The Importance of Licensing and Contracts in the Software Industry

For the software professional, the industry can often be a quagmire of software license agreements, copyright issues, and a whole range of legal complexities that can make you wonder if a law degree is necessary to develop software these days. However, that's why a software contract is so important in helping to address some of these complexities. While the international status of things like software license agreements can make things more difficult than necessary, a contract can still be your best solution for getting all the terms on the table and creating an environment of mutual trust between buyer and seller. In essence, software licensing exists in order to try and protect those who designed the software and distribute it.

Obviously, if you designed something, you don't want one person to buy it and then make a copy for all their friends. Perhaps even more importantly, you don't want that person to make a buck selling what is rightfully yours. Good software license agreements protect the interests of software developers while delivering high-end product to the end consumer. This is what a good software contract should be about. Complicating the issue even further is the extent to which software can change hands from start to finish.

A developer can design the software. A distributor can sell it at various different levels, which can lead to further distribution of the software, and so on. Each step of the way creates the need to determine the status of software license agreements: who owns what, and when they do own it, the terms of use they accept with that ownership. A good software contract takes all these factors into consideration. Another issue to consider with respect to software license agreements is copyright, which gets into the question of whether software is a good or a service, and whether or not an intellectual property is associated with the software. In other words, when you transfer software to someone else, not only are you transferring a physical good in the form of a CD or Internet download, there are ideas and even words created which are owned by someone and can be protected by a software contract involving copyright.

Taking this into account will help in resolving legal issues with software down the road. The range of software license agreements needs also to be taken into consideration, as well as what can be done to them after the initial development is complete. A license agreement can be unique to one individual or company. This is called custom or bespoke software. Getting a license agreement hammered out with one entity can make things smoother, but is obviously less common. Standard license agreements accompany software which you can buy off the shelf, so that every person who ends up using it ends up signing onto the same software license agreements.

This leads to yet another distinction in this quagmire of software contract issues. Shrink-wrap end user agreements are those that users don't even get to see until they open up the product. While common in off-the-shelf software, they obviously limit the extent to which the end user has any choice before making purchase. Click-wrap end user agreements allow end users to essentially read the agreement before accepting the product. Anyone who has downloaded software on the Internet is familiar with these types of software license agreements.

Because the world of software licensing is so potentially complex, sorting out the terms before distribution can only help to protect your interests and even your profitability. The last thing you want is for someone else to profit from your hard work and creativity. It's why you should consider software license agreements as an integral part of a good software contract for your business.

James Cochran is the founder of ContractEdge, a provider of legal forms and contract agreements designed specifically for IT professionals and contractors. Created by attorneys who specialize in Information Technology law, ContractEdge software license agreements and software contracts go beyond the standard provisions and include critical special provisions unique to the IT industry.