Important software users often ask us whether they should buy the software or just license it from the vendor. Here are some instructions and options.

Software Ownership

Ownership of the Software is the safest place a licensee can hold. On the surface, ownership has little risk of unauthorized modification or copying of the software, or the software falling into the hands of a competitor. Usually, the licensee buys software from the company (as an asset), not the licensee, who buys the vendor’s business (by selling the business) or the company (by how to sell shares). part). Where it buys software from a company, it is usually a module or a standalone software product, where the vendor owns many different software products.

The only downside to this is that the license faces a high risk of “the licensor being intellectually incompetent” to maintain the software if a key employee leaves the company or dies. This is why there is a current trend of “acquiring” startups – that is, when a large company buys a smaller company just to get its employees.

Software Licensing

There are basically three different types of license agreements when it comes to proprietary software (as opposed to open source software):

non-exclusive source code license (allows licensees to make changes to the software without infringing any copyright in the software);
non-proprietary object code license (prevents licensees from making changes to the software); And exclusive license of either (where the licensee has the right under the Copyright Act to sue third parties for copyright infringement on their behalf.

The downside to a license is that when the software has value, the license sometimes encourages the licensor to break the contract rather than continue to license the software to the licensee.

Software Licensing: “Actual” or “Personal” Rights?

Software license or “use right” means “personal right” or “real right”. Our courts have yet to decide whether a software license confers personal or substantive rights on the licensee. Individual rights are “weaker” than real rights (when viewed from the perspective of the licensee).

If the right to use the software under the license is a personal right, the liquidator may have the right to sell the software to a third party (even a competitor of the licensee) to liquidate the company’s assets. . contains software. If the license agreement grants individual rights to the licensee, the License Agreement has no effect on third parties other than the parties to the contract.

On the other hand, if the rights created under the License Agreement are actual rights, then they have effect on third parties who are not a party to the contract. This means that the Liquidator will be obligated to sell the software subject to its constraints (License Agreement) and the new owner will have to continue to license the software to the licensee.