Why Are Technology Licenses So Important For Business?

If your company has technology that it wants to commercialize and license out to customers, it is vital to draft an agreement that your business can present to its customers that lays out the business terms, such as payment and number of users, as well as legal issues such as indemnification and limits on warranties. On the flip side, if you run a business that needs to get a license to third-party technology or software, you also want a contract that is clear so that you know on the front end what the features and functionality of that technology are and whether they meet your needs. There are a number of issues that should not be left to assumption or to an implied understanding between parties. For example, the scope of the license should indicate whether the licensee can only use the technology for its own internal business purposes or if it can sublicense it to other customers. Every aspect needs to be in a clear and unambiguous written contract so that in the event of a dispute, everyone understands the terms of the agreement.

What Basic Contract Principles Apply To A Technology Related Agreement?

Technology licenses are contracts just like any other. The three primary elements of a contract are an offer of services or goods, a clear acceptance of that offer, and valuable consideration, meaning both sides see a (more or less) equal benefit from the agreement. Services in exchange for payment, for example. Those are the basics of any contract. A technology license is going to have some specifics on top of that, like the limitations of the license, warranties about functionality that are specific to software, or the promised uptime in a Software-as-a-Service arrangement, where the software is hosted by the licensor.

Should A Lawyer Have A Technology Background To Be Able to Address And Understand What Should Be Included In My Contract?

Our clients are in just about any technology field you can imagine. E-commerce, manufacturing, health technology, web design and development, and even farming. No lawyer is going to be an expert in all the fields that our clients represent. Our job is to listen to your explanation of the technology and extract from that what is important to you in a contract, and draft accordingly. That is what we are good at.

Should We Include Automatic Renewal Components In The Contract Or Should We Draft A New Agreement Each Year?

Absolutely you should let an agreement renew automatically! Your contracts should survive automatically over the years unless there are specific reasons not to do so. It is much easier, from an administrative standpoint, to have a contract include automatic renewal components – this does not mean that you allow a contract to go on forever. Most often the agreement will allow the parties to review the contract at the end of the year and decide whether or not they want to continue, and terminate if they do not. If the parties decide to continue, they can do so under the contract that’s already drafted and not have to start over.

How Should We Address Termination of a Contract?

It seems like terminating an agreement should be a simple matter, but these provisions can be tricky to negotiate and sometimes even to properly follow. A number of things should be considered. The length of a contract is a factor to consider. As the licensee, you might want to have a month to month agreement, whereas the licensor might want to lock you in for a year or multiple years. Often, determining the length of the contract goes hand in hand with the payment terms. Determining what constitutes a breach of an agreement and material terms are essential. An agreement may state that the licensor has the option to terminate if the licensee materially breaches the contract, but what a “material breach” actually is sometimes heavily debated.

You’ll want to ensure you are prepared for a potential bankruptcy. If a licensee goes bankrupt, the question of whether or not a licensee has the right or authority under the law to terminate an agreement can be challenging. A licensee has to figure out whether or not it’s the kind of agreement that a debtor can assume in bankruptcy law.

Should A Contract Be Amendable Or Do We Draft a New Contract If Anything Changes?

Contracts are meant to create certainty in business, so they should not be easily amendable. Usually, the contract will state that it cannot be amended unless there is a written agreement between the parties. However, if the parties agree to a change, they can attach an amendment that signifies the change to the corresponding paragraph of the agreement rather than throwing the whole thing out and starting over again.

For more information on Technology License Agreements, an initial consultation is your next best step. Get the information and legal answers you are seeking by calling (615) 734-1188 today.