Top 15 Other Considerations for Software Contracts and Licenses

Software contracts should also address the following:

1. Flexibility and choice for upgrades and updates. Some contracts specify required upgrades to receive updates or maintenance.
2. SLAs for defining expectations for support and maintenance.
3. Annual maintenance costs. Should be fixed at the time of purchase and should not vary.
4. Provisions for protecting the company against unforeseen problems such as software interoperability.
5. Intellectual property rights for modi. cations. Customer may not be granted the rights for modifications.

6. Terms and conditions for termination options such as what transfer process will take place
7. when the license ends, length of the transition period, and the impacts from the termination.

8. Assignment clauses requiring consent. Assignment clauses allow the supplier to segregate the customer’s payments from that of the service provider. Under an assignment clause, the supplier can transfer the customer’s financial obligations to another firm or ongoing service components to a third party. With the payment and service separated, the supplier’s motivation to perform to the terms of the contract may be reduced.

9. Verification of any export or import restrictions by customers. Speci. cally, the export of the
specified technology should be allowed by U.S. legal restrictions and the import allowed by
the foreign government. A e license should specify responsibility for any costs or duties.

10. Regulatory approvals that may be required. Some governments, such as Japan, require that
they approve the license. If the approval is not sought, the license can be considered void.

11. A license should specify which party is responsible for obtaining the approval.
12. Review of competition or antitrust laws to ensure compliance with any related legal requirements.
13. Consideration of currency exchange rates. Exchange rates should be agreed in the contract to minimize the risk of fluctuating currency rates.
14. In the case of outsourcing, specification in the contract for the . nancial and legal interests in the company’s software now being supported by the outsourcer. For example, in some cases, the software license may transfer to the outsourcer, which will require relicensing its own software if the company later chooses to discontinue outsourcing. An other option is to allow the outsourcer to use the software with the company retaining responsibility for all license agreements.