Software Contract Agreements: Negotiating and Drafting Tactics and Techniques (Thorogood Reports)

526 Pages·2004·1.09 MB·English

by  Robert Bond

THOROGOOD
PROFESSIONAL
INSIGHTS
A SPECIALLY COMMISSIONED REPORT
SOFTWARE CONTRACT
AGREEMENTS
Drafting and Negotiating
Techniques and Precedents
Robert T J Bond
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THOROGOOD
PROFESSIONAL
INSIGHTS
A SPECIALLY COMMISSIONED REPORT
SOFTWARE CONTRACT
AGREEMENTS
Drafting and Negotiating
Techniques and Precedents
Robert T J Bond
Thorogood Publishing Ltd
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Drafting Commercial Contracts
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© Robert T J Bond 2004
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THE AUTHOR
The author
Robert Bond, BA, FSALS, CompBCS
Robert Bond is a Partner and Notary Public, at Faegre Benson Hobson Audley.
He has specialised in Intellectual Property, Information Technology and Multi-
media Law since 1979, representing a wide range of international and blue chip
companies. Robert advises a wide range of clients on IP/IT including inventors,
authors and programmers, telecommunications and multimedia businesses,
publishers, breweries, banks and insurance companies as well as companies in
the biotech sector. His skills are in negotiating and drafting the full spectrum
of legal agreements involved in IP/IT combined with applying commercial realism
to the same.
Apart from providing legal advice, Robert is actively involved in a number of
specialist committees including the Legal Advisory Group to the Federation
Against Software Theft, the Intellectual Property Committee of the IBA and the
Privacy Committee of the World Law Group. In addition, he is chairman of the
International Chamber of Commerce (UK) Working Group on Electronic
Commerce and a legal advisor to the E-Law Committee of the Law Society of
England & Wales.
He is a freeman of the City of London Solicitors Company, and a member of
the Law Society of England and Wales, the Notaries Society, the American Bar
Association, and the Licensing Executives Society. He is a Companion of the
British Computer Society, a Fellow of the Society of Advanced Legal Studies
and he regularly lectures on IP/IT issues. He is the author of Software Licence
Agreements (Thorogood 1997), Negotiating Tactics and Techniques for Software
and Hi-Tech Agreements (Thorogood 1998), E-Licences and Software Contracts
(Butterworths 2000 ) and regularly speaks and writes on IP/IT matters.
© Robert Bond 2004
Tel: [phone]
Fax: [phone]
[email protected]
THOROGOOD PROFESSIONAL INSIGHTS 3
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CONTENTS
Contents
Introduction................................................................................................13
Glossary .....................................................................................................15
Recommended reading list.......................................................................56
1
UNDERSTANDING SOFTWARE LICENCE
AGREEMENTS 57
What is a Software Licence Agreement?................................................58
What types of software and databases are distributed
under contract and what laws protect them?.........................................61
General comments.....................................................................................63
Goals and purposes of parties to a Software Licence Agreement.......64
Some differences between Software Sale,
Lease and Licence transactions................................................................66
Weaknesses of the Software Licence Concept.......................................69
2
SOME GENERAL TYPES OF SOFTWARE
LICENCE AGREEMENTS 73
Developer-publisher licence agreements................................................74
Publisher-distributor licence agreements...............................................76
User licence agreements...........................................................................78
Escrow and TTP agreements....................................................................83
Runtime licence agreements.....................................................................84
Manufacturing licence..............................................................................85
Cross-licensing...........................................................................................86
Joint venture licensing..............................................................................86
Core technology licence agreements.......................................................87
Software conversion agreements............................................................87
Database and access software licence agreements...............................88
Maintenance service licence agreements...............................................89
Facilities management agreements.........................................................90
THOROGOOD PROFESSIONAL INSIGHTS 5
SOFTWARE CONTRACT AGREEMENTS
Web site agreements.................................................................................91
Open source licences.................................................................................91
Application service provider licences...................................................102
3
LAWS AND REGULATIONS 103
Overview...................................................................................................104
Patent law.................................................................................................104
Copyright..................................................................................................106
Trade secret law.......................................................................................110
Trademark law.........................................................................................112
Contract law.............................................................................................113
4
EUROPEAN UNION LAW 115
Overview ..................................................................................................116
Competition law.......................................................................................116
EC Directive on the Legal Protection of computer programs............120
EC Directive on Rental and lending rights and
certain rights relating to copyright.......................................................121
EC Directive harmonising the term of protection
of copyright and certain related rights.................................................121
EC Directive on the legal protection of databases...............................122
EC Directive on Unfair Contract Terms................................................123
EC Directive on Electronic Signatures .................................................123
EC Directive on Distance Selling of goods and services.....................125
EC Directive on Data Protection............................................................126
The U.S. Safe Harbor Program..............................................................130
Article 26.1 of the Directive....................................................................132
Article 26.2 of the Directive....................................................................133
Trans Border Data Flow (‘TBDF’) Agreements....................................134
Moral Rights.............................................................................................137
Draft Directive on the Patentability of
Computer-implemented Inventions.......................................................138
6 THOROGOOD PROFESSIONAL INSIGHTS
CONTENTS
EC Directive on the Legal Protection of Designs (98/71/EC)..............139
EC Directive on waste electrical and electronic
equipment (WEEE) Directive (2002/96/EC) .........................................140
5
FOCUSING ON MAJOR TRANSACTIONS 143
What is a major transaction, and why is the
answer important to you?.......................................................................144
Some common mistakes in major transactions...................................146
6
PREPARING FOR NEGOTIATIONS 153
Provider preparations.............................................................................154
Customer preparations...........................................................................161
7
PREPARING THE CONTRACTS 171
The use of Heads of Agreement.............................................................172
Checklist of the contents of a typical software licence agreement ......177
Should efforts be best or reasonable.....................................................233
8
NECESSARY LICENCE PROVISIONS 235
Key licence provision from the provider’s viewpoint..........................236
Key licence provisions from the customer’s viewpoint.......................240
9
UNDERSTANDING NEGOTIATING
PRINCIPLES 249
Introduction..............................................................................................250
What is negotiation?...............................................................................250
Why negotiate?........................................................................................251
The Give/Get Principle............................................................................252
THOROGOOD PROFESSIONAL INSIGHTS 7
SOFTWARE CONTRACT AGREEMENTS
What is a win-win deal?..........................................................................253
Negotiating styles and ethics..................................................................254
Negotiating Styles....................................................................................254
10
SOME NEGOTIATING TACTICS
OF SUPPLIERS 257
Overview...................................................................................................258
Identify and control the decision makers..............................................258
Active listening........................................................................................259
The stone wall..........................................................................................260
The ‘most favoured customer’ clause....................................................260
The reluctant retreat................................................................................261
The company policy.................................................................................263
Tabling tough issues................................................................................264
Horse trading...........................................................................................264
Minimizing customer concerns..............................................................265
Influencing the opposition’s performance............................................266
Pending price increases..........................................................................266
Time is of the essence..............................................................................267
Acceptance, back door protection.........................................................267
Challenge customer orientation.............................................................268
Going around obstacles..........................................................................268
Good guy, bad guy approach.................................................................269
Control the deal summary sheet............................................................269
The old solicitor approval ploy...............................................................270
11
CUSTOMER NEGOTIATING TACTICS 271
Overview...................................................................................................272
The strong attack.....................................................................................273
The ‘intelligent attack’.............................................................................274
The selected target strategy, with red herrings...................................279
Further customer negotiating tactics....................................................280
8 THOROGOOD PROFESSIONAL INSIGHTS