Software License Negotiation Checklist

 

We have developed a software licensing and implementation checklist. The checklist is designed to be used to verify that significant issues are considered and, as applicable, addressed.

Scope of License Grant:

  • Correct licensee identified
  • Exclusive/nonexclusive license
  • Sublicensing
  • Transferable/nontransferable
  • Third party access
  • Third party products
  • License metric
    • user based/type of user/scope of use
    • revenue
    • site/location
    • hardware
    • operating system
    • other
  • Access to source code/source code license
  • Open source
  • Correct/accurately described products licensed
  • Documentation licensed
  • License to updated, enhancements releases
  • Disaster recovery/additional copies/backups
    • Scope of coverage
    • Term
    • Fees

Warranty:

  • Performance warranty for software
  • Services warranty for maintenance services
  • Length of warranty
  • Scope

  • Express remedies for breach

  • Exclusions/carve outs

  • Fraud/Negligent misrepresentation issues

  • Infringement

Remedies:

  • Scope of available remedies
  • Events giving rise to remedies
  • Failure of essential purpose

Payment Terms:

  • Form of payment, amount, schedule
  • What is being purchased
  • Payment tied to milestones/acceptance
    • Revenue recognition
  • Maintenance
  • Segregation of licenses from services and other fees
  • Future options
  • Discounts off of list
  • Suspension of maintenance
  • Ability to shelve unused licenses

Indemnification:

  • Types
  • Scope
  • Triggering events
  • Limitations

Term and Termination:

  • Perpetual license or term license
  • Ability to terminate:
    • For cause/convenience
    • Force majeure
      • Scope of triggering event
    • Other
  • Termination notice
  • Obligations upon termination
    • Transitional use rights/support
    • Return of software
    • Termination fees

Purchase of Hardware:

  • Compatibility with software
  • Warranties/Pass Through
  • Indemnity issues
  • Upgrade
  • Installation

Delivery and Acceptance:

  • When does delivery occur, pre-live/post-live
  • When does acceptance occur pre go-live/post go-live
  • Acceptance testing criteria
  • Process for accepting/rejecting
  • Vendor obligation to remedy
  • Effects of failure to accept

Confidential Information:

  • Scope/Definition

  • Standard of care

  • Duration of obligation

  • Disclosure to third parties

  • Return/destruction

  • Trigging event

  • Publicity/Terms of agreement

  • Other issues (HIPPA/GLB etc.)

Limitation of Liability:

  • Mutual

  • Direct Damages cap

  • Fees paid

  • Multiple of fees paid

  • Is amount of recovery depreciated

  • Calculation of damages cap

  • Exclusions from cap

  • Carve outs to cap on damages

Source Code Escrow: 

  • Escrow agent

  • When deposited/updated

  • Triggering events

  • Fees

  • Is amount of recovery depreciated

  • Calculation of damages cap

  • Exclusions from cap

  • Carve outs to cap on damages

Implementation Services:

  • Consider separate agreement
  • Scope of services to be provided
  • Location where services to provided
  • Cost of services/discount/cap on fee increases
  • Project plan/milestones/deliverables
  • Change orders
  • Acceptance testing process/ criteria
  • Dispute resolution process
  • Services warranty
  • Indemnification
  • Definition of vendor implementation team
    • Experience
    • Ability to replace
  • Definition of licensee implementation team and scope of involvement

Miscellaneous:

  • Bankruptcy Code §365(n)

  • Force majeure

  • Assignment

  • Fees

  • Transitional use rights

  • Permitted assignee

  • Formal mechanism for dispute resolution

  • Integration/Entire Agreement

  • Properly incorporate appendix/schedules, addenda

  • Big boy clause

  • Applicable law, venue, forum

  • Attorneys fees/costs of litigation/arbitration

  • Insurance

  • Non-solicitation

  • Non-compete

  • Survival

  • Severability

  • Waiver

  • Security interest in hardware of software

  • Authority to enter into agreement

  • Taxes