Prime Clauses

AuthorDavid W. Tollen
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
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
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

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