Software licence agreement

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A B2B software licence agreement, which may be used for both time-limited and perpetual licences.

Author: Alasdair Taylor
Updated: 13 January 2021
Length: 11 pages (min.)
Notes: 13 pages (min.)
Format: MS Word (.DOCX)

At its most fundamental, a software licence is a right granted by one person or company to another, permitting the other to use the software. Use of software without a licence will usually amount to copyright infringement.

These software licence agreements include a detailed licensing clause, which sets out the scope of the licence being granted. In other words, it answers the question: what is the licensee permitted to do with the software? The clause comprehends a number of different licensing models, for instance where licensing is on the basis of:

  • concurrent user numbers;
  • named users; and/or
  • number of installations or instances.

These software licence agreement templates are very much B2B documents, and are unsuitable for B2C software licensing.

There are three different agreement versions: a basic version which covers only the essentials, a standard versions with provisions suitable for a wide range of licensing situations, and a very flexible premium version.

Basic software licence

This document includes provisions relating to the supply and licensing of the software, charges and payments, software-related warranties along with limitations on those warranties, liability disclaimers, rights of termination and results of termination, together with standard boilerplate clauses.

Standard software licence

In addition to the provisions of the basic software licensing agreement, this document includes an acceptance testing clause, a provision covering set up services, confidentiality obligations, indemnities, audit rights, and an optional background section. Many of the other provisions included in the template are more detailed than those in the basic agreement.

The software licence agreement template does not include provisions for the licensing of source code to the customer. Nor does it include escrow provisions. If you need a licence agreement covering source code and/or with escrow provisions, see our premium software license agreement template.

The template refers to, but does not include, an end user licence agreement (EULA). You may therefore also need to consider our EULA template.

Premium software licence

This licence agreement template is based upon - and contains all the provisions included in - the standard software licence agreement template.

In addition, it includes provisions relating to contract management, change control, licensing of source code and source code escrow.

As with the standard document, the template refers to a EULA. However, it does not include a EULA. If you need a EULA, please consider our EULA template. Similarly, the template refers to but does not include an escrow agreement. Typically, an escrow agent will supply its own model escrow agreement.

Basic version:

  1. Definitions
  2. Term
  3. Supply of Software
  4. Licence
  5. No assignment of Intellectual Property Rights
  6. Charges
  7. Payments
  8. Warranties
  9. Acknowledgements and warranty limitations
  10. Limitations and exclusions of liability
  11. Termination
  12. Effects of termination
  13. Notices
  14. General
  15. Interpretation

Standard version:

  1. Definitions
  2. Term
  3. Supply of Software
  4. Set Up Services
  5. Acceptance procedure
  6. Licence
  7. Source Code
  8. Licence audit
  9. Licensee obligations
  10. No assignment of Intellectual Property Rights
  11. Charges
  12. Timesheets
  13. Payments
  14. Licensor's confidentiality obligations
  15. Licensee's confidentiality obligations
  16. Warranties
  17. Acknowledgements and warranty limitations
  18. Indemnities
  19. Limitations and exclusions of liability
  20. Force Majeure Event
  21. Termination
  22. Effects of termination
  23. Notices
  24. Subcontracting
  25. Assignment
  26. No waivers
  27. Severability
  28. Third party rights
  29. Variation
  30. Entire agreement
  31. Law and jurisdiction
  32. Interpretation

Premium version:

  1. Definitions
  2. Term
  3. Supply of Software
  4. Set Up Services
  5. Acceptance procedure
  6. Licence
  7. Source Code
  8. Source Code
  9. Licence audit
  10. Escrow
  11. Licensee obligations
  12. Licensee Systems
  13. Licensee Materials
  14. No assignment of Intellectual Property Rights
  15. Representatives
  16. Management
  17. Change control
  18. Charges
  19. Expenses
  20. Timesheets
  21. Payments
  22. Licensor's confidentiality obligations
  23. Licensee's confidentiality obligations
  24. Publicity
  25. Data protection
  26. Warranties
  27. Acknowledgements and warranty limitations
  28. Indemnities
  29. Limitations and exclusions of liability
  30. Force Majeure Event
  31. Termination
  32. Effects of termination
  33. Non-solicitation of personnel
  34. Notices
  35. Subcontracting
  36. Assignment
  37. No waivers
  38. Severability
  39. Third party rights
  40. Variation
  41. Entire agreement
  42. Export control
  43. Law and jurisdiction
  44. Interpretation

Is the licence automatically terminated if licence fees go unpaid?

Not automatically. A failure to pay licence fees may be a material breach of the agreement, giving a right to terminate the entire agreement.

Does the licence acknowledge that software may be a little buggy?

Yes. The warranties section includes an acknowledgement that "complex software is never wholly free from defects, errors and bugs".

Does the software licence agreement exclude all liability for faulty software?

No. A provision that attempted to exclude all such liability would likely fall foul of the Unfair Contract Terms Act 1977 (amongst other things).

How are charges under the software license agreement structured?

Obviously, different licensors will have different charging models. The model suggested in the template agreement is therefore likely to need at least some amendment. With that caveat in mind, the suggested charging model is as follows: the licensee will pay to the licensor an agreed fee (or an agreed fee per licensed user or per installation) in respect of each defined period (e.g. calendar month) during the term of the agreement. Where the defined period falls partly outside a calendar month, it is the job of the licensor to pro-rate the fee. In doing so, the licensor must act reasonably. The fee may also be varied by the licensor, but optionally such variations may be subject to a ceiling (e.g. at the level of RPI increases).

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A copy of this software licence agreement is included in the following pack:

  • Software developer pack (all versions of this document are included in the premium version of the pack and the basic and standard versions of this document are included in the standard version of the pack)

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