A Software License Agreement governs the use and distribution of software between a licensor and licensee. This playbook examines license grant terms, maintenance obligations, and compliance mechanisms for audit and enforcement.
Why This Matters: Overbroad warranties elevate indemnification demands and liability exposure, leading to disproportionate financial risk.
Negotiation strategy
If you're the Licensor:
Negotiate for mutual warranties to ensure both parties are equally accountable. Limit the scope of warranties to reflect actual risk exposure and include a cap on liability.
If you're the Licensee:
Ensure that warranties are not overly broad and align with the actual capabilities and rights of the licensed IP. Advocate for carve-outs in liability for indemnification obligations.
Essential elements
1
Ownership Warranty
Rights to enter agreement.
2
Non-Infringement Warranty
IP does not infringe third parties.
3
Performance Warranty
IP meets agreed specifications.
Action framework
ACCEPT
Propose edits when warranties are too broad or misaligned with actual risk.
EDIT
Reject clauses that impose unreasonable liability or lack mutuality.
ADD
Add language to clarify liability caps and indemnification carve-outs.
PRO TIP
Always align warranty scope with actual risk exposure to avoid unnecessary liability.
Example clauses
FAVORABLE
Balanced Ownership Warranty
"Each party represents and warrants that it has the full right, power, and authority to enter into this Agreement and to perform its obligations hereunder."
NEUTRAL
Standard Limitation of Liability
"Except as expressly provided herein, neither party shall be liable for any indirect, incidental, special, consequential, or punitive damages."
UNFAVORABLE
Overbroad Warranty
"Each party warrants all aspects of the IP without limitation."
Fallbacks
High-Risk Projects
In high-risk projects, warranties should be more detailed to cover specific risks associated with the project scope.
Cross-Border Transactions
Consider jurisdictional differences in IP laws and adjust warranties to comply with local regulations.
Start-Up Agreements
Start-ups may require more flexible warranty terms to accommodate evolving business models and IP development.
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WEEK 2
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WEEK 3
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WEEK 4
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