LL.M. in Intellectual Property 2006
Università degli Studi di Torino - WIPO
Avv. Daniela De Pasquale
Why to use a license?
Limits to restrictions:
3. Free uses rights
What is a software license
A software license agreement is a legal contract between:
a software application
author or publisher
of that application
The “software license” is similar to a rental agreement:
the user agrees to pay for the privilege of
using the software,
and promises the software author or publisher to
comply with all restrictions stated in the license.
How can you enter a license
- Shrink-wrap license (s/w): licenses terms became effettive
as a sum as customer opens software packaging
- Click-wrap license (c/w): present user with online terms
and require user to consent by clicking on “I agree” icon
- Browse-wrap (b/w): allows user to view terms but do not
require specific consent to those terms
- Execution of a written license agreement.
What rights are conveyed to
- make or reproduce;
- distribute by sale, lease, rental, loan,
gift, or license;
- publicly display;
- publicly perform.
Software is licensed but not sold
What are the main aspects to be
ruled in a license agreement?
Typical terms: - Duration;
- Number of copies which are licensed;
- Limitations on the licensee’s actions;
- Site, CPUs and Users;
- Transfer to third parties;
- Choice of law and Forum
- Acceptance tests;
- Reverse engineering.
What kind of code is licensed?
The object code is usually
made available to the user
the source code
is only made available pursuant to a
separable source code agreement.
What does licensed software
Licensed software usually includes:
Is it permitted to reproduce
copies of the software?
The number of copies of the licensed
software is normally specified.
However, pursuant to Directive 91/250/EC
restrictions on back-up copies
are now invalid.
Can you modify the software?
Pursuant to Directive 91/250/EC it is permitted to
- analyse the underlying code,
- copy and translate the program and
- investigate its functioning
in order to evaluate and understand its
ideas and principles, without licensor’s consent,
only for the purpose of achieving inter-operability of
the software with an independently created software
subject a number of conditions.
What consequences can stem from
can be required to
or erase it
Certificates of destruction may be required
and help preserve trade secret protection
and may also be helpful in litigation over
software piracy by an ex-licensee.
What other agreements may be
connected with software licenses?
Maintenance terms could be included in the
license agreement, in an appendix thereof or in
a separate agreement.
In this case the licensor makes available to
customers copies of updates containing several
Note: particular attention should be paid to the
interplay of maintenance and warranty
provisions (what may appear to the licensee
generous maintenance terms by the licensor
may be a means of reducing original “fit for
How would you rule
Enhancements are major improvements
in software functionality. They could be
charged separately or not.
How can a licensee get the
source code ?
A licensee can get a source code through a
source code escrow.
A source code escrow is a deposit of the
source code with a party (possibly a third
subject) with the intention to have the code
released to a user of executable code upon
one or more events such as a failure to
provide timely maintenance service.
Shared Source Licenses… Microsoft !
Microsoft Permissive License (Ms-PL) - It allows licensees to view, modify,
and redistribute the source code for either commercial or non-commercial
purposes. Under the Ms-PL, licensees may change the source code and
share it with others. Licensees may also charge a licensing fee for their
modified work if they so wish. (less restrictive).
Microsoft Community License (Ms-CL) – It allows for both noncommercial and commercial modification and redistribution of licensed
software and carries a per-file reciprocal term. (collaborative development
Microsoft Reference License (Ms-RL) – It allows licensees to view source
code in order to gain a deeper understanding of the inner workings of a
given technology. It does not allow for modification or redistribution
What warranties would you include
in a software license agreement?
- Virus warranty;
- Ongoing performance warranty.
Note: Suppliers will seek to warrant their goods and services to
the minimum and customers will have to negotiate express
warranties to cover their requirements and needs.
In general, the more a customer negotiates extended warranties
into a contract the more the supplier will seek to limit the impact
of those warranties under the Limitations of Liability clauses.
As a result the interplay among warranties, limitations of liability,
indemnity and insurance should be carefully considered.
What language should be included
regarding IP rights?
With reference to Intellectual Property
rights it could be included a clause on
representations and warranties
regarding the ownership or right to
license the software
and a clause providing that all rights on
future enhancements performed by the
licensee will belong to the licensor.
How can the licensor safeguard
himself against legal liability?
A licensor can safeguard himself against legal
liability by inserting in the agreement a
“limitation of liability and remedy” clause.
Note: in EU countries when limitations on liability are imposed
in contract terms between a supplier and a customer,
statutory provisions may override attempts to limit
liability, but if the customer is an intermediary distributor
the limitation of liability could be effective.
Furthermore, in some countries it may be impossible to
limit liability where the claim is for damages for personal
injury or death resulting from negligence.
What if the license is to be executed by a
The “consumer” is any natural person who is acting for
purposes which are outside his or her trade, business or
The applicable law is Directive 93/13/EC on unfair terms
in consumer contracts.
As for click-wrap licenses and shrink-wrap licenses for
products which are purchased by distance contracts, the
applicable law is the Directive 97/7/EC on the protection
of consumers in respect of distance contracts and the
Directive 2000/31/EC as far as information society
services are involved.
on unfair terms in consumer contracts
“Unfair terms” cause a significant imbalance in the parties'
rights and obligations.
Standard term contracts: sellers and suppliers define the terms
in advance and consumer can not individually negotiate them.
Contract terms shall be drafted in plain and intelligible
language and ambiguities will be interpreted in favour of
Terms which may be regarded as unfair vary from country to
country within the EU. The Directive provides examples of
terms that may be regarded as unfair.
Terms that are found unfair under the Directive are not
binding for consumers.
Directive 97/7/CE on protection of
consumers in respect of distance contracts
• Provision of comprehensive information before the purchase;
• Confirmation of that information in a durable medium (such
as written confirmation);
• Delivery of the goods or performance of the service within 30
days of the day after the consumer placed his order;
• Invalidity of any waiver of the rights and obligations
provided for under the directive, whether instigated by the
consumer or the supplier.
US case law
ProCD v. Zeinenberg (7th Cir. 1996), held s/w and c/w license of
software/ database product enforceable under UCC art. 2 and not
preempted by copyright law.
Most US courts, ProCD, hold “pay now, terms later” licenses to be
enforceable under UCC art. 2 against consumer.
Westerndorf v. Gateway 2000, (Del. Ch. 2000) even held s/w license
terms enforceable against user who received computer as a gift.
Specht v. Netscape Comm. Corp., (2nd Cir. 2002) on line b/w license
not enforceable because end user not required to view or accept terms and
terms were not conspicuous.
Register.com v. Verio Inc., (2nd Cir. 2004) upheld preliminary injunction
enforcing b/w terms where user made systematic use of website & admitted
knowing of terms.
Avv. Daniela De Pasquale
La Scala & Associati
Corso Magenta 42