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Purpose This particular agreement defines a relationship between a software manufacturer and a software developer whereby the software developer works on a component aspect of the final version of the software application. For practical purposes, the manufacturer has to receive a license from the developer in order to sell the final software package. In exchange for this license, the developer receives various fees including royalties. This agreement also defines the limits of such license.
Definitions For clarity's sake, it is often necessary to define certain terms and/or industry vernacular/nomenclature such as:
Customer - any authorized user of the Licensed Software. Documentation - any and all documentation relating to the Licensed Software including source code and other developmental drawings and specifications capable of being reduced to some tangible medium (usu. Set forth in various exhibits). Derivative Work - Any and all modifications, translations, abridgments, condensations, improvements, updates, enhancements, or any other form in which the Licensed Software may be recast, transformed, adapted, or revised. The Licensor retains all rights in such derivative work. Source Code - The code with which the developer creates the software. This code is editable and reveals the script language from which the application is made. This is the most important aspect of the software and remains with an Escrow Agent in the form of a Master Copy. Object Code - The final executable version of the software application for use by customers. This code does not reveal the source code. Entity - Any individual, corporation, partnership, trust, business trust, association, joint stock company, joint venture, pool, syndicate, sole proprietorship, unincorporated organization, or governmental authority. Gross Collected Revenues - revenues collected from customers utilizing any product of which the Licensed Software has been made a part thereof. For purposes of determining licensing and royalty fees. Licensed Software - collectively, the software and documentation developed by the Licensor for use in the final software application(s). Licensee - The software manufacturer Licensor - The component software developer Master Copy - the portable memory storage device that contains the source code for the Licensed Software and any accompanying documentation.
Term/Duration Initial five year term with two successive like periods. 60 days written notice required by either party to terminate existing term.
Termination Upon default by either party, 60 Days written notice.
Payment/Compensation The Licensor is usually compensated through the imposition of a per term license fee paid up-front and thereafter through the collection of royalties per use or sale.
Licensing Fees - Important to set out exactly how the Licensee will pay for the license. Also, include how much Licensee will have to pay for Additional Terms and Additional Territories. Royalty Fees - Usually a percentage of gross revenues collected from the sale of the Licensed Software.
Warranties & Representations of Licensee Licensee Manufacturer warrants that they will work exclusively with the Licensor and will not attempt to solicit Licensor's employees. See also Restrictive Covenants.
Warranties & Representations of Licensor The Licensor Developer warrants that they are the exclusive developer and owner of the component software and have the full authority to enter into the agreement.
Non-Exclusive License The Licensor grants a nontransferable, nonexclusive, fee-bearing, worldwide license, during the term of the agreement. Pursuant to such license, the Licensee is allowed to make copies of the object code version of the Licensed Software and any Derivative Work thereof, and to distribute such copies to an unlimited number of customers pursuant to sublicense agreements that protect Licensor's intellectual property rights.
Licensee may be permitted the right to sublicense the foregoing distribution rights to the extent necessary to allow distribution of such copies through one or more resellers.
Licensee has no right to sublicense the source code version of the Licensed Software or any derivative work thereof.
Delivery The Licensor shall deliver an executable object code version of the Licensed Software.
Updates The Licensee Manufacturer has the opportunity to purchase updated versions of the software from the Licensor in the future. Negotiated case-by-case.
Limitations of License The Licensee may not sublicense or transfer the rights not otherwise granted under the license without the express approval of the Licensor. The Licensee may not reverse-engineer or attempt to access the source code.
Attributions Licensee must attribute ownership of the software rights to the Licensor on any and all packaging and designs. Licensor agrees to cooperate in merchandising, promotional advertising, and publicity ideas and campaigns. However, final approval from Licensor is required to begin any merchandising, promotional advertising, and publicity ideas and campaigns. Licensor agrees not to unreasonably withhold such approval.
Revenue Reports A specific accounting of the gross revenues collected from the sale of the licensed software.
Technical Support If and to what extent the Licensor is willing to offer technical assistance to the Licensee. This can be negotiated as an up-front warranty fee or by hour. May be telephone support only or include on-site assistance.
Escrow An escrow is extremely important in software development situations because both parties want some assurances that if the terms of the contract fall through, the source code may be utilized to bouy a sinking ship. See Standard Escrow Agreement Defense of Mark If lawsuits or other types of action are instituted against the Licensee because of its use of the Mark, Licensee shall immediately notify Licensor and Licensee shall cooperate with Licensor in the defense of any and all such suits or action and Licensee shall be solely responsible for the decision and payment of all expenses related to defending such suits or actions, including court costs, litigation expenses, other expenses and attorney's fees.
Restrictive Covenants Licensee's Promise Not to Disclose. Such restrictive covenants offer the Licensor statutory remedies for violation and often prevent the Licensee from disclosing confidential business information about the Licensor with others. As always, ensure any such restrictive covenant is within statutory parameters. Non-Disclosure Licensee acknowledges that the structure and organization of the Licensed Software are valuable trade secrets of Licensor and Licensor's intellectual property. Licensee agrees to hold such trade secrets and intellectual property in confidence.
Other Important Provisions Must include provisions relating to who has what authority. Such as, the authority to determine the mode and method of advertising, merchandising, promoting, manufacturing, selling, and distributing. Also, who has authority to fix the prices, discounts, and terms of sale, whether for consumers, dealers, distributors, wholesale or retail.
Mediation and Arbitration Mediation and Arbitration should always specify a location in Client's jurisdiction (preferably, in the same county where they run their business). Mediation is a non-binding way to settle the dispute quickly and amicably. If unable to settle in mediation, arbitration is first option available. Arbitration is the preferred alternative to litigation because of speed, cost, and ability to maintain low profile (no info is publicly available).
Governing Law Always stipulate that the contract will be governed under whatever law the Client ordinarily conducts business. Always make sure that venue and jurisdiction are as convenient to client (Buyer) as possible.
No Modification or Waiver No modifications except those specifically agreed upon by the parties in writing. Any waiver of a term or provision will not act as a waiver of any other provision.
Notices Notices should always list the current and best addresses where each party may contact the other for whatever reason.
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