Software Contracts: On Premise and in the Cloud

Software Contracts: On Premise and in the Cloud:

Legal and Operational Issues with Business Consequences

Software licensing transactions are more complex and more important than ever. The constantly evolving legal, technical and regulatory landscape drives the need to stay current in a wide variety of key areas. The ability to structure, draft and negotiate complex software license agreements is critical to a successful transaction.

This seminar is designed to address the important legal, operational and practical issues that arise in preparing for and negotiating software licenses.

You will learn to:

  • Understand and analyze the legal and operational issues in software licenses
  • Find hidden prohibitions on certain uses and other pitfalls in vendor form licenses
  • Understand the issues in software licensing relating to “the cloud” and “SaaS based solutions
  • Ensure appropriate warranty support, maintenance, response times and software updates
  • Identify “hidden” costs in maintenance contracts
  • Make sure you get what you paid for.
  • Address disaster recovery and business continuity to ensure on-going operation and support
  • Minimize your risks and maximize your rights
  • Feel more comfortable with the software license agreement negotiation process!

The Agenda for the “Negotiating Software Contracts: On Premise and in the Cloud” seminar is as follows:

Basic Contract Terminology

  • Damages: compensatory; incidental, consequential
  • Limitation of liability
  • License; Licensor; Licensee; Independent Contractor
  • Exclusive/ non-exclusive
  • Revocable/ irrevocable
  • Subsidiaries/ Affiliates/ Divisions
  • Source code/ Object code
  • Warranties: Express/ Implied
  • Disclaimers

Intellectual Property Types and Protection

The four key types of intellectual property law

  • Copyrights
    • What they protect
    • Protection requirements
    • When protection attaches
    • Copyright holder’s rights
  • Patents
    • What they protect
    • Protection requirements
    • Patent holder’s rights
    • Types of patents
  • Trade secrets
    • Definition : Confidential Information vs. Trade Secrets
    • Examples
    • Protection requirements
  • Trademarks
    • Definition
    • What they protect
    • Types

License Issues

Parties to the contract

  • Who is the licensor?
    • Representation and warranty that own IP
    • Or rep and warrant have right to license IP rights
  • How is licensee defined
    • “Enterprise” Agreement
    • Site License – location
    • End User – seat or named
    • Affiliates
    • Divisions
    • Independent contractors
    • Acquisitions
    • Divestitures

Grant of License and Scope of Use

  • Do defined terms limit use?
  • Hosted in-house v cloud
    • Self-hosted
    • SaaS
    • PaaS
    • IaaS
  • Other common restrictions
    • Perpetual v fixed term
    • Exclusive v non-exclusive
    • Worldwide v geographic restrictions
    • Revocable v irrevocable
    • Field of use restrictions
    • Source code v object code

Pricing and Payment terms

  • Up-front payment vs milestone payments
  • Installation – who does it?
  • Acceptance tests
  • Aggregate purchase discounts
  • Audits
  • Most favored customer


  • Do the warranties match the vendor’s proposal?
  • Are the minimum requirements to operate the software listed for hardware, operating systems, and other third-party software?
  • What warranties should be included?
    • Warranty that software interacts/ interfaces with your system
    • Title
    • Non-infringement
    • Documentation/Operation according to performance specs
  • Defining your rights to use/ modify
  • Is the vendor obligated to update?
    • Date compliant
    • Open Source
    • Virus Free
    • No disabling codes
    • No Data Breach
  • The applicability of UCC warranties
    • Merchantability
    • Fitness for a particular purpose
    • Disclaimers
  • Length
  • Revenue recognition
  • Remedy


  • Mandatory?
  • What is included/excluded?
    • Bug fixes
    • Patches
    • Upgrades
    • Future Releases
  • Types of Support
    • Telephone support
    • In-person support
    • Access to user system?
    • Levels (Silver, Gold, Platinum)
  • Severity levels and service level response times
  • Service level agreements
  • Caps on increases
  • If you can cancel, can you reinstate? Reinstatement fees? Remedies


  • Defend, Indemnify & Hold harmless
  • Who is protected?
  • What is included?
    • Type of Claim– infringement/alleged infringement
    • When does indemnification start?
    • Geographic Scope
    • Type of IP – Patent/copyright/trade secrets/trademark
  • Any financial limitations?
  • Which versions of the software are covered?
  • Exclusions: Software operating with hardware/other software?
  • Remedies
  • Licensee indemnity?


  • How much training is included?
  • Who needs to be trained?
  • Hidden charges
  • Scheduling


  • Firm up fees


  • Consent required?
  • When can licensee do without consent?
  • Issues in permitting vendor assignment

Source code escrow

  • How will the source code be used?
  • Drawbacks


  • Who can? When?
  • Licensee breach
  • Licensor’s audit rights

Limitation of liability

  • Carve-outs
  • Reasonableness of the limit


  • What should be protected?
  • Reasonable duration
  • What should be disclosed?


  • Entirety/ Order of precedence/exclusion
  • Survival
  • No waiver
  • Choice of law/venue