Software licenses are usually categorized into two sets of licenses.
They are 1. Upstream licenses; and 2. Downstream licenses.
1. Upstream licenses: They are used to build software products, and create customer specific solutions.
2. Downstream licenses: They are usually used to distribute the software and the license that measure usage to the end user through End User License Agreements (EULA), which can be characterized as click-wrap and browse-wrap.
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Source code licensing
The most common form of licensing is source code licensing. Source code runs in the background and can be easily perceived by software developer in the form of code language such as Java, .Net etc. Source code licensing can be categorized into two types. They are: 1. Confidential source code. 2. Free or Open Source Software (FOSS).
1. Confidential source code: The usual method of protection used for confidential source code is trade secret. The agreement with the licensee involves Non Disclosure Agreement (N.D.A.) along with affirmative statements that using or sharing the confidential source code outside its stated purpose will lead to liability.
2. Free or Open Source Software (FOSS): Open Source Software is available to the public to use, modify, create derivative works for free. There is a misconception that FOSS is in “public domain,” with no expectation in return. That is not true.
a. They require the users of FOSS to “dedicate,” any improvements, alterations made to the code FOSS community.
b. They also have “acknowledgement” requirements when FOSS is used in their development projects. They are majorly two types of FOSS. They are:
i. General Public License (GPL), and
ii. Berkeley Software Distribution (BSD License).
Software evaluation license agreement
Big enterprise software contracts usually involve evaluation agreement for a definite period of time before any commitment to commence a fully enforceable software license agreement. For evaluation license, there needs to be a limit on the authorized parties to limit the risk of use outside of the agreed upon conduct. The intellectual property rights in the evaluation intellectual property needs to be with the licensor (owner of the software). For evaluation license agreements the grant is usually non-exclusive & non-transferable.
Reverse engineering of source code
Reverse engineering for the purposes of disassemble, decompile is allowed under “fair use” of the copyright act. However, such conduct can be negated by including a provision in the licensing agreement which prohibits reverse engineering. This is made to protect any “trade secrets” in the confidential source code.
Preemption related to copyright and patent?
Preemption is possible whenever copyright law or patent law conflicts with the state contract law in a software licensing agreement. With preemption, a party may avoid a condition to a grant clause in a license or limit the cause of action in case of a lawsuit due to same rights and remedies available under federal and state law. For “express” preemption purposes, there needs to be an “equivalent,” right available under both federal and state law. State contract law provides more rights and avenues than that available under federal copyright and patent law.
“Conflict” preemption applies when there is no express preemption but “(1) it is impossible to comply with both the state and federal law or when (2) the state law stands as an obstacle to the accomplishment and execution of the full purposes and objectives of Congress.” Pacific Gas & Elec. Co. v. Energy Res. Conservation and Dev. Comm’n, 461 U.S. 190, 204 (1983).