Software Licenses – Clean Off Your Glasses for the Small Print
We have all seen them, but you have probably ignored them – all that tiny print using convoluted terminologies that make for an effective alternative to a sleeping sedative. While the terms of a software license may be relatively benign when you buy a program off the shelf, what if you are looking for custom or specialty software at a cost that exceeds $10,0000 or more?
The use of almost any software on the open market is subject to a “license” agreement. That means that you, as the consumer, do not actually own anything except perhaps the disc the software came on (and with more and more downloading available, you may not even get that). What you “buy” instead is the right to use the software subject to conditions spelled out in a license agreement. The simplest of these are conditions prohibiting you from modifying the software, even for personal use. Typically you will not have the rights to transfer the software to someone else, whether through a gift or a sale; usually you cannot even install the program on another computer.
When do these conditions go too far? Here are just a few things to look for when negotiating software licenses:
Limitation of Remedies and Liability
Even with programs that are expressly intended merely to protect your computers, if something goes wrong, you often waive your right to seek damages from the developer – even in the event when the company is negligent. Forget getting a new computer when your firewall crashes. Typically, you agree that the only right you have is either another copy of the program or a refund of your purchase price or service plan.
This is truly a case where the buyer must beware. While most programs guarantee that they will be free of defects for the first 60 days, the developer completely disclaims that the program will do anything beyond that date.
Functionality of Custom Software
Most consumers are not software engineers, and so for most of us the only way we can convey what we want a custom program to do is to describe its functionality: we want the program to generate reports comparing collections over custom time frames, or we want reports that show how our inventory is aging. When you hire a programmer, make a list of specific deliverables that you want, print pages off the company’s website that show what they say they can do. Your license agreement should incorporate these lists as performance specifications and bind the developer to write a program that warrants that the program will perform.
For U.S. customers, many software developers will require that you arbitrate any dispute you have with the developer. We often encourage our clients to participate in arbitration proceedings instead of lawsuits, as arbitration can be quicker and less expensive. The process does involve risks, however, and you should evaluate these risks on a case-by-case basis. These clauses may also require that you waive any right to participate in a class action against the developer.
Many software licenses contain provisions requiring the application of law from remote states or even different countries. Most require that disputes be resolved (whether through a court or an arbitration proceeding) in jurisdictions other than in Arizona.
Some terms and conditions are negotiable, others are set in stone, but ultimately it is important that you be aware of what you are really getting for your money.