A software license agreement is made between the author or owner of the software (the licensor) and a purchaser. It details the purchaser’s rights, the manner in which the software may be used and any restrictions place upon it. It may also outline any guarantee give with the purchase. It is often available only once the purchase is complete.
On installation of the software, the agreement is displayed to the purchaser who has the opportunity to read all the terms and conditions. They will then be required to confirm that they agree to the licensing agreement in order to proceed with use of the software. If the purchaser does not agree they will be unable to use the software.
Violation of a software license agreement puts a business at risk of legal action by the software provider. Breach of the agreement can happen easily, for example where software is put onto more computers than licenses have been paid for. Small businesses are particularly at risk; larger organisations often bulk buy more licenses than they need.
A software license agreement usually contains a clause allowing the software company to audit any usage of their product. If a breach is found, the company will be liable to pay all outstanding software and support charges, audit costs, which can on occasion run into six figures, and any legal costs.
When a software user clicks a button saying “I Agree” he should assume that a binding contract has been made between him and the software proprietor. Although it has been argued that this does not necessarily form a contract, the courts tend to find in favour of software companies when it comes to online contracts.
By keeping track of exactly what software is being used and on what devices companies can avoid costly audits and penalties. Proper licensing and tracking of software helps software developers understand the end user’s requirements. The revenue from licence payments funds innovation.
A perpetual software license agreement continues indefinitely. It is usually more expensive than say a yearly licence, but allows the user continued use of the software. However in some instances it may be terminated, depending on the language used in the agreement.
A master software license agreement sets out most of the terms to all future agreements, but allows some scope for alteration. Generic terms are set out in detail, but terms that are specific to individual use and requirements are left open ended and will be tailored to fit.
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