You had started a venture focused on the software field. You reached the time at which you wish to initiate “sales” of the software. At this stage, you will be required to prepare your end user license agreement with respect to your software. This agreement shall define the rights and obligations of yours and of the end user regarding the relationship between such parties.
Many of the end users will not read the license agreement. Consumer end user license agreements have been criticized countless times from all sides. Sometimes, even the court may not recognize as valid certain limitations that you will include in the license agreement. Despite all of the foregoing, in general, the license agreement is a contract for all intents and purposes and you have to be strict and about it and adjust it to your interests and concerns as any other contact.
There are many types of end user license agreements and they vary per the circumstances (for example, where the end user is a business or a private customer). Notwithstanding the foregoing, I will attempt, in this post, to shortly describe the main provisions in such agreements.
The specification of the license
The software – clearly define what the software means and consider whether its documentation should be part of such definition.
The permitted use – defined, as concisely as possible, the permitted use of the software, including, for example, the allowed purposes of such use, the number of copies to be used and the hardware on which the software should be used. If the license is not for commercial use, that should be explicitly specified.
Use Restrictions – it is customary to include a long list of barred uses, such as: not to change the software, not to copy the software, not to disclose the software, not to reverse engineer or disassemble the software, not to use on or with certain products, etc.
Term – the agreement should clearly provide for the term and specify the termination rights prior to the end of the term. It is worthwhile to specify the duties of the end user in case of expiration or termination, for example omission of the software and destruction of its documentation.
Additional Important Provisions
Intellectual Property – it has to be clarified that the software and the intellectual property therein remain yours.
Warranty – you have to define, as accurately as possible, your warranty (if any) regarding the software, for instance by referring to the relevant places in the software documentation. Further, it is essential to limit the remedies available for a warranty breach, for example – a limitation to repair of material breaches as a sole remedy. In addition, you have to indicate what the warranty period is. Furthermore, in end user license agreements, extreme limitations of liability (including, but not only, for indirect damages) with respect to the software are most common.
Liquidated damages – consider insertion of a clause specifying a damages amount for breaches of the agreement by the end user, depending on the customer type and other circumstances. Further, you should include a provision allowing you injunctions and like remedies in cases of breach by the end user, without proof of damages etc.
What do you think of end user license agreements? What additional provisions would you include in such agreements?
An Hebrew version has been published with TheMarker today – http://www.startisrael.co.il/Article/303#.UyHJeD-SyP0
* It is hereby clarified that this post does not constitute or replace legal advice.