Without the license agreement, the digital age may look very different from the one that exists today. License agreements, like those used by software manufacturers to license and protect their products, allow owners of proprietary material to distribute them for public consumption yet also receive royalties in exchange. Without the protections in license agreements, the publication of original thought would be that much harder.
A license agreement is a written agreement in which one party (the licensee) is granted the revocable right to perform an act by another party (the licensor). Without the licensor’s permission to perform this act, the licensee’s performance would be illegal. From operating a restaurant to driving a motorcycle to using a word processing application, the act in question can be nearly anything. Meanwhile, the licensor’s grant, memorialized in the license agreement is represented in a document called the license, which is usually of a finite duration and may be exclusive or non-exclusive.
License agreements are used often in connection with copyrighted material such as artwork, books, music, and videos’ content, in other words. While this trend shows signs of shifting toward greater liberalization, owners of copyrighted material generally do not want to give up ownership of their material; yet they also want to distribute their work for public consumption. The answer to this dilemma is to license their creations to the public in exchange for royalties - fees that the public pays to listen to the music or use the artwork. Once the license expires, the right to use the material reverts back to the owner.
In the IT world, license agreements are highly prevalent. The software license agreement, also known as the end-user license agreement (EULA), allows software makers to distribute their wares to the public for a fee. A widespread iteration of the EULA is called the shrink-wrap license, named primarily because of the way the license agreement is displayed on the outside of the software’s packaging. By opening the software package, the consumer agrees to abide by the terms of the license.
A similar EULA is called the click-wrap license, which is displayed to the consumer during installation of the software on a computer. Certain types of these EULAs have created legal problems because they are not visible to the consumer in their entirety prior to purchasing the software. In other words, the consumer must purchase the software to see the complete license agreement’a catch-22 if there ever was one.
Whether EULAs are displayed on the software packaging or are found in the installation phase of the software, they generally hold the end-user to certain basic restrictive covenants. They seek to restrict the consumer from making unauthorized copies or modifications to the software; to load it only on one computer; to limit the manufacturer’s liability, and to disclaim warranties.
License agreements require several important provisions. First, the parties must define the scope of the license to be granted. The scope will cover what is to be granted, for how long, to whom, in what capacity, and so forth. Essential rights and restrictions will be laid out, without which the licensor would likely never agree to license the material. Next, in significance, is the provision dealing with consideration - what will the licensor receive in exchange for licensing its work? After these all-important provisions have been determined, the license agreement should discuss points such as remedies in the event of breach, indemnification for the parties, warranties and representations, if any, disclaimers on liability and boilerplate provisions like governing law, severability and survival.
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