Although more companies are purchasing software nowadays, spending perhaps tens of thousands of dollars a year in this one area, they continue to fall into the familiar trap of immediately signing pre-printed or online “form’ license agreements designed to protect the vendor not the purchaser. Some of these “form” agreements are non-negotiable, but many can be modified upon request. Here are five important points to address in most software agreements, from the perspective of the purchaser:
- Assignability. It is important for the purchaser to be able to freely assign its rights under the license without the vendor’s consent in the event of a reorganization, merger or sale of the company. Negotiating these exceptions to a “no assignment without consent” clause can prevent a lot of headaches such as vendor delay, “consent” fees or a renegotiation of rates.
- Permitted Users. Workforces are increasingly made up of independent contractors, “temp” hires and even volunteers. Is use of the software limited only to “employees” of the purchaser? What if the “users” are actually employed by a corporate affiliate? Tailoring standard “user” language to suit your particular situation can avoid problems later if there is a software user audit.
- Training & Support. Is the “support” more than a helpdesk? Is it available locally if you need onsite help? Is training included in the license fee and if so, how many hours? Is it provided onsite or remotely? Negotiating adequate support and training is essential especially if the software is “mission critical” to the purchaser’s business.
- Security & Encryption. Does the software comply with the security or encryption requirements particular to the purchaser’s industry? Ask the vendor to include a warranty to that effect and note the response. If the vendor appears unsure of the requirements or unwilling, that is not a good sign and you should probably look to other vendors.
- Indemnity. If not included, request that the vendor protect you by either paying for or reimbursing your legal fees and expenses if someone claims that your use of the software violates their intellectual property rights. This is called an “indemnity” clause, and having a properly worded clause in the license can help the purchaser avoid costly attorneys fees defending itself in a lawsuit and require the vendor to pay for a settlement or damages awarded to the claimant.