Any entrepreneur, investor, or professional advisor in the tech industry understands the important value in protecting a start-up company most precious asset – its intellectual property. When preparing or reviewing a form of license agreement to your company, the most important issues to look for are the scope of license and definition of purpose of use, drafting a broad ownership clause that relates to customizations, and drafting a sound warranty and limitation of liability clause.
Any entrepreneur, investor, or professional advisor in the tech industry understands the important value in protecting a start-up company most precious asset – its intellectual property.
One of the key tools is achieving that goal is drafting a good form of a license agreement. Whether you are trying to do on your own, or with the help of a licensing attorney, one should be aware of the major issues that create a good form of a license agreement.
Scope of License and Purpose of Use – one of the key issues in any license agreement is the scope of the license. In a standard license of a software program one would grant a non-exclusive, non-transferable, non assignable license, to use the software for a certain purpose. Purpose would vary depending on certain functionalities of the software program involved. To avoid any questions whether or not the licensee can sublicense the software, one should make sure that license is non transferable and non assignable. The scope license clauses usually entail a restrictions clause that makes sure that the licensee is forbidden from taking different actions with respect to the licensed software. Those include a prohibition to transfer, export, resell, sub license, ship or divert the licensed software to any third party or any attempt to reverse engineer, disassemble, or decompile the licensed software in any form or by any means or modify the licensed software.
Ownership & Customizations – another material key issue in a license agreement; this section will ascertain the fact that your company owns all intellectual property rights in the licensed software. Although it seems self evident, the case is much less clear when special customizations are made to the licensed software at the request and cost of licensee. If the license agreement does not provide specifically that any such customizations are part of the intellectual property owned by licensor, this could cause severe problems and complexities as it may be claimed that since the licensee paid for those customizations, he owns them. This may cause severe legal problems if any customizations that were made included any changes, modifications and revisions to the licensor’s core source code. This could mean that the ownership of licensor’s core technology may be in question. Therefore, it is advisable to include that ownership of intellectual property also apply to any customizations.
Warranty & Limitation of Liability – Warranty and Limitation of liability usually are boiler plate sections. Most software licenses offer very limited warranty, if any, and does not guarantee an error free operation of the software. In addition, limitation of liability sections usually limits the amount a plaintiff can receive to the actual purchase price paid for the software and aim eliminate any exposure to any indirect or consequential damage.
If you are looking for a license agreement form which is suitable for start-up companies you can find one at www.mystartuplegaltemplates.com.