1. Avv. Daniela De Pasquale SoftwareLicenses LL.M. in Intellectual Property 2006 Università degli Studi di Torino - WIPO Università degli Studi di Torino - WIPO

2. Why to use a license? 1.Warranties 2.Liabilities 3.Free uses rights Limits to restrictions: Directive 91/250/EC Restrictions

3. A software license agreement is a legal contract between: and What is a software license agreement? The “software license” is similar to a rental agreement: the user agrees to pay for the privilege of using the software, and promises the software author or publisher to comply with all restrictions stated in the license. a software application author or publisher the user of that application

4. -Shrink-wrap license (s/w): licenses terms became effettive as a sum as customer opens software packaging -Click-wrap license (c/w): present user with online terms and require user to consent by clicking on “I agree” icon -Browse-wrap (b/w): allows user to view terms but do not require specific consent to those terms - Execution of a written license agreement. How can you enter a license agreement?

5. -use; -make or reproduce; -distribute by sale, lease, rental, loan, gift, or license; -publicly display; - publicly perform. What rights are conveyed to the licensee? Right to: Note: Software is licensed but not sold

6. -Duration; -Number of copies which are licensed; -Limitations on the licensee’s actions; -Delivery; -Site, CPUs and Users; -Transfer to third parties; -Choice of law and Forum -Acceptance tests; -Reverse engineering. What are the main aspects to be ruled in a license agreement? Typical terms:

7. The object code is usually made available to the user whereas the source code is only made available pursuant to a separable source code agreement. What kind of code is licensed?

8. Licensed software usually includes: -documentation -updates -enhancements -(support) What does licensed software include?

9. The number of copies of the licensed software is normally specified. Is it permitted to reproduce copies of the software? However, pursuant to Directive 91/250/EC restrictions on back-up copies are now invalid.

10. Pursuant to Directive 91/250/EC it is permitted to - analyse the underlying code, - copy and translate the program and - investigate its functioning in order to evaluate and understand its ideas and principles, without licensor’s consent,but only for the purpose of achieving inter-operability of the software with an independently created software subject a number of conditions. Can you modify the software?

11. Certificates of destruction may be required and help preserve trade secret protection and may also be helpful in litigation over software piracy by an ex-licensee. What consequences can stem from termination? User-licensees can be required to return licensed software or erase it

12. Maintenance terms could be included in the license agreement, in an appendix thereof or in a separate agreement. In this case the licensor makes available to customers copies of updates containing several defect corrections. Note: particular attention should be paid to the interplay of maintenance and warranty provisions (what may appear to the licensee generous maintenance terms by the licensor may be a means of reducing original “fit for purpose” warranties). What other agreements may be connected with software licenses?

13. Enhancements are major improvements in software functionality. They could be charged separately or not. How would you rule enhancements?

14. A licensee can get a source code through a source code escrow. A source code escrow is a deposit of the source code with a party (possibly a third subject) with the intention to have the code released to a user of executable code upon one or more events such as a failure to provide timely maintenance service. How can a licensee get the source code ?

15. Shared Source Licenses… Microsoft ! Microsoft Permissive License (Ms-PL) - It allows licensees to view, modify, and redistribute the source code for either commercial or non-commercial purposes. Under the Ms-PL, licensees may change the source code and share it with others. Licensees may also charge a licensing fee for their modified work if they so wish. (less restrictive). Microsoft Community License (Ms-CL) – It allows for both non- commercial and commercial modification and redistribution of licensed software and carries a per-file reciprocal term. (collaborative development projects). Microsoft Reference License (Ms-RL) – It allows licensees to view source code in order to gain a deeper understanding of the inner workings of a given technology. It does not allow for modification or redistribution (reference-only license).

16. - Virus warranty; - Virus warranty; - Ongoing performance warranty. - Ongoing performance warranty. Note: Suppliers will seek to warrant their goods and services to the minimum and customers will have to negotiate express warranties to cover their requirements and needs. In general, the more a customer negotiates extended warranties into a contract the more the supplier will seek to limit the impact of those warranties under the Limitations of Liability clauses. In general, the more a customer negotiates extended warranties into a contract the more the supplier will seek to limit the impact of those warranties under the Limitations of Liability clauses. As a result the interplay among warranties, limitations of liability, indemnity and insurance should be carefully considered. As a result the interplay among warranties, limitations of liability, indemnity and insurance should be carefully considered. What warranties would you include in a software license agreement?

17. With reference to Intellectual Property rights it could be included a clause on representations and warranties regarding the ownership or right to license the software and a clause providing that all rights on future enhancements performed by the licensee will belong to the licensor. What language should be included regarding IP rights?

18. A licensor can safeguard himself against legal liability by inserting in the agreement a “limitation of liability and remedy” clause. Note: in EU countries when limitations on liability are imposed in contract terms between a supplier and a customer, statutory provisions may override attempts to limit liability, but if the customer is an intermediary distributor the limitation of liability could be effective. Furthermore, in some countries it may be impossible to limit liability where the claim is for damages for personal injury or death resulting from negligence. How can the licensor safeguard himself against legal liability?

19. What if the license is to be executed by a “Consumer”? The “consumer” is any natural person who is acting for purposes which are outside his or her trade, business or profession. Directive 93/13/EC The applicable law is Directive 93/13/EC on unfair terms in consumer contracts. irective 97/7/EC Directive 2000/31/EC As for click-wrap licenses and shrink-wrap licenses for products which are purchased by distance contracts, the applicable law is the Directive 97/7/EC on the protection of consumers in respect of distance contracts and the Directive 2000/31/EC as far as information society services are involved.

20. “Unfair terms” cause a significant imbalance in the parties' rights and obligations. Standard term contracts: sellers and suppliers define the terms in advance and consumer can not individually negotiate them. Contract terms shall be drafted in plain and intelligible language and ambiguities will be interpreted in favour of consumers. Terms which may be regarded as unfair vary from country to country within the EU. The Directive provides examples of terms that may be regarded as unfair. Terms that are found unfair under the Directive are not binding for consumers Terms that are found unfair under the Directive are not binding for consumers. Directive 93/13/EC on unfair terms in consumer contracts

21. Directive 97/7/CE on protection of consumers in respect of distance contracts Provision of comprehensive information before the purchase; Confirmation of that information in a durable medium (such as written confirmation); Delivery of the goods or performance of the service within 30 days of the day after the consumer placed his order; Invalidity of any waiver of the rights and obligations provided for under the directive, whether instigated by the consumer or the supplier.

22. US case law ProCD v. Zeinenberg (7th Cir. 1996), held s/w and c/w license of software/ database product enforceable under UCC art. 2 and not preempted by copyright law. Most US courts, ProCD, hold “pay now, terms later” licenses to be enforceable under UCC art. 2 against consumer. Westerndorf v. Gateway 2000, (Del. Ch. 2000) even held s/w license terms enforceable against user who received computer as a gift. Specht v. Netscape Comm. Corp., (2nd Cir. 2002) on line b/w license not enforceable because end user not required to view or accept terms and terms were not conspicuous. Register.com v. Verio Inc., (2nd Cir. 2004) upheld preliminary injunction enforcing b/w terms where user made systematic use of website & admitted knowing of terms.

23. Avv. Daniela De Pasquale d.depasquale@lascalaw.com La Scala & Associati Corso Magenta 42 20123 Milano Contact: