Jeff Gordon has posted a free copy of an issues matrix that nicely explains the vendor’s and customer’s positions on a lot of issues that come up regularly in software license negotiations. There are one or two points on which I might quibble with his take on things, but even so it’s very well done; I wish I’d had something like that years ago when I was negotiating my first software license agreements.
Software licensing risk matrix at LicensingHandbook.com
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Signing a business contract:
What are your quibbles? You know I value your opinion. And who knows, maybe I’ve just said things in a bad way. :)
Regardless, thanks for posting!
Page 5, intellectual-property indemnifications: The refund-reduction (depreciation) periods I’ve seen have ranged from 3 years — the IRS depreciation period for software license purchases, if memory serves, and also the statute-of-limitation period for copyright infringement — to 6 years (the limitation period for patent infringement). I don’t think I’ve ever see a deal in which more than 6 years was either requested or conceded; the usual period seems to be 5 years.
Page 16, source-code escrow: When I was a vendor GC, I pushed back hard, and almost always successfully, against source-code escrow requests, because in the real world they’re of questionable value to the customer. Here’s what I mean: Suppose that (enterprise) software Vendor A were to tank, either on its obligations or as a business. The customer normally wouldn’t be staffed to take over maintenance and development, and wouldn’t want to try. The customer most likely would just rip out Vendor A’s product and switch to competing Vendor B — which often will be delighted to let the customer switch for free in order to capture the future maintenance revenues, and to get a “hey, look, we replaced Vendor A!” story for its marketing. (See this posting from last year for a longer explanation.)
Page 17, governing law and forum selection: Tactically, there’s something to be said for a software vendor’s agreeing to the customer’s jurisdiction. Many software vendor suits include a request for preliminary injunctive relief because the customer is allegedly infringing the vendor’s IP rights. In those cases, you can move faster if the suit is in the customer’s jurisdiction (it’s easier and cheaper to effect service of process) and if the law of that jurisdiction applies (the judge will already know the law and won’t make you prove up ‘foreign’ law as a factual matter).
Page 1, delivery, testing, & acceptance: This is really more an amplification than a quibble. A customary compromise on acceptance testing is for the vendor to give the customer a free pre-sale trial period of the fully-featured software. Sales people love free trial periods for several reasons: • It gives them something to give away for free and thereby look good to the prospect; • with any luck, it gets the customer’s end users hooked on the software; • it lets the vendor book the revenue at signing, without having to wait until the acceptance period is over. (The last reason is questionable from an accounting perspective — in terms of booking revenue, a post-sale acceptance period is pretty much the same as a pre-sale trial period, the only difference being that the contract is already signed.)
As I say, it’s a great chart.