open source software certainly can be useful in the development stage, it will not be helpful if you want to
make money off the software or restrict how the software is used. Instead, a more restrictive software license
agreement is recommended to accomplish these goals.

What intellectual property rights should I be concerned about when licensing my

software?

Intellectual property includes any creation of the mind, from physical inventions to artwork to software. As such,
software is subject to certain intellectual property rights, but only if it is adequately protected. Intellectual property
rights include the following:

Patents
Copyrights

Trademarks
Trade secrets

Know-how

Proprietary data
Registered designs

Customer or potential customer information

A license transfers some or all of these rights to another person or entity for their personal use. When you provide
a license, you are essentially waiving some of your intellectual property rights to allow another person to use your
idea or product. It allows the original owner to keep the majority of his or her rights, and can be an easier process
to reverse compared to an outright transfer if a dispute arises.

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Technically, a license could affect any and all intellectual property rights that an owner has. The software license
Software will
License Agreement Get Started
agreement explicitly set out which rights are and are not affected by the agreement. Most often, however,
software licenses will correspond with trademark, patents, and copyright laws that protect the software.

Patents prohibit others from using, selling, or making a particular invention for a period of time, while copyrights
protect certain material from being published. Trademarks may be affected in situations where the licensee wants
to use a particular brand name in connection with a larger product, such as where the software is a piece of a
larger package or product.

Ready To Get Started? Create a Software License Agreement

Checklist
Step 1: Gather Information

As you complete your software license agreement, you will need to provide certain relevant information. This
includes the permitted uses of the software, the software delivery method, installation and testing details, and the
fees involved.

Step 2: Answer Key Questions

Use the information you collected to complete the software license agreement. We make this easy by guiding you
each step of the way and helping you to customize your document to match your specific needs. The questions
and information we present to you dynamically change depending on your answers and the state selected.

Step 3: Review and Sign

It is always important to read your document thoroughly to ensure it matches your needs and is free of errors and
omissions. After completing the questionnaire, you can make textual changes to your document by downloading it
in Microsoft Word. If no changes are needed, you can simply download the PDF version and sign. These downloads
are available by navigating to the Documents section of your account dashboard.

This agreement allows the parties to sign and deliver copies electronically. Therefore, it is not necessary for both
parties to sign a single printed copy of the agreement.

Step 4: Periodically Review and Update

It is easy to forget the ins and outs of your software license agreement. Periodically reviewing it will help you stay
familiar with any responsibilities or requirements so that you can determine when it needs changes or additions.

Over time you may need to make changes and updates to the contract. Using a contract amendment allows you to
specify your changes without having to create an entirely new agreement. This is helpful when you only need to
make a few changes instead of a complete overhaul of the language.

When the time comes to renew your software license agreement for an additional term, LegalNature makes this
process easy by saving your answers to the original agreement within the questionnaire.

Step 5: Complete Related Documents

Other documents may offer additional legal protection. For example, those who use software license agreements
often incorporate a sales contract, invoice, and consulting services agreement into their existing business practices.

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Ready To Get Started? Create a Software License Agreement

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