Technology Contracts: An Overview

4 min

Want to learn more about drafting, negotiating, and understanding intellectual property and technology contracts and have 10 minutes to spare? Grab your morning coffee or afternoon tea and dig into our Tech Contract Quick Bytes – small servings of technical contract insights expertly prepared by our seasoned attorneys. This month, we're dishing up best practices for technology contracts.

The use, distribution, and licensing of software and technology are commonly governed by legal terms both to protect the software or technology owner intellectual property (IP) rights and to allow another permission to use or otherwise exploit the IP. Following is an overview of some different types of technology contracts, how such contracts are often used in practice, and some of the supplementary documents used alongside such contracts.

IP Licensing Agreement

An intellectual property license agreement is a legal contract authorizing the right to use, make, or sell IP in exchange for adequate consideration. A license allows one party to use the IP, while the other party retains ownership of the IP at issue. An entity may desire to license its intellectual property for a variety of reasons, such as allowing the creation or derivatives or the further distribution of the IP. An intellectual property license agreement may simultaneously be attractive to the licensee because the arrangement provides the licensee access to established IP.

Software Licensing Agreement

A software licensing agreement is a legal contract through which a licensee obtains a license from the software owner, otherwise known as the licensor, to install and use the software within the licensee's systems, and which describes the rights granted to the licensee regarding its use of the software.

A licensee may use the licensed software for a variety of reasons, such as to manage aspects of its business, or to communicate with employees and customers. A software licensing agreement is typically supplemented with additional policies and terms. The software licensing agreement can generate revenue for the licensor and can function to ensure that the licensor maintains ownership and control of its intellectual property rights in the software.

Software as a Service Agreement

A software as a service (SaaS) agreement is a legal contract through which a customer receives computer software services from a service provider. A SaaS agreement provides the customer access to software that is hosted on the service provider's server, as opposed to the customer's own server or hardware.

Typically, SaaS agreements are supplemented with a separate service-level agreement and privacy policy.

Distribution Agreement

A distribution agreement is a legal contract whereby an IP owner appoints a distributor to sell, distribute, or sublicense its intellectual property (e.g., software) to other parties within a particular territory. This category of agreements encompasses reseller agreements, value-added reseller agreements, franchise agreements, and original equipment manufacturer agreements, among others.

In practice, these kinds of agreements are often used to commercialize intellectual property. IP owners may choose to engage in distribution agreements to maximize product revenue or capitalize on the competitive advantages they provide in the marketplace. However, software distribution agreements may also raise antitrust issues. So, parties on both sides of the distribution agreement should at least consider in part the impact of the licensing arrangement on competition in its market.

Professional Services Agreement

A professional services agreement is a legal contract used to procure the services of a skilled business or individual for a specific period. It may be supplemented with a statement of work (SOW), which is incorporated by reference into the underlying professional services agreement after negotiation and execution.

In practice, professional services agreements are frequently used with IP or technology and for a variety of services, including marketing, auditing, program management, website design and development, and others.

Development Agreement

In a software or IP development agreement, a contractor, programmer, inventor, or developer is retained to create new IP or a customized software or programmable application. Software development agreements involve professional services and require the effective transfer of ownership from the developer to the hiring party. These agreements are usually accompanied by an invoice or order form that a buyer submits to the software developer to detail the buyer's request and the agreed-upon fees.

If considering entering a technology contract, a company should consult with counsel to identify the appropriate contract form for the company's needs, to consider the company's compliance with any applicable laws, and to ensure that the company's intellectual property rights are adequately protected during the drafting process.

If you or your company would like to talk about technology contracts, please contact A.J. Zottola or Channing Gatewood. Click here to learn more about Venable's IP Tech Transactions services, and subscribe to Tech Contract Quick Bytes.

Special thanks to Sydney West and Oluwatobiloba A. Kalejaiye for their assistance with this article.