With Andrew Hartshorn, Partner – Commercial
In this webinar, we’ll look at what a software licence is, it’s purpose and benefits, and the points that you should look for from a legal and technical perspective.
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Webinar transcript
(Please note this is auto-generated and un-edited)
0:11
Welcome to this talk on the basics of software licenses on onto HUBZone. Partner in the commercial team here at Shakespeare Martino. As you can see, Joy, not than, I've hardly changed at all from, by a profile photo at the bottom of the slide.
0:27
Before we go on, I'd just like to be clear exactly what I mean by software licenses, Software licenses, the license fee to install, and run, a copy or copies of a software application, an app in current problems.
0:42
What it isn't, is a contract for online services, sasse, pass, Well hosted services, or anything along those lines.
0:52
If you want to know Issues to look out for in contracts of that nature, I've done or will be doing a separate podcast, which you should be able to access from our podcast website.
1:05
So a software license is a document which effectively prevents you being in breach of copyright for making and using a copy of a third party's copyright work.
1:16
But that's a nice technical point.
1:19
What I'm going to talk about for the next 10 minutes or so are the areas that you should look for from a legal perspective and technical perspective in any software license.
1:30
So the first question of the first thing to look for is a really obvious one.
1:35
What is it that you're buying a license all, what does the software that you're licensing, why is it described its root version number?
1:44
You need something to link from the license to the software.
1:50
The license probably won't contain a spec of the software, but there ought to be a reference to a spec on a website or similar so that you can go that's referenced in the software license that tells you what the software does and how well it does it.
2:06
You're probably buying software as it currently is, with the functionality currently available.
2:12
Software obviously moves on over time, and we'll talk a little bit about what you need to look for that later. So once you know what you're buying, the next question is what's the scope of use, Who, where, and how can you use the software?
2:30
I'll put a few examples of license restrictions or scopes in here.
2:35
The best scope of use from a customer's perspective is enterprise wide. This means that anyone within the organization is entitled to use a software. That's great.
2:46
What is the organization?
2:48
Is it merely the legal entity hassan's license, or does it extend to a group of companies?
2:53
You need to make sure that the scope of user or similar, as defined within the agreement is wide enough to capture anyone. You may need to opt to use the software.
3:03
Does it include contractors?
3:07
As an alternative to enterprise wide, you can have a user based license where the business is limited to a given number of users.
3:16
But, again, you need to ensure that the way a user's defined aligns with how the business will use the software.
3:23
It might be concurrent users, IE, anyone within the business, can use a software, as long as you don't exceed a specified number of users logged on at any given time.
3:33
It might be named Jesus, where you have to allocate usage rights to specific individuals, and if you want to add someone else, you have to remove an existing user.
3:43
Make sure that the business understands this, and also look how the license count works.
3:50
If I now, if I look on at work, and then again at home without logging out from work, not so much these days, but in the olden days, when I might do that, am I two concurrent users?
4:05
Is the license instant based when you're limited to a number of machines that you can install software on?
4:11
Anyone set up that machine can use it? But, obviously, it's stuck on a particular machine. That's great for public library when you might get random people coming in to use the software. But it's only on a particular machine. But it's not great for most conventional commercial organizations.
4:27
It might be limited to processes, we're getting technical here.
4:31
So inside each computer is a chip, which may have multiple cores, a bit like cylinders in a car, will cause faster processing.
4:38
Most of this plastic up some license ... limit the number of processes. Oracle are a good example of this.
4:47
The license is clear that you have to pay based on the number of processes that can run the software.
4:52
That sounds fine.
4:53
But beware, if you have an IT infrastructure setup, so the old processes can access all software, they may not all do it. But if they can, you might find yourself paying far higher license fees than you expect, even if you aren't actually allowing this access across the state.
5:10
The last as much all be limited, might also be limited to a number of specific transactions. So you can do 5000 payrolls, or whatever.
5:20
It could be, uh, different scale fees for people with rights to actually use and amend the data on the software, or people having the right to read only the software so you get a lower fee for read only, access rights only.
5:37
There is no right or wrong to any of these models.
5:40
All are equally valid and equally appropriate. You just need to make sure that the business understands how the license that's being bought, aligns to have the business, and the infrastructure works.
5:56
Once you've worked out, what's being licensed and how the model works?
6:02
you'll need to check whether you're paying for a perpetual license, which means just that you get to use it in perpetuity, or whether it's term based, usually a minimum term with annual renewals.
6:14
There are accounting differences between the two as well. The petro licenses are usually treated as capital, and will be written off by the business over a number of years. And your licenses are a revenue cost.
6:26
So that's the software itself.
6:28
The software sometimes, very rarely, has bugs.
6:33
So the chances are that you will want some form of help with fixing bugs, whether that's a warranty or whether support both the warranty and the support will be with reference to the published specification warranty, it's normally free.
6:57
Probably only given with perpetual licenses, it's likely to be time limited, usually between 30 and 90 days, from deliberated the software, possibly limited to fixing material defects only and it's usually, on a an endeavors basis. We'll have a good at fixing it.
7:16
But with no timetable for thought for doing anything.
7:23
Support, on the other hand is a chargeable service it will run for as long as you are happy to pay for it should get better support than the warranty.
7:37
With support, you'll normally pay for this from day one. So there is obviously an overlap between the support service which helps on day one, on the warranty which also runs from from day one.
7:47
Support is a chargeable service. It will run for as long as you want to pay for it. And it should give better support than a warranty.
7:55
But as you're paying for support from day one, there is an overlap between the warranty period and support services, which kind of means that the warranty isn't really adding anything over and above the support service that you're purchasing. But you get them anyway.
8:09
You'll need to understand, understand what is offered around support.
8:13
Market practice, is it support comes bundled with annual licenses, where you pay an annual fee for both, but there was perpetual licenses. You pay an additional support charge discretely around 20% of the initial price of the software.
8:28
Then, there's the question of what support you get.
8:30
Does the basic support, the ability to report bugs? And when a patch or affixes issued, then you get a copy of that.
8:38
Then, there's the SLA version, service level agreement version where the provider promises usually to use reasonable endeavors to try to fix any bugs.
8:46
But within a given timeframe, they usually have a sliding scale for fixing problems, depending on the impact that has on the business side from business critical, which they'll try to fix the issue within 3 or 4 hours down to.
9:02
It's the wrong color, which they'll try to get around to in a couple of months, or whether whenever they issue a new patch.
9:09
And if you're very lucky, you might get service credits to backup the price, but watchful walk around, drafting.
9:18
This is where a problem with software is fixed, if you can get to the same end result, by doing it a different way. So, this is effectively, you changing your business process, to avoid them having to actually solve that problem.
9:34
Many providers will say that they only provide support for the current version, or may be constant, immediately previous version of the software.
9:42
So, if this is not uncommon, you've decided to stay on the older version of the software, because it works really well for you, and you hit a problem.
9:50
You may have to do an upgrade to get the Bento to fix a problem.
9:56
Might even be that the problem has been fixed in the new version.
9:59
To be fair to the supplier, said, this is not unreasonable to release patches for multiple versions, a piece of software becomes prohibitively expensive.
10:07
Like, it is possible to grow extended support for budgets that are going out to support.
10:13
But your pay over and above, the standard fee for this support is generally on a no promises bases, so they'll keep a team of people around to work on the old version.
10:24
You and whoever's desktop version will pay for those people, but they'll get to your problems whenever they come.
10:32
You should also check with other price. you're paying for support.
10:35
Gets you access to updates on new versions.
10:39
Your annual license, this is less of an issue. You can just stop paying for them for the version that Iran and move to the next version.
10:44
When it comes to renewal, for perpetual licenses with support, expect to have to pay additional upgrade fees to move to a new version.
10:54
What you should get as part of Support Access is support is access to all patches and updates issued, which are not part of a new version.
11:02
So, if you look at version number, say we will have version 2.3, 6 8, or 2.3 point 6.4, a version is an integer at the beginning, version 2.3 point 4 point.
11:14
A patch or a bug fix should be anything that's issued to the right of the decimal, the first decimal point.
11:21
You should also check whose obligation is to install or implement or configure the software. These, though, our professional services and should pick up separately in a statement of work covered by separate professional service warranties with things like milestones and stuff like that and that's beyond the scope of this talk.
11:37
Finally, some nice legal points.
11:40
The first thing is that a software license should come with an IPR indemnity covering you against any times that the software infringes the third parties IPO.
11:49
Most do.
11:50
The alternative to an indemnity and it's not quite as good, is the warranty. Software, won't infringe, a third party's, IPR.
11:58
The benefit for the license. All of an indemnity.
12:02
Is it the quid pro quo of an indemnity? Is that license or gets control of the claim?
12:07
So, they can deal with a claim that's coming across all of their software, one bit of litigation, managed by them with one set of legal fees and they get control of any settlements that are entered into.
12:20
So, that's the benefit. That's the reason they get better.
12:24
Indemnities and that's why it's not unusual to get, uh, it should be fine for a software vendor to give an indemnity.
12:33
And to be fair, it says Ross Hen's teeth in commercial software have IP claims.
12:39
I think in the 20 or so years I've been doing this, I've only come across a couple where there's been impacts on the customer.
12:48
The next question which a lot of people get very excited about is, does the provider put software in escrow?
12:54
This is where the source code, which is the version of the software that you can read as an individual and amend, it's held by a third party.
13:05
The licenses are generally considered confidential doesn't want to give it out to all and sundry but will be needed if anybody else was to provide support for that.
13:16
So, an escrow service is where a third party holds onto this source code and releases it to the community in the event that the software owner goes bust or doesn't provide maintenance in accordance with any maintenance promises it makes.
13:31
If it doesn't provide it automatically and you want it, you will have to pay for the privilege.
13:36
It's not hugely expensive, but it's a cost.
13:40
But you should ask yourself before deciding whether you're going to push for escrow actually asked the head of IT what you're going to do with a million lines of code in the event.
13:50
That software is released out of escrow, provides combust, all the factory terminate the contract. because they're not providing maintenance, you're going to have to do it. Yourself. Will get someone to do it. There's going to be a huge learning curve around that.
14:03
So, um, people can get excited about it, is a protection in the event that the worst happens, but, most businesses will say, If the worst is going to happen, then it's going to be best for me to move onto another bit of software. With a provider who is stable and will be able to maintain it, then try to understand what this complicated, better software doesn't, how it works.
14:28
I've never known an escrow agreement be called upon in anger.
14:32
The difference between an esker an agreement and an IP indemnity is that there should be no cost in the provider giving unit entity. You will have to pay for escrow services.
14:42
It's a small point.
14:42
But check what Soulfulness that says about making backups, technically, under the copyright act, back in the day you can make a backup if it's necessary.
14:52
So that's usually one.
14:55
But software license may be more generous here, but what you need to do is to check how they the right to make backups ties in with your IT platform works. Do you make regular full backups of the whole system as part of your backup and archive? If so, you might have a number of backup copies in circulation at any one time. So you need to make sure that license allowances.
15:18
Don't think that a software license I would never find out about the number of backups that you you have. They probably reserve the right to audit your use of the software.
15:29
It's not unreasonable for them to ask this if they do make sure that they do it on notice and in a manner that it doesn't interfere with your business operations.
15:37
If they find misuse, you'd expect to pay not just for additional software licenses, but also for the cost of the oddity.
15:47
So, as well as asking, as well as making backups, check the license allows you to pass the software onto a third party outsourcing provider in the event that you want to move on to set sail on a private Cloud platform. More about this in the Cloud Talks, Audio business process outsourcing.
16:01
Similarly, can you assign the License's between it within the Group, or as part of the sale of the business?
16:07
No, say, no, you can't.
16:10
They might say, will allow you to that on payment of an administration fee which could be junky. Check what it says.
16:18
And finally, three bits of pure legal drafting.
16:20
First, check the limitations of life of liability.
16:24
For a perpetual license, I'd expect the cap to be around the amount paid For support And for annual license it, I'd expect the captor be on an annual basis and capped at roundabout the annual fees at the very least.
16:39
Sometimes the drafting goes awry, and you might find a per event, Capp.
16:46
Slipped in. But they've tried to draft it as an aggregate cap, which will be nice.
16:52
Obviously, we'd like the contract being used or jurisdiction, but it's likely to be the lower the lesson so on first, teaching you a second.
17:01
I won't go into boilerplate issues here.
17:02
Stuart Argos webcasts do just that, But I would say, watch out for any provisions, which means that the license to terminate automatically without notice, if you breach it nicely, batra means that they can claim damages from a from the date that your first in breach of contract, not from the date when they gave you notice terminated.
17:22
And that's it for this talk.
17:24
If you want to ask me any additional questions, please don't hesitate to get in touch. My contact details on the slide on the next slide.
17:31
And if you'd like this talk, as I said before, there are a number of others, which you can access through our site.