IP Tech Knowledgy

The purveyor of software should know what rights it holds and what rights it may be granting. When a developer provides a customer software, or access to online usage, or the right to download an app, the transaction is a license, not a sale.  The documentation should be careful to reflect this relationship.  

The user of a commercial software program obtains only the right to use the program with certain limitations. A license grants rights of use for particular purposes. The grant can define how a customer can and cannot use the program, allow others to use it, limit the types of systems it can be used on, and contain other constraints. The language of any agreement -- whether it is an End User License Agreement, Terms of Service, or other document allowing usage -- should use words that reflect the licensing scenario. Nothing in the document should create an implication of anything more than that limited usage. Words such as “license,” “grant,” “control,” “program,” and “software” are tied closer to a license arrangement.

A sale of software occurs only when the developer is divesting itself of all ownership rights and control over the product and is truly selling and assigning the one asset to its customer. Words such as “sell,” “sales,” “assign,” “title,” “purchase,” and “product” are tied closer to the outright sale.

Distributors such as value-added resellers or channel partners should similarly understand they are not the owners selling the software, and may not even be the party entitled to grant a license to the customer. They should also determine whether they are receiving a license from the developer and sub-licensing it to their own customer, or if they are not a part of a license relationship at all between the developer and the end user. If the intermediary vendor is a sales agent or other type of middleman, the intermediary’s contract with the end user should affirmatively recite to the end user that the license to use the software comes from the developer and not the middleman.

Ned T. Himmelrich
410-576-4171 • nhimmelrich@gfrlaw.com