If your company drives its revenue with proprietary software assets, you must ensure those assets are not improperly shared or misused by others. One way to protect your company’s software-related intellectual property (IP) rights is through a written contract. How Can Contract Provisions Help Protect Software? Most commercial software products are distributed in compiled object code form (as opposed to source code) or distributed via the Internet, with terms of use governed by some form a license or terms of use agreement. The contract should clearly state that the licensee is not actually purchasing the software, but instead purchasing a right to use the software in a certain way. The license agreement typically grants the licensee narrowly drawn rights to access, use, copy—and perhaps internally distribute—the software. Software licenses are important for companies with software assets because a carefully crafted, protective contract clearly spells out the type of access and use you wish to provide, and provides you with remedies you can pursue in or outside of court if you find the terms of use are exceeded by the licensee. For instance, software licenses should contain provisions meant to:
- Limit use of the software.
- Prohibit reverse engineering of the software code.
- Restrict copying, modifying, or redistributing the code.
- Limit access to the code itself.
- Impose conditions on the license grant and define consequences for breaching the agreement. For instance, misuse may result in termination of the license and cause an infringement action under copyright or patent
- Impose restrictive covenants that, if breached, will lead to a breach of contract legal action.
- Provide restrictions on the scope of the license, such as limits in terms of geographical location, term, number of users, volume of usage, and, if exceeded, prompts an infringement action.
- Provide audit rights to ensure the licensee is using the software within the scope of use provisions of the license and remitting the correct amount of fees to your company.
Breach of Contract When someone uses, copies, modifies, distributes, or reverse engineers your software outside the bounds of your agreement, you and your business can redress the problems by exercising your audit rights or commencing legal action against the person who breached the agreement. State law governs contracts. Claims for breaches are based upon the specific language of the contract or license and what the alleged breach of contract involves. Audit rights flow directly from the terms of the license and can be a quick and low cost was of remedying any breaches of the license without resorting to legal action. Using Contract Protection as Part of Your Company’s Software IP Protection Strategy Safeguarding software through the use of a license agreement is very effective, especially when coupled with copyright, patent, and/or trade secret protections your company has secured in the software. The techniques your company can use to protect its software are not mutually exclusive. Contract protection is just one of several layers of IP protection to employ so that permitted use is very clearly defined. You may want to review our prior post for an overview of four primary means of protecting software assets. An Experienced Software IP Attorney Can Help You Finkel Law Group, with offices in San Francisco and Oakland, has assisted many companies in developing software intellectual property protection strategies to protect their IP assets. If you need intelligent, insightful, conscientious, and cost-effective legal counsel to assist you with developing a program to protect your intellectual property, please contact us at (415) 252-9600, (510) 344-6601, or write us at info@finkellawgroup.com to speak with one of our attorneys about your matter.