Prime Clauses

• Author: David W. Tollen
• Pages: 1-60

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PART I

Prime Clauses

The prime clauses are the key terms in most technology contracts.

They provide for the fundamental transaction: the exchange of soft-

ware or services for money or other consideration.

Most software and tech services contracts include two of the

clauses described in this part: (1) a transfer or sale of software rights

or of services (Chapters I.A through I.F) and (2) a promise of pay-

ment (Chapter I.G). But combination contracts—agreements with

multiple transactions—include several prime clauses.1

1. For combination agreements, see “Subject Matter: Types of IT Contracts” in the

Introduction.

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A. Standard End User Software License

A license grants the customer rights to copy software or to exploit it

in other ways. It leaves ownership with the vendor. A license works

like a rental agreement. The vendor/landlord still owns the house, but

the customer/tenant gets to use it.

This chapter looks at standard end user licenses: the central clause

in an end user license agreement (EULA). In a standard license, the

customer gets the right to run software for internal business pur-

poses. It can’t share the software with third parties or modify it.

A software license is a copyright license, but this chapter doesn’t

go far into the mechanics of copyright. That kind of knowledge

isn’t usually necessary for a standard license. If you want a deeper

understanding of licensing, or if your license doesn’t fit the “stan-

dard” model discussed here, see Chapter I.C (“Software Licenses in

General”).

Before drafting your license, ask yourself: What is being licensed?

The contract should clearly define the “Software” or “Licensed

Product”—usually in a separate definitions section. In a standard

license, it’s usually enough to give the software’s name and ver-

sion number and specify object code: “‘Software’ refers to Vendor’s

GlitchMaster software application, version 3.0, in object code format.”

But if the software has multiple modules or libraries or whatever, or if

you see any chance of dispute about what’s included, list the necessary

elements: “‘Licensed Product’ refers to Vendor’s RoboSurgeon for the

PC software application, version 2.0, in object code format, including

the following modules: RemoteScalpel, Anesthesia-Alarm, and Mal-

practiceManager.” You might also specify the platform: Windows,

Macintosh, Linux, etc. Finally, if the customer needs to reproduce