Enterprise License Agreement: Everything You Need to Know
An enterprise license is issued for a large corporation for a particular product, such as a software program. 4 min read
What is an Enterprise License?
An enterprise license is issued for a large corporation for a particular product, such as a software program. An enterprise license usually permits unlimited use of this product or system throughout the enterprise, although there may be some restrictions and limitations. An enterprise license at all times foregoes the need to register the software program every time it is installed on a new device or utilized by a new person in the enterprise. Sometimes an enterprise password is set and necessary to activate any individual instance of a software program.
How do I Design an Enterprise License Agreement?
Most software program corporations have a licensing template that they use to design an enterprise license agreement whereby they supply their software program to their clients based on some licensing metric (person, pc, system, division of an organization, income, and so on.). Licensing typically works effectively for small and medium dimension clients, however, less so for large clients (enterprise prospects searching for an enterprise license settlement). Enterprise prospects need an agreement that provides added flexibility, low cost/predictable pricing, and ease of administration. An enterprise license agreement should be designed to fit the needs and requirements of the prospective client.
What Factors Should be Considered in Designing an Enterprise License Agreement?
Several important factors should be considered when designing an enterprise license agreement for your client. What do they need the software program to do, what limits would be burdensome, and what kind of flexibility would allow them to be more effective in their business operations? Proper pricing can only be done after these initial requirements are outlined in the agreement.
What Should be Avoided When Designing an Enterprise License Agreement?
There are some pitfalls to avoid when designing an enterprise license agreement. First, taking the easy approach and just providing full access to a website or unlimited use of a software program is not recommended. This approach will restrict your ability to be adequately compensated for the use of your product. For example, what happens if the client firm is bought out or merges with another larger company. All of a sudden, many more people are using your product and support may even need to be increased. However, you’re trapped within an unlimited use license agreement. In this particular example, it is important to include a “change of management” clause. Another approach is to include a specific time period for your enterprise license.
What are the Pitfalls of an “Unlimited” License?
There are several pitfalls to consider in an unlimited license. An “enterprise” or “limitless” license can be devastating if not properly constructed. Each software program license should have limits, those that are considered enterprise wide or unlimited. Misunderstanding the boundaries of what is put forth as a “limitless” license erodes the deal’s value proposition and could be costly in addition to being embarrassing when justifying the extra expense essential to pay for uncovered rights. An “enterprise settlement” typically meant that anybody within the enterprise can use the product anyplace within the enterprise’s geographic footprint as long as the software program was solely used on a particular machine.
Some actual difficulties can come up within the definition of the “enterprise” due to the decentralized material of an enterprise’s information technology operations. An enterprise can also be thought of in terms of utilization by a particular firm or by a particular enterprise unit inside an organization. Therefore, it is important to understand how an enterprise is structured and what rights you want actually to provide. When you understand how the “enterprise” is outlined, it is very important to comprehend that enterprise rights typically don't translate into limitless utilization or deployment rights.
Consider terms that provide for precise utilization and adequate deployment rights. The license could allow anybody in the organization to make use of the product throughout a number of geographies. However, it might permit use only by a specific type of customer (or processors, or an outlined degree of enterprise revenues). Utilization rights are another additional constraint that can be effective. For example, an enterprise license settlement could allow for limitless deployment rights for a product (e.g., a database). However, total utilization might be used as a metric to provide some limits.
It is rather uncommon for unlimited utilization rights that allow product deployment in an unlimited fashion. Most unlimited license agreements outline a specific list of products that apply, usage terms, and deployment boundaries. A well-intentioned end-user might construe unlimited in lay terms, so it is important to be clear about this with customers.
In terms of database products, it is important to be clear about the limits of a license, and what additional charges or remedies become activated it those limits are surpassed. Many licenses will also include an audit clause that allows for regular review that the product is being used within the licensing agreement terms. Failing to specify such audits and additional license terms several weakens the benefit of a license. Additionally, most licenses have a set time period, for example, three to five years.
When designing a license agreement, it is important to consider the time period that it will be in effect. Will the license cover the expected lifetime of the initiative, or allow for product updates and adequate support? These terms should be clearly presented in the agreement.
There are many details to consider when designing an enterprise license agreement. Get some help by posting your legal need on UpCounsel’s marketplace. UpCounsel provides a platform that allows small businesses access to top lawyers. Lawyers on UpCounsel come from law schools such as Harvard Law and Yale Law and average 14 years of legal experience, including work with or on behalf of companies like Google and Twilio.