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Technology Licensing:

A)  Traditional Licensing:

A license is when someone who owns or has rights to certain intellectual property, or IP, (see here for discussion on what IP is) grants a right to someone else to use that IP under certain terms, conditions, or other restrictions.  A license is usually put into written form of an agreement that sets out exactly what the IP is and what rights are being granted.  This is to be distinguished from an outright sale or assignment of IP, which is normally a different kind of written agreement.

The best features of a license are that the company maintain certain controls over its property to be sure that they are not used improperly and try to assure that they continue to get revenue or royalties from the future use of the IP.  This can be valuable in protecting distribution rights.  Also, in software applications, the company can control more of the confidential trade secrets within the coding or design of the software.  It is a good way to try to prevent reverse engineering or unplanned uses of the software.  There are certain advantages in terms of maintaining control of the software and deriving additional revenues from things like additional user licenses and updates or revisions to the software.  A little more detail on the revenue applications and differences will be discussed in the section on SaaS.

A certain amount of confidentiality is key to license (and many other tech) transactions.  Most companies will utilize some form of written non-disclosure agreement (NDA) or confidentiality agreement, even during the preliminary negotiations and obviously within the actual license agreement.  Here are a few key areas that will need to be addressed:

  • Need a clear definition of what exactly the intellectual property is?
  • Who actually holds the rights to the IP? Is it the company or sub-licensed from another party?  Is there a patent or patent application or other filing that covers it?
  • Terms of the grant?  Exclusivity, geographic limitations, use limitations, length of license grant, any rights to sub-license, who owns improvements of the IP?
  • What are the payment terms?  Is there an up front down payment, how are royalties or future payments calculated and when?
  • What does the licensee (one granted the license) have to do to maintain the confidentiality of the IP and related trade secrets?
  • What rights does the licensor (one granting the license) have to get regular reports necessary to calculate royatlies and any rights to inspect the books of the licensee to assure accurate reporting?
  • What happens if there is a dispute and how will it be handled?

B)  SaaS Licensing:

SaaS stands for software as a service.  There are starting to be more and more similar acronyms for other services, AaaS (architecture as a service), BaaS (business as a service), IaaS (infrastructure as a service, often used in cloud computing), and so on.

SaaS license agreements generally fall within the end user license agreements covered within the Section on Online Contracts & Policies.

C)  EULA (End User License Agreements)– Although considered a license agreement, they are dealt with in the section on Online Contract & Policies.

Related Blog Posts:

What is SaaS versus traditional software?

Risks with Open Source Licensing


Legal Disclaimer: All answers and discussions in this article are meant to be general and educational in nature only and should not be relied upon as legal, business, or tax advice for your specific situation.  Most discussions refer to laws and regulations as applied to a California corporation and these can vary by location, as can other factors in certain situations within California, so it is always best to consult with a licensed local attorney with experience in these matters.  Use of, or any discussion as a result of these articles does not create an attorney-client relationship and is not governed by rules on confidentiality.