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Legal Considerations When Purchasing Software

Friday, 6 November 2015

by Staff, Spaulding Law

We live in an increasingly technological world, and the terms of the technology are constantly changing. While many software companies have click-through agreements, if you have the opportunity to negotiate and sign an agreement, there are some basic things you should take into consideration:

Is the software being offered as a license or a subscription? Licenses are often irrevocable (as long as you maintain compliance with the terms of the agreement), perpetual and royalty-free. Subscriptions are usually “right to use”. This means that you can only use the software for the term of the subscription. Many cloud or SaaS (Software as a Service) products are considered to be subscriptions. A license often includes a one-time fee with additional charges for maintenance and updates. A subscription usually involves an ongoing fee with the maintenance and updates included in the cost of the subscription.

Most software systems are programmed to collect information about activity in the program, and sometimes specifically the end user (Personally Identifiable Information “PII”). This information allows the software company to refine their product, sell information to advertisers, personalize the experience of the user, and direct them to subjects or items that may be of interest to them. Examples of this can be found in the ads that show up in your Facebook feed, the shows recommended through your Netflix account, products recommended on your Amazon account, etc. It is important to know if the software you are using will collect this kind of information.

If the software you are planning to use does collect PII, what kind of protections does the provider offer? It is likely that the provider offers only an industry standard duty to protect that information. This standard may vary by industry and it is recommended that you research this standard before accepting a clause with this language. If you are looking for specific language about what may be involved in protecting your information, there are several security certifications available to software companies (such as ISO 27001) that you may be able to request be included in your agreement.

The provider will likely make several guarantees in the agreement with respect to warranties, indemnification, etc. It is important to be aware that they also often include a limitation of their liability. This means that any damages you can potentially claim under the agreement may be limited by this limitation. It is recommended that you assess your risk to determine if the limitation of liability is sufficient to cover your needs.

The above are just a few of the issues to consider when signing a software agreement. A licensed attorney, specifically an attorney familiar with software and licensing, can help a customer navigate the many other potential issues in such an agreement.

This information is made available by Spaulding Law for educational purposes only and not to provide legal advice. By using this website, you understand that there is no attorney-client relationship between you and Spaulding Law, unless you have entered into a separate representation agreement. This information should not be used as a substitute for competent legal advice from a licensed professional attorney.

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