The buzz on social media (that is, the 21st century's "word on the street") often is all about the latest software updates for various popular applications or operating systems. Reviewers or first adopters list all or the most important features/issues of the updates for those more skeptical of the newest and least-tested versions. Against a background of more frequent software updates and the fervor surrounding them, it's easy to see that a company would want to take advantage of every opportunity to keep their business running most efficiently and on the cutting edge. Opting for a software subscription that includes updates as opposed to a one-time purchase of a particular version then may be the better choice for a company.
Attorneys then need to provide client companies with a list of questions to consider before choosing between subscription-based software and a one-time software purchase. Questions to ask the client company in advising them on this issue are:
- What function does this particular piece of software serve for the business? Is it a core process?
- What are the security expectations for the data associated with the software?
- How many people need access to the software? How often is access needed?
- What is the cost difference? What resources are available/budgeted for this area? Is there an allocation for negotiation costs?
- Would the company require any software customization?
- What do the updates provide?
- What are the implications on the business of an update that creates a lot of issues/errors?
- What are the cross-platform compatibility requirements of the software outputs? Would the one-time purchase of a particular version meet these? Could updates ruin the requisite compatibility of the software with other software systems used by the company?
- What are the hardware/software/resources required for updates? What are the associated costs?
When advising about the terms of a licensing agreement, an attorney should make sure the following questions are asked:
- Who pays what when?
- What are the expectations for the frequency of updates? The substance of the updates?
- Who is liable for errors or loss caused by updates? Are there set penalty fees (per unit time) for a loss of service?
- Is there an indemnification clause?
- What are the information security expectations for the software and updates?
- Who is liable and when in the event of a data breach? Are there set fees?
- Are there minimum requirements that the subscriber/purchaser must maintain?
Finally, from the software licensor's perspective, subscription-based software service may be the preferred direction in which the company wants to move because of the potential for a steadier stream of revenue. Attorneys should ask their software company clients:
- What is the potential for software updates? The likely frequency?
- What is the software landscape in the area? What is the infringement potential?
- What are the insurance terms available to the software company for covering risks or liabilities taken on by them?
- What are the ownership expectations for customized software?
- What are the terms of use or expectations for the licensees? What are the penalties for violations?
These considerations and more should aid in getting the software licensing process mapped out or started for a client company.
