Software License Agreement

Order Form

The Order Form contains the business details that you can customize from deal to deal.

The Order Form is contained in a Cover Page. Learn about how standard agreements work in our anatomy of a contract blog post.

Framework Terms

The Framework Terms operate as an overarching governing document between two organizations, similar to a “master agreement”. Framework Terms can apply to one or many Order Forms. When you combine an Order Form with Framework Terms, you get the Agreement or overall contract.

The Framework Terms included below

If the Framework Terms are not included as Key Terms in this same document, you can replace this first sentence with “This Order Form incorporates and is governed by the Framework Terms dated [ enter Effective Date of Key Terms ] between [ enter name of Provider ] and [ enter name of Customer ].”

Order Date

The Order Date is distinct from the Effective Date, which is the date the Framework Terms start and is defined below the Key Terms. They are often, but not always, the same date.

( x )

Choices pre-marked with an “x” show the default selection. You can use the “x” to mark off your choice, or keep the text for your choice and delete the text for the other options.

(    )

Parentheses with blank space indicate a choice you need to make where one option must be chosen, but not more than one should be selected.

[ Fill in custom start date ]

Square brackets with text indicate a field you can fill in or customize before sending the agreement.

For this one, if the Order Date is different from the date of signature, then set the Order Date here.

Pilot

This is an optional field. Use it to include a pilot or trial period that is in addition to the full Subscription Period. If there is no pilot period, delete this entire row.

The Subscription Period will automatically start following the Pilot Period.

This clarifies that the Pilot Period is in addition to the Subscription Period.

[    ]

Square brackets with blank space indicate choices that are optional. You can pick none, one, or more than one. Indicate selections by checking the box for those you wish to include and/or deleting the unused options.

[ – Sections 5.3 (Representations & Warranties from Provider), 5.4 (Provider Warranty Remedy), and 8 (Indemnification) do not apply during the Pilot Period. – There are no Increased Claims nor Unlimited Claims during the Pilot Period. – The General Cap Amount is $1,000 for all claims that arise during the Pilot Period. – Either party may immediately terminate the Agreement during the Pilot Period for any or no reason by giving notice to the other party. ]

Use this area to make modifications that only apply during the Pilot Period. Shown are some common modifications that occur for pilots and trials, which can be changed to suit your needs.

Subscription Period

Historically, it was common for on-prem software licenses to grant perpetual licenses for a large up-front cost. The provider would then charge for customer service or technical support as an ongoing revenue stream. Customers would have to pay for an entirely new license if the provider released a new major version of the software.

Modern software companies have started offering on-prem products (whether as the only option or as an alternative to a SaaS delivery) on a subscription basis, modeled on SaaS purchasing behavior. This modern approach to on-prem licensing grants a term-limited license that can be renewed. The recurring license fee generally includes some combination of customer service, technical support, maintenance, and updates.

This Software License Agreement supports the subscription-based licensing model of on-prem software.

[    ] Fees may increase up to [ # ]% per renewal if Provider has given notice of the increase prior to the Non-Renewal Notice Date.

This is optional and may be deleted if not applicable. It permits a Fee increase upon renewal, so long as the customer receives timely notice of the increase.

[    ] Fees will increase [ # ]% per renewal

This is optional and may be deleted if not applicable. It authorizes an automatic Fee increase upon renewal, without the requirement to notify the customer.

[    ] Modifying Section 3.1 of the Standard Terms, Fees are inclusive of taxes.

This is optional and may be deleted if not applicable. It is for situations where the prices listed include applicable taxes, such as in regions that use a VAT-inclusive model.

Payment Process

Use Payment Process to clarify how billing and payments will work for your customer.

(    ) Pay by invoice

This option requires the provider to send invoices in order for your customer to pay.

[ monthly | quarterly | annually | once per Subscription Period ]

If using this option, set how frequently the provider must send invoices. Although this time frame is often the same as the Subscription Period, it can be different. For example, you can have a 1 year subscription period that is invoiced monthly in 12 equal increments.

[  #  ] days from [ Customer’s receipt of invoice | the invoice date ]

Together, these two fields set how long a customer has to pay each invoice. Finance teams often refer to this time period in “NET terms” such as “NET-30 days”.

(    ) Automatic payment

This option requires the customer to keep a credit card or other payment method on file that the provider automatically charges on the agreed-upon cadence.

[ monthly | quarterly | annually | once per Subscription Period

If using this option, set how frequently the provider will charge the customer’s payment method. Although this time frame is often the same as the Subscription Period, it can be different. For example, you can have a 1 year subscription period that is charged monthly in 12 equal increments.

( x )

The Standard Terms set a default of automatic renewal. However, automatic renewal doesn’t mean the contract cannot end. At baseline, either side can cancel renewal by giving sufficient notice, the time period for which is set here.

(    )

Select this option if the contract will not automatically renew when it ends. In these situations, both sides will need to explicitly opt in to the renewal by signing a new Order Form.

Permitted Uses

The rights a customer has to the software are tied to the Permitted Uses. Use this field to specify the ways your customer(s) may use the software.

( x )

In general, most customers use on-prem or downloaded software for internal business purposes.

[ fill in details about additional permitted uses ]

There are times where a customer will need to make copies of and distribute the software, which is not an internal business purpose. One example is when software is included as firmware in a piece of hardware. Use this option to specify the unique details about how the customer use the software.

License Limits

Including license limits is optional. If no limitations apply, delete this entire row.

Warranty Period

This sets the length of the limited warranty granted in Section 5.2 of the Standard Terms. The Committee agreed that in the context of downloadable software, providing a limited performance warranty is a common and fair give. The warranty period give the customer a specific time window to ensure the product functions as described and expected. It expedites when the customer raises any concerns, allowing the provider to troubleshoot and/or fix the issue in a timely manner. This also benefits the vendor by outlining an exclusive remedy for warranty issues, meaning the customer cannot subsequently sue for breach or terminate the contract due to a warranty issue. In addition, from a relationship perspective, this helps align the two parties and provides a better overall experience for the customer.

However, if you do not want to provide a limited warranty, you can replace the text in this section with: “None. Sections 5.2–5.4 do not apply.”

Deletion Procedure

Unlike a cloud or SaaS product, on-prem or self-hosted software does not have an inherent way to end customer’s access when the contract ends. As a result, this Software License Agreement imposes contractual obligations on the customer to follow the deletion procedure outlined in this field. Choose one or more of the suggested protocols, and/or detail other customer deletion requirements.

Additions, Supplements & Modifications

All fields in the Additions, Supplements & Modifications section are optional. Delete any rows that do not apply.

License Compliance Verification

This is an optional field. Some vendors require an inspection or audit to verify that their customers have complied with their deletion obligations, or are otherwise in compliance with the software license limitations, such as seat counts or deployments. Use this field to specify the ways in which the provider can conduct such inspections or audits. If no verification needs to be conducted, delete the entire row.

[ Provider may inspect and audit Customer’s use of the Software under this Agreement during the Subscription Period, and Customer agrees to cooperate or otherwise make available the information that may be reasonably requested by Provider in order to ensure compliance with this Agreement and any usage restrictions. Provider must give at least 7 days advance notice of an audit. If the audit determines that Licensee’s use of the Software exceeded the usage permitted by the Agreement, Customer will pay to Provider all amounts due for such excess use of the Software according to the Payment Process. ]

The Committee included baseline rights for a provider to review the customer’s compliance with the contractual limits and obligations. If including verification rights, customize the language to suit your needs.

Free to use under CC BY 4.0

All Common Paper agreements are released under the Creative Commons CC BY 4.0 license, which enables you to use the agreements in any way, as long as you leave in the attribution.

Framework Terms

The Framework Terms operate as an overarching governing document between two organizations. Framework Terms can apply to one or many Order Forms. The Framework Terms are made up of the Key Terms + the Standard Terms. When you combine an Order Form with Framework Terms, you get the Agreement or overall contract.

The Common Paper Software License Standard Terms Version 1.1

This incorporates the Standard Terms by reference, with a link to commonpaper.com/standards/software-license-agreement/1.1. Each version of the Standard Terms will remain unchanged and posted our website, and updates will get posted as new versions.

Incorporated by reference

Incorporating the Standard Terms by reference ensures there are no hidden changes in the Standard Terms

A copy of the Standard Terms is attached for convenience only.

This allows including a copy of the text of the Standard Terms for convenience. You can find a version without the standard terms attached on the software license agreement page.

Key Terms

The Key Terms contains the key legal details of each specific contract.

Effective Date

The Effective Date is when the Framework Terms start. If the Effective Date is different than the Order Date, then things like confidentiality obligations start on the Effective Date, while the customer’s access to the product won’t start until the Order Date.

Governing Law

Governing Law identifies the set of laws under which the contract will be interpreted.

Chosen Courts

Chosen Courts identifies where a lawsuit related to the contract can be filed in the event of a dispute.

Covered Claims

Including Covered Claims is optional. Use this Variable to set which claims the provider and/or customer will be responsible for under an indemnity obligation.

Section 8 of the Standard Terms includes the full language around indemnities and Covered Claims, including narrowing the obligation to claims brought by entities other than the provider, customer, end users, or their affiliates (i.e., third party claims).

If there are no Covered Claims, delete the entire row.

[ Any action, proceeding, or claim that the Software, when used by Customer according to the terms of the Agreement, violates, misappropriates, or otherwise infringes upon anyone else’s intellectual property or other proprietary rights. ]

This reflects a default for Provider Covered Claims (i.e., what indemnification obligations the provider has) set by the Committee . You can modify it in any way to address your particular situation.

[ Any action, proceeding, or claim arising from or related to Customer’s or Users’ breach or violation of Section 1.1 (License) or Section 2.1 (Restrictions on Customer). ]

This reflects a default for Customer Covered Claims (i.e., what indemnification obligations the customer has) set by the Committee . You can modify it in any way to address your particular situation.

General Cap Amount

The General Cap Amount is the maximum dollar amount a party to the contract could be responsible for in the event of a legal dispute over the contract. It applies to all contract claims, except for Increased Claims (below), Unlimited Claims (below), and claims that cannot be limited as a matter of law.

Deleting the General Cap Amount does not set it to $0. Instead, it would mean there is no monetary limitation of liability that applies to the contract, and either party could be responsible for an unlimited amount of monetary damages in the event of a legal dispute over the contract.

( x )

This option sets a variable liability cap amount that fluctuates with the cost of the contract. It is expressed as a multiple of fees, for example 1x or 2x. This option sets the time period for calculating the fees to the 12 months before the claim.

Paid or Payable

Including fees that are “paid or payable” (but potentially unpaid) helps balance the incentives between a provider and customer. If the liability cap is set to the fees paid but does not include payable but unpaid fees, a customer could pay a fraction of the cost they agreed to and limit their liability to that lower amount.

(    )

This option sets a fixed liability cap amount. It is expressed as a monetary amount, for example $1,000,000.

In general, a $0 liability cap would be unenforceable.

(    )

This option sets a hybrid liability cap amount. It combines the two above options.

Greater

This is set to “greater” rather than “lesser” to avoid situations creating a $0 liability cap, for example where there are zero fees due.

Increased Claims

Including Increased Claims is optional. If using this Variable, it will define certain claims that are not subject to the General Cap Amount, but are instead subject to the Increased Cap Amount (below). In addition, Increased Claims are not subject to the damages waiver in Section 7.2.

If there are no Increased Claims, delete the entire row.

Increased Cap Amount

Including an Increased Cap Amount is optional, but it must be set if you are including Increased Claims. If there are no Increased Claims, delete the entire row.

Unlimited Claims

Including Unlimited Claims is optional. If using this Variable, it will define certain claims that are not subject to any monetary liability cap.

[    ]

Because Section 7.4 excludes breaches of confidentiality from the damages waiver, selecting this option as an Unlimited Claim would mean these types of claims are not confined by any limitation of liability, whether by types of damages or monetary amounts.

[    ]

Because Section 7.4 excludes breaches of confidentiality from the damages waiver, selecting this option as an Unlimited Claim would mean these types of claims are not confined by any limitation of liability, whether by types of damages or monetary amounts.

[    ]

Because Section 7.4 excludes customer’s breach of sections 1.1 or 2.1 from the damages waiver, selecting this option as an Unlimited Claim would mean these types of claims are not confined by any limitation of liability, whether by types of damages or monetary amounts.

Additional Warranties

Including Additional Warranties is optional. If there are no Additional Warranties, delete the entire row.

[  fill in   ]

In situations where the customer is requesting the provider to provide an intellectual property representation and warranty, you could add the following language: “the Software, when used as authorized by the Agreement, does not and will not infringe or misappropriate anyone else’s copyright, trademark, trade secret, [[U.S.] patent], or right of publicity”.

“U.S.” and “patent” are in brackets, because this type of representation can be tricky for many companies, as it is possible to infringe a patent without necessarily knowing about the patent.

Attachments, Supplements & Modifications

All sections in the Attachments, Supplements & Modifications section are optional. Delete any rows that do not apply.

DPA

A Data Processing Agreement is commonly used by companies that need to comply with the GDPR. GDPR is the legal regulation that protects an individual’s personal data in Europe (EU) and the European Economic Area (EEA). It restricts what companies can and cannot do with the personal data of EU/EEA individuals.

Other Changes to Standard Terms

Including Other Changes is optional. Examples of how to use this section can be found in the Language Library .

Subscription Period

Historically, locally-deployed or on-prem software used perpetual licensing models with a high up-front cost. Recurring revenue was generated from providing ongoing support and updates. However, as SaaS developed and subscription-based pricing became a norm, many providers have elected to model on-prem software licenses after SaaS subscriptions.

In line with the movement of the industry, the Committee decided to make this Software License Agreement a subscription-based licensing model.

Provider may use all Feedback freely without any restriction or obligation

Many customers bristle at seeing an assignment clause in inbound contracts. This is a lightweight approach to clarify that a provider may use any and all feedback that’s given. If you prefer to be more explicit about intellectual property ownership over Feedback, you could use the Other Changes to the Standard Terms section on the Cover Page to add an assignment for Feedback .

Machine Learning

In light of the rapid rise in the use of AI to supplement products and services, the Committee opted to include a default clause to permit basic training of AI and machine learning models.

If you prefer to remove the AI training language , you could use the Other Changes to the Standard Terms section on the Cover Page.

Open Source Software

With the prevalent use of open source soft in software development, the Committee felt it was necessary to include baseline obligations around open source software. This clause addresses the most common open source licensing requirements that are triggered upon a distribution. However, you should be aware of all open source software included in your product and use the Other Changes section to cover any additional licensing obligations that may need to be passed through to your customer.

Updates

Many modern software companies push updates to their customers as part of the subscription. This is in contrast to older styles of one-time software downloads that required customers to purchase subsequent updates. Including updates as part of the subscription benefits both sides. It allows customers to receive the latest enhancements and features, and it allows providers to ensure bugs and other issues are regularly resolved.

then Provider may temporarily suspend Customer’s access to the Product or Services with or without notice. However, Provider will try to inform Customer before suspending Customer’s account when practical. Provider will reinstate Customer’s access to the Product only if Customer resolves the underlying issue

Due to the nature of the issues listed in this section, provider has the ability to suspend customer’s access regardless of the materiality of the violation. However, the Committee saw this as a fairly reasonable risk allocation because it is not permanent termination and the customer has the ability to remove the suspension by resolving the underlying issue.

Payment & Taxes

This software license supports 2 methods of payment: invoicing with an obligation to pay within a set time (Section 3.2), or automatic payment with a credit card or other payment method (Section 3.3). The details of when payment must be made or how frequently an account is charged are all set in the Payment Process Variable on the Cover Page.

Payment

This standard intentionally does not include fines for late payments. In the experience of Committee members, payment disputes were more often an oversight by the customer rather than an intentionally bad act. Moreover, the time and expense of enforcing late payment fines tend to be more than what a provider recoups; not to mention the strained customer relationship these actions can create.

If adding a late payment penalty is important for you, you could use the Other Changes to the Standard Terms section on the Cover Page to do so.

Automatically renew for additional Subscription Periods unless one party gives notice of non-renewal to the other party before the Non-Renewal Notice Date.

As a default, contracts will auto-renew unless someone affirmatively notifies the other company that they wish to not renew. That notice of non-renewal must be given before the Non-Renewal Notice Date, which is on the Order Form and expressed as a set time period before the renewal date (e.g., 30 days before the end of the Subscription Period).

If you do not want a deal to auto-renew, you can change this in the Auto-renewal section of the Order Form.

Effective Date and continue for the longer of one year or until all Order Forms governed by the Framework Terms have ended.

The Framework Terms serve as an overarching umbrella agreement. To better facilitate multiple Order Forms, such as one Order Form for an introductory time period like 6 months, followed by a longer term engagement, the Framework Terms will last for at least 1 year. This allows two companies to issue new Order Forms without needing to renegotiate the Framework Terms. It is also helpful if the initial Order Form expires before the two companies have signed the longer term Order Form because it preserves the Framework Terms during that gap in time between the Order Forms.

Termination

There is no termination for convenience, as that is uncommon in software subscriptions.

In some situations, a customer may want the ability to terminate for convenience after a set time period . This could be because the deal is for a longer time, or because the customer is wary of purchasing a product that is still unproven. If this type of termination right is needed for your deal, you could use the Other Changes to the Standard Terms section on the Cover Page.

Either party may terminate an affected Order Form upon notice if a Force Majeure Event prevents the Product from materially operating for 30 or more consecutive days.

Termination under this clause would not terminate unaffected Order Forms nor the overarching Framework Terms.

Will follow the Deletion Procedure to remove the Software.

Unlike SaaS, removing access for on-prem, downloaded, or self-hosted software can vary from company to company, or even customer to customer. Use the Deletion Procedure Variable on the Order Form to detail what customers must do to ensure proper removal of the product if/when a subscription ends.

Provider Warranty

This simple warranty has come to be expected by customers. You can control the extent of the warranty by expanding or contracting the Warranty Period and being precise about requirements and functionality in the Documentation.

This Section 5.4 (Provider Warranty Remedy) describes Customer’s exclusive remedy and Provider’s entire liability for a breach or alleged breach of Section 5.2 (Provider Warranty).

The options in Section 5.4 are the exclusive remedies available to a customer in the event of a warranty issue.

Section 7.1 (Liability Caps) does not apply to any Unlimited Claims.

Neither the General Cap Amount nor the Increased Cap Amount apply to Unlimited Claims. However, the damages waiver in Section 7.2 still applies to Unlimited Claims. The one exception is if a breach of Section 9 (Confidentiality), Section 1.1 (License), or Section 2.1 (Restrictions on Customer) are Unlimited Claims, in which case no cap amount and no damages waiver would apply to those claims.

The liability provisions are set this way because the trend in tech licensing has been to use an Increased Cap Amount, or supercap, for higher risk concerns such as IP issues. In addition, having fully uncapped and unlimited claims has come to be seen as a risk that is hard to justify. As a result, companies have more and more relied on the damages waiver to have some measure of risk mitigation when they do remove a liability cap on certain claims.

Made by someone other than Customer, Customer’s Affiliates, or Users

This excludes claims by the customer, its affiliates, or Users so that provider is not responsible for first party claims. In other words, a customer could not sue the provider and then seek indemnification coverage for the lawsuit they filed.

Made by someone other than Provider or its Affiliates

This excludes claims by the provider or its affiliates, so that the customer is not responsible for first party claims. In other words, a provider could not sue the customer and then seek indemnification coverage for the lawsuit they filed.

Exclusive Remedy

It is very common for indemnification obligations to be the sole and exclusive remedy for claims that are subject to indemnity. This is important in situations where there is overlap between other contractual obligations or commitments (such as representations and warranties) and claims that are subject to indemnity.

Governing Law and Chosen Courts.

Common Paper standard agreements were created with the laws of the United States in mind by a committee of US-based attorneys.

The parties will bring any legal suit, action, or proceeding about this Agreement in the Chosen Courts and each party irrevocably submits to the exclusive jurisdiction of the Chosen Courts

Some companies prefer arbitration for speed and confidentiality reasons. You could use the Other Changes to the Standard Terms section on the Cover Page to add mandatory arbitration.

However, either party may assign this Agreement upon notice if the assigning party undergoes a merger, change of control, reorganization, or sale of all or substantially all its equity, business, or assets to which this Agreement relates

Alternatively, you could use the Other Changes to the Standard Terms section on the Cover Page to permit assignment to any Affiliate, or to prohibit all assignment.

Logo Rights

The default is to allow providers to use customer’s name and logo to identify the customer as a user of the product, for example on a customer list webpage.

Some customers prefer to remove the grant of any logo rights, which you could do by using the Other Changes to the Standard Terms section on the Cover Page.

However, if the Order Form and the governing Framework Terms omit or do not define a Variable, the default meaning will be “none” or “not applicable” and the correlating clause, sentence, or section does not apply to that Agreement.

Some Variables are optional. When optional Variables are removed from the Cover Page, the related clauses will not apply to the contract.

Free to use under CC BY 4.0

All Common Paper agreements are released under the Creative Commons CC BY 4.0 license, which enables you to use the agreements in any way, as long as you leave in the attribution.