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Software licensing

Лизцензирование ПО

Software License Agreement — the main document that defines the rights and obligations of the client using the software. The contract is attached to the purchased product in electronic form or in paper form. It defines the norms for the operation of a certain type of product. In other words, the license guarantees that the creator of the software, who owns all the rights to the software, will not sue the one who uses this program under the license. The software publisher sets certain safety boundaries for the operation of the software product created by him.

What are licensed programs?

Each program is the result of someone’s intellectual activity, which means that it is the intellectual property of the creator. From a legal point of view, it is not the application that is acquired, but the right to operate it. How you can use certain software is indicated in the license agreement – license – attached to this product.

All software is divided into two large categories – software products of free use (we are talking about a free and open license) and non-free (commercial license). In addition, there is an intermediate category between them – shareware products, which are half of both categories. Such software can be installed on your computer, but until the user pays for it, there is a risk of certain restrictions.

Definition of a license

A software license is a document containing the terms and conditions for using the program. It is concluded between the licensor and the licensee (the first is the party to the agreement, granting, respectively, the second party the right to operate the object of the license: inventions, technologies, in our case, software).

Thus, the copyright holder prevents copying, modification and sublicensing, or, on the contrary, allows such actions to be carried out with the software.

The license is also a way to give the software to the user, but keep the publisher’s ownership of it and receive royalties. In other words – to give the program for rent.

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    Types of licenses

    In order to properly organize business processes, it is important to look at the types and types of licenses. Based on the licensing terms, there are 5 types of licenses:

    1. PUBLIC DOMAIN. Each user can freely exploit and change the code if he needs it.
    2. PERMISSIVE. Small requirements are implied here, in particular, to indicate the creator of the program.
    3. COPYLEFT. The GPL, LGPL, AGPL, CDDL, Mozilla Public License, and Open SSL insist that every derivative work be created under the same license as open source software. Open source is open source software. Whose initial code is available for viewing, studying, changing and allows you to make sure that there are no vulnerabilities. This means that the firm must make its personal changes public. The Jason Hunter OSS, Java Enterprise Edition, and Oracle licenses close the possibility of commercial promotion of the results, on the basis of which it is impossible to sell a derivative product or receive royalties.
    4. PROPRIETARY. The code is popularized exclusively by agreement between the owner and the user.
    5. EULA. End User Agreement.

    Types of licensing

    1. OEM. Preinstalled software is one of the most affordable solutions. It consists in the fact that the user buys programs along with a computer and uses it only on the purchased gadget. This version is optimal for those who purchase new equipment. If the programs are installed by the assembler, then a new computer will cost much less than if you buy it and install the programs yourself on the device. This is beneficial both in terms of time and cost.
    2. Full Package Product. The “boxed” version is used, as a rule, in retail sales, it is comfortable for individuals and small businesses. The purchase of such a box gives permission to use the software on one PC, regardless of how many people will sit at this computer. It is possible to change the computer, but a limited number of times. This version is optimal for those who already have a computer, but do not have the required software product.
    3. Volume Licensing. A corporate license is suitable for companies where there are a lot of employees, equipment, and therefore it is required to buy a lot of licenses. Here, the company is provided with a single nominal license for software. Which includes data about the customer, a list of programs and keys for their installation. This option is optimal for large companies that require fast technical support and work with unusual cases. When purchasing this option, the company provides discounts.
    4. Subscription. Product Licensing Subscription includes monthly and annual fees. This scheme is comfortable for firms that acquire more than 10 licenses. It gives you the opportunity to get all the benefits of the program for a small initial cost. The version is optimal for those who need the software for a short period of time or the user does not know for how long the program will be needed.

    Our company provides legal services for various types of software product licensing. You can ask for advice and/or for the creation of a complete package of documents that provide full protection of copyright software and/or rights to the priority of the invention.

    Why is a license required for a manufactured product?

    1. First of all, toprotect copyright. Property copyrights are the legal basis for generating income. The owner has the right to prescribe his own rules for users. In particular, to assign the number of users and processors, to put a ban on changing and publishing derivatives of the original product of the program.
    2. To monetize software. The main goal of creating a program is profit. The license agreement specifies the amount of royalties. Accordingly, this document acts as a basis for generating income.
    3. To confirm the source of profit in a banking institution, organization of financial control, tax. You must prove the source of funds so that they can be credited to the account. A similar standard is put forward by the tax. The license becomes the proof that makes it possible to pass bank compliance with the requirements and submit a report to the tax office.

    Exclusive and non-exclusive rights to software products

    Currently, there are such options for using software: on the basis of exclusive and non-exclusive rights. What is the difference between them?

    1. An exclusive license for the software means that the creator of the product transfers the software to only one user and can no longer sign an agreement with other parties. This kind of license implies that only one person, other than the owner, can operate a particular software. So, you’ve written code and you’re going to pay someone to use it. If you sign an exclusive license agreement, then for the duration of this agreement you will no longer be able to transfer the right to use it to someone else.
    2. A non-exclusive license is a document in which there are no restrictions on giving licenses to other users.

    What is important to remember?

    • exclusive right – the right to dispose and apply the program;
    • from the very beginning it belongs to the creator of the software;
    • it will be possible to grant such a right forever if it is a service work or when an alienation agreement is signed;
    • it is possible to provide the opportunity to use the exclusive right for a certain period under a license agreement;
    • there is an exclusive license (it will be possible to transfer the right to only one person) and there is a non-exclusive one (it is possible to transfer the right to an unlimited number of people).

    What is commercial use?

    Commercial use is an application that is aimed at obtaining commercial benefits, profits, and monetary compensation. This is a legal term that defines the exploitation of specific goods, tools or, as in this case, intellectual property, namely software products. Commercial use licenses impose certain restrictions on the owner’s assets to ensure fair remuneration for the labor of creating the software. Commercial Use Agreements are important documents. As they allow you to preserve the assets of the company and guarantee a decent profit. Accordingly, commercial software is software that was developed to make a profit from its operation by third parties, in particular, through the sale of software.

    What should be included in the license document?

    1. Set the exclusive / non-exclusive type of license, the territory of operation of the software product.
    2. Specify access rules.
    3. Note the elements of royalty: reward for the use of programs, a subscription fee for sublicensing. (A sublicense is a condition of a license agreement. According to which the owner transfers to the client the authority to grant the right to apply the patent for the priority of the invention to third parties within the boundaries of his rights). Payment periods and options for providing access are also approved if the calculation is not carried out within the agreed time frame.
    4. Permission to issue a sub-license, but in accordance with the written consent of the IT firm. Fix sublicensing rules.
    5. Supplement the document with a notice of the user’s responsibility for saving the access key.
    6. Secure that the right to the priority of the invention remains with the creator company.
    7. Close the ability to change and modify the software product, multiply the access key, falsify the IP address.
    8. Close the ability to distribute confidential data.
    9. State that the licensor is not responsible for
      • software and technical violations in the operation of the access key verification server, which led to the fact that the software cannot be operated;
      • negative results of the action or inaction of the client or other persons;
      • direct and indirect costs, lost benefit of the licensee.

    Additionally, it is worth creating an agreement for the introduction of the system and maintenance of the complex in production. Then the software product will have a full set of legal documents.

    SION patent law tax firm will help you register a license for your software product, draw up an agreement on granting the rights to use the software. To learn more about the possibilities of drawing up a license, to receive a full set of legal documents for software with well-developed business risks, write to us at info@sion-ip.com.

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    Author: Nataliia Riazanova