Software Licence Agreement (Escrow, Affiliates & Sub-Licensing)

This Software Licence Agreement (Escrow, Affiliates, and Sub-Licensing) is a comprehensive document designed for use between a software licensor (who will generally be a developer and/or owner) and a licensee who will be using the software in the course of business.

This version of the document extends the licence to include the licensee’s affiliates and gives further limited rights to grant sub-licences to certain agents (such as sub-contractors) in order to provide certain services, and to “divested entities” for a limited period of time in the event that an affiliate breaks away and needs time to switch software and/or software licences.

Note that this document may not be suitable for use in situations in which the licensee operates in the financial services industry, particularly if it is subject to any regulatory requirements which preclude it from assuming the debts or liabilities of any non-regulated affiliates.

This document is designed for use with software that is run on the licensee’s premises (known as “on premises” use); that is, as opposed to being hosted on a server and accessed remotely. It is not suitable for SaaS or ASP use.

The template is also designed for use with standard software that is sold in the same form to all customers, rather than fully custom-made or otherwise customised.

The terms of this software licence aim to be reasonably balanced, but it is drafted in a manner which slightly favours the licensee (i.e., the customer). This is intended to help keep the document fair from a legal perspective. Note also that this is a B2B document. For B2C software licences, please refer to our range of EULAs in click-wrap, shrink-wrap, and browse-wrap formats.

This document includes provisions for escrow. Escrow helps to protect the interests of the licensee in the event that the licensor becomes unable (or is unwilling) to maintain the software. The source code and related key materials are deposited with an escrow agent for safekeeping. If what is known as an “escrow trigger event” occurs (for example, the licensor’s insolvency), the licensee can obtain the source code and other materials and can continue maintaining the software. This document also refers to a separate escrow agreement – a tripartite agreement between the licensor, licensee, and escrow agent. Such an agreement (potentially in the form provided by an escrow agent) should be attached to this document as a schedule. Please note that we do not currently offer a software escrow agreement template.

The use of software under the terms of this licence is limited by reference to a maximum number of authorized users. These restrictions, included in Clause 2.2, are designed to be flexible (when completing the document; not once it is in force). Instead of a limit on authorized users, for example, a limit could be based on the number of concurrent installs. Defined terms may require adding, removing, or amending if these parameters are customized. Further restrictions focus on the way in which the software may be used, namely in object code form for the normal business purposes of the licensee. As noted above, this version of the document also extends to the use of the software in source code form, allowing for maintenance and modifications if the escrow provisions are triggered.

Other limitations incorporated in the licence address the making of copies of the software (for example, for backup purposes), and restrictions on the making of alterations.

Following delivery of the software by the licensor (which may or may not be on physical media), the licence agreement sets out a testing period during which the licensee can ensure that the software performs correctly and in accordance with the specification (also set out in a schedule to the document). Further provisions govern the provision of software updates and similar testing provisions apply to them.

Intellectual Property Rights are addressed, and the licensor undertakes to indemnify the licensee in the event that the licensee has a claim brought against them alleging that their use of the software in accordance with the agreement infringes the IP rights of a third party. This provides valuable security for the licensee. Further protection for the licensee comes in the form of a series of warranties provided by the licensor.

Liability of both parties is limited under this template licence. Certain forms of liability, however, are expressly left unlimited including sums due in respect of the aforementioned IP indemnity.

Other detailed provisions in this agreement govern payment (structured by default as a simple one-off payment for a perpetual or term-limited licence), export control and compliance with laws, and confidentiality.

Optional phrases / clauses are enclosed in square brackets. These should be read carefully and selected so as to be compatible with one another. Unused options should be removed from the document.

This Software Licence Agreement - Licensor to Licensee contains the following clauses:

1. Definitions and Interpretation
2. Grant of Licence
3. Escrow
4. Restrictions on Copying
5. Restrictions on Alterations
6. Licence Fee and Payment
7. Delivery [and Media]
8. Testing and Acceptance
9. Software Updates
10. Licensor’s Proprietary and IP Rights
11. IP Claims and Indemnity
12. Warranties
13. Liability
14. Export Control and Compliance with Laws
15. Confidentiality
16. Termination
17. Data Protection
18. Force Majeure
19. No Agency or Partnership
20. Notices
21. Successors and Assignees
22. Entire Agreement
23. Counterparts
24. No Waiver
25. Severance
26. Time of the Essence
27. Third Parties
28. [Dispute Resolution]
29. Law and Jurisdiction

And the following schedules:

1. The Software
2. The Specification
3. [New Release Preferential Sale Terms]
4. Escrow Agreement

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