A software licence agreement is a contract under which the owner of rights in computer software allows another person to use that software. With off-the-shelf products the licence is generally standard and is supplied with the software; simply installing the software indicates acceptance of the terms of the licence. Where the software is supplied on physical media, such a licence is called a "shrink-wrap" licence; where the software is downloaded online, this type of licence is referred to as "web-wrap".

In large installations, and where the software is written or customised specially for the customer, the licence will usually be part of the contractual terms negotiated by the parties.

Common provisions of software licences include:

• The licence fee payable. This may be a one-off initial payment or a regular fee
• Whether the licence is exclusive to the customer. This is only likely to be the case in entirely bespoke software, as the software producer would not be able to reuse or resell software that was exclusively licensed to a single customer
• Whether the licence is for an indefinite period or is limited in time
• Restrictions on the customer's right to sell or sublicense the software
• Restrictions on the customer's right to copy or alter the software
• Limitations on liability
• Rights to upgrades

In software development projects, the ownership and licensing of the software is frequently overlooked. There may be no clear agreement as to where the rights in the software vest, which can cause problems with later attempts to exploit or transfer the software. It is therefore important to ensure that the correct software licences are put in place at an early stage.

Finally, it often useful for companies for whom their won software is crucial (such as those creating and selling their own software products) to use software licensing to protect their business assets. This is done by incorporating a special company just to own the software rights, which is not a trading company. The software owning company would then licence the rights to the trading company. This can protect against the loss of the software in the event that the trading company finds itself in financial difficulties which put it assets at risk, as the software would not be among those assets (being in the ownership of a different company).

We have extensive experience and expertise in drafting and negotiating software licences. We take a realistic and commercial approach to a client's needs, and ensure that we understand the purpose and functionality of the software as a far as possible, in order to tailor the licence to the client's needs.