Software license agreements often specify important rights and
obligations that are triggered when the software license ends or
that continue to apply after the software license agreement ends.
Customers should understand those rights and obligations and be
prepared to enforce and comply with them.
Consequences of Termination
A time-limited software license usually terminates when the
specified license period ends, if not sooner. A perpetual software
license usually continues in perpetuity, but the customer's
right to receive important services necessary for the practical
continued use of the software (e.g., software maintenance or
technical support) is usually limited to a specified period. Even a
perpetual software license may be subject to termination by the
vendor in specified circumstances (e.g., if the customer fails to
pay fees or misuses the licensed software). Software license
agreements usually require the customer to stop using the licensed
software and delete or destroy all copies of the software and
related documentation when the software license ends, and often
require the customer to verify in writing that it has done so.
Software license agreements often provide the vendor with a
right to inspect and audit the customer's facilities to verify
compliance with the customer's termination obligations.
Software vendors may use technologies (e.g., time-limited license
keys) to prevent customers from continuing to use licensed software
after the license ends.
If licensed software is critical for a customer's business
operations, then the software license agreement may provide the
customer with an optional post-term transition period during which
the customer may continue using the licensed software after the
software license ends and while the customer transitions to
replacement software. A customer's right to invoke an optional
transition period may be subject to restrictions and requirements,
including timely notice and payment of applicable fees.
Software license agreements may also specify other consequences
of early termination of a software license. For example, a refund
of pre-paid fees (if the customer terminates the software license
because of the vendor's breach) or accelerated payment
obligations (if the vendor terminates the software license because
of the customer's breach).
Software license agreements usually specify rights and
obligations that are triggered when the software license agreement
ends. Those rights and obligations often vary depending upon
whether the agreement expired at the end of its prescribed term or
was terminated early.
Surviving Rights and Obligations
Software license agreements usually specify that certain rights
and obligations that apply during the term of the agreement
continue to apply after the agreement ends. Surviving rights and
obligations commonly relate to the protection of intellectual
property and confidential information, audit and inspection rights,
liability limitations and exclusions, indemnity obligations, and
dispute resolution procedures. Surviving rights and obligations can
impose substantial burdens on a customer, and a customer's
breach of those obligations can result in significant
When negotiating a software license agreement, a customer should
understand its rights and obligations that are triggered when the
software license ends or that continue after the agreement ends.
The customer should ensure that those rights and obligations are
consistent with the customer's business requirements, and the
customer should be prepared to enforce and comply with them.
On March 11, 2009, the Office of the Superintendent of Financial
Institutions of Canada (OSFI) released a revised version of Guideline B-10, Outsourcing of Business Activities, Functions and Processes.
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