Intellectual property (IP) is intangible property that is created in someone’s mind using his intellect or other tangible goods. Categories include art, literary works, music, inventions, designs, processes and trademarks.
Intellectual property has value just like tangible property, and you have to protect it otherwise your property can be exploited without your knowledge or permission.
Some view intellectual property as a shield that prevents unlawful exploitation while others view intellectual property as a net that allows you to synergise with others through licensing of intellectual property.
Licenses and Your Rights
A license allows an intellectual property rights holder (the licensor) to make money from an invention or creative work by charging a user (the licensee) for product use. Licenses protect proprietary rights in things such as software and other computer products, for example. An intellectual property owner uses a license to give someone permission to do a certain activity or to use his property, without the license this would have been unlawful. Once you have a handle on your IP rights, you can create your software license agreement.
What Do I Include in a Licensing Agreement?
In business, a written license agreement is a must. There is no hard and fast rule to giving someone a license for property use. At this point I need to remind the reader of the essential functions of a properly drafted commercial agreement.
Firstly, it forces consideration by the client and, ultimately by the other parties, of the issues involved in a particular transaction.
It ought to clearly establish the obligations of the parties to each other in a way, hopefully, that will preclude future dispute and will, if a dispute does occur, enable a tribunal better to determine the issues involved, as a result of the clarity of the drafting.
You may also use these tips as a yardstick in determining whether the other party’s attorney or contract manager’s work product is favourable to you or not.
First you need to set the license’s scope. Licensing is assigning limited use rights for property. Be sure you keep ultimate ownership rights. However, rights need to be broad enough so customers want to use your product. Except for custom-made products, a license is typically nonexclusive, so you could sell it to others too and make more money.
However, there should be balance it must not allow the licensee to reproduce or pirate the product and sell it in turn to third parties. Sometimes, licenses allow reproduction within a controlled environment such as with enterprise licenses or network licenses. In other cases, a licensor may allow for a resale license, with royalties paid to the licensor. Be sure about the wording of clauses permitting such activities.
Revenue from Your Product
Terms controlling revenue streams generated by licensed products are very important. Usually most license agreements on end-user consumer software, for example have a one-time license fee usually paid at the time of purchase. Other arrangements may include recurring payments such as royalties or monthly lease payments. License agreements may also cover on-going maintenance charges that are usually hidden thus forcing the unsuspecting licensee to go back to the licensor to negotiate on-going maintenance charges that should have been negotiated with the original agreement.
Good legal writing
Good legal writing is a matter of style. Be mindful of subject-verb agreement. Use parallel construction on parallel concepts. Know the rules of singular possessive nouns as compared to plural possessive. Finally, use the names of the parties (a “shorthand” reference is acceptable) rather than “Licensee” and “Licensor.” It is too easy for the reader (and even the writer!) to confuse the two. This last part is however subject to debate with most objections coming from the abyss of habit rather than from the cliffs of reason.
There is generally no requirement for a contract under Nigerian Law to follow a particular format or layout.
Good legal writing is also a matter of organization. Contracts are not different from novels in the sense that they tell a story about the agreement that both parties have arrived at either independently or through the guidance of their lawyers if any.
They have a beginning, middle and end. A good lawyer would know what material to put in each part of the document. A definitions section should appear at the beginning of the body of the software license agreement. Each key term in the agreement should first be defined in this section and then be used according to this definition throughout the agreement. Each defined term should also be capitalized throughout the document so that the reader knows that it is a term of art, whose meaning may be different from a dictionary definition. The following terms are the least which should be defined in the definitions section: “Licensor,” “Licensee,” “Software,” “Documentation,” “Acceptance,” and “Licensed Location.” “license fees”
First things first
A lot of people including but not limited to writers seem to understand the principle that the first paragraph of any story should follow the “who, what, when, and where” convention. A well-crafted license agreement should follow this principle or methodology if you please. It is important that the business elements of the deal (which is what is being licensed, the cost of the license, and the scope and duration of the license) should be included right after the definitions section. You or your client will be grateful in knowing that the principal business elements of the deal are addressed near the front of the agreement, avoiding the need to read page after page to find the price of the software or the payment terms or the scope of the license.
Avoid repetition which is a common trap of legal drafting, I recently read an agreement that addressed the issue of who was going to pay the lawyers’ fees on the transaction by using similar language in two different parts of the document. This technique is probably poor legal writing; and it can even spring up a more serious problem especially where there are differences in the wording of the provision in different parts of the agreement. If multiple provisions address the same issue even in slightly different ways, which one controls the issue in question? What if the multiple provisions vary the licensor in one breath and in another breath favours the licensee?
Draft the Agreement in a consistent manner
A good agreement like a good story needs to be consistent with the facts. Be careful to make sure that the agreement is consistent with the attachments, especially the software documentation. The drafter of a software license agreement should be prudent enough to actually read the software documentation prepared by the vendor or software customer (or both) prior to drafting the license agreement. In essence do your research well. In that way, a contradiction between the text of the agreement and the documentation should be easy to avoid. As a safety net, the drafter should include, near the end of the agreement, a provision which lists the priority of the documents (priority clause). For example, “in the event of a conflict or contradiction between this Agreement and Schedule A, the parties intend and agree that the Agreement shall control.” This avoids any argument that one document should control over another.
Use conventional “markers” to set-off, caption, and paginated text. These include numbered or lettered section headings and pagination. It does not speak well when a software vendor (or customer) is sloppy in preparing legal documents, what kind of performance would you expect on the business side of the transaction?
Many issues come up when drafting a license agreement. Laws relating to intellectual property can be extremely complicated. An attorney can provide invaluable help with drafting your agreement and enforcing it
The attorney should carefully review the form and substance of any software license agreement prepared by a vendor to determine how closely it conforms to these guidelines. To the extent it does not, the customer or client should contemplate the risk that the transaction is not adequately documented.
This risk may be minimal when the contract is executed but may increase as the transaction unfolds and the parties look to the contract to define their rights and duties as the conflict unfolds.*
Megathos Law Practice © 2012
*( “As it appeared in THISDAY Lawyer 08/05/12)