In the modern world of information technology, where innovation and the speed of implementation of new solutions are becoming key factors of competitiveness, the formalization of obligations between IT companies and their business partners plays an important role. As the basis of business relations, agreements define the rules of interaction, ensure the protection of the parties’ interests and help reduce risks. In this article, we will consider the types of agreements that IT companies most often conclude, analyzing their features, advantages and possible risks. Understanding these aspects will help establish clear and transparent terms of cooperation and form long-term and mutually beneficial relations with partners in a rapidly changing digital environment.
Why is it Important for IT Companies to Navigate IT Agreements
Navigation in IT agreements is important for IT companies for several reasons:
Protection of Rights and Interests
IT agreements form the legal basis for cooperation and clearly define the parties’ duties, rights, and responsibilities. It reduces the risks of misunderstandings and legal disputes.
Reducing Legal Risks
Properly drafted agreements help avoid potential legal conflicts and define dispute resolution mechanisms. It is especially important in areas where intellectual property and confidential information are central.
Taking into Account Industry Specifics
IT companies often work with unique products and services that require specific agreement terms, such as licensing, software support and updates, and terms of use of technologies.
Flexibility and Adaptation to Change
In the rapidly changing world of technology, IT agreements must be flexible and adaptable to changes in business models and market conditions. Such agreements’ relevance and correct interpretation allow companies to respond to new challenges quickly.
Establishing Trust
Transparent and formulated terms of cooperation help build trusting relationships with clients and partners. It can positively affect the company’s reputation and attract new clients.
Financial Security
IT agreements may include terms regarding payment, fines for non-fulfilment of obligations, and other financial aspects, allowing IT companies to plan a budget and minimize financial risks.
Thus, understanding the specifics of IT agreements and the ability to manage them effectively are important tools that facilitate investing resources in business development and strengthening positions in the market.
What are the Features of IT Agreements
IT agreements have unique features due to the specifics of the industry, technological aspects and the nature of the services provided. Here are some key features:
1. Intellectual Property
Issues related to copyrights, patents, trademarks, and trade secrets often arise in the IT industry. It is necessary to clearly state who owns the rights to the products, code, and other results of intellectual activity.
2. License Agreements
Agreements often include licensing terms that regulate how and to what extent the software or other intellectual assets can be used. It can include both limited and perpetual licenses.
3. Terms of Use and Maintenance
Agreements often specify the terms of service, including support, updates, bug fixes, and other services. It is critical to ensure the smooth operation of software and services.
4. Privacy and Data Protection
The protection of personal data is becoming increasingly important. Agreements should contain provisions on privacy and data protection, especially in light of global laws such as the General Data Protection Regulation (GDPR) and national requirements for the protection of personal data.
5. Deadlines and Project Deadlines
IT projects often require clearly defined deadlines for work, development stages, and other time frames to avoid misunderstandings and conflicts.
6. Terms of Product Modification and Adaptation
Technologies and user requirements change very quickly. Therefore, agreements can include terms that allow for changes and modifications to the product and the procedure for approving these changes.
7. Liability for Failures and Losses
IT agreements should consider the parties’ liability for possible software failures, data leaks, and other risks. It may include both liability limitations and insurance requirements.
8. Service Level Agreements (SLA)
IT services often use service level agreements (SLAs) that clearly describe the company’s obligations to provide services, including response times to requests, service availability, and other parameters.
9. Use of Cloud Technologies
Cloud service agreements have specific features, such as data security conditions, server location (especially in an international context), and data access rules.
These features make IT agreements more complex than in other industries and require a careful approach from both legal specialists and IT companies.
Features of IT Company Agreements on the Transfer of Intellectual Property
As a rule, IT companies do not create physical objects but intellectual property objects, such as computer programs and services. About these programs and services, IT companies are copyright holders and can transfer their rights in full or in part to business partners and individuals. The rights transferred under IT agreements must be listed in such agreements so that the parties to the agreement do not have any doubts about the limits of the use of the IT product.
Agreement on the Assignment of Exclusive Rights
When transferring full rights to an intellectual property object, an agreement on the assignment of exclusive rights is usually concluded (this is the right of the copyright holder company to own, use, and dispose of the program or service). Such an agreement is concluded for the entire term of the copyright holder’s rights. It means that the IT company transfers all rights to its product to the business partner for a fee.
An agreement on the assignment of exclusive rights is valid from the moment of conclusion or from another moment, which is determined in the agreement itself.
License Agreement
When transferring rights partially (for example, only the right to use a computer program or service or another product of an IT company), the IT company (licensor) enters into a license agreement, under which, for a fee, it allows the other party (licensee) to use its software product. Such an agreement is concluded for a limited period, which is determined in the agreement. In addition, the license agreement specifies the territory of the license and the amount and procedure for paying for the use of the IT product. Specifying the conditions for a trial (free) period of use is possible.
A license can be exclusive and simple (non-exclusive). The difference between them is in the scope of rights that the licensor transfers to the licensee.
Simple (Non-Exclusive) License
A simple (non-exclusive) license agreement means that the licensor retains the right to use its IT product and can enter into similar agreements (simple (non-exclusive) license) with other persons.
By default, the licensee is granted a non-exclusive license.
Exclusive License
An exclusive license implies that:
- The licensor may use its IT product in the part of the rights that it has not transferred to the licensee under the license agreement.
- The licensor does not have the right to transfer the rights to the IT product to other persons.
- The license agreement under which an exclusive license is transferred must include a condition on the exclusive license. Otherwise, the license will be considered simple (non-exclusive).
Software Development Agreement
In general, when developing software, the parties to the agreement enjoy the freedom to choose the terms of the agreement. It is important for the IT company – agreementor not only to make the development, but also to properly transfer the rights to it to the customer.
A software development agreement is a mix of the terms of contractor’s agreement or service agreement (regarding the terms of the terms of reference for software development, financing, product testing) and the terms of a license agreement (regarding the transfer of development rights to a business partner).
In such an agreement, it is important to define the stages of work (provision of services) and deadlines for the completion of the stages. The possibility of contractors’ participation in the development may be important for the contracting party. For reasons related to confidentiality, the agreement may provide for the possibility or prohibition of the involvement of contractors.
Unforeseen circumstances may arise during the development and transfer of rights that cannot be foreseen in advance. Therefore, we recommend that you specify in the development agreement the possibility of making changes and the procedure for quickly changing the agreement.
A Software Development Agreement often Includes the Following Provisions:
1. Obligations of business partners to comply with the commercial secrecy regime established by the customer (Non-disclosure agreement (NDA) – agreement). This is an agreement prohibiting the dissemination of commercial information that has become known to the IT company in connection with the fulfillment of the customer’s terms of reference. NDA is usually issued in the form of a separate agreement.
2. About the maintenance of the software product after its transfer to the customer. A software development agreement may provide for the obligation or the possibility of servicing an IT product under a separate agreement with the customer. A separate agreement for the maintenance of an IT product is usually concluded after the transfer of the product to the customer. Maintenance may include updating, configuring the product, and improving its characteristics.
Adhesion Agreement
Such agreements are usually concluded when subscribing to software products online or distributing them on physical media. Such agreements are usually called “open licenses”. The terms of an open license are the same for all users of IT products. The start of using the products means the user agrees to the terms of the agreement.
An open license can be free or paid. In Belarus, agreements between companies must provide for payment: they must be reimbursable.
The validity period of an open license for an IT product for the licensee is usually unlimited. Often, the terms of an open license agreement provide the possibility of using the IT product subject to making periodic payments (purchasing a subscription to the product). In case of non-payment of the next subscription, the licensee’s ability to use the product is suspended, and after payment is made, this ability is resumed.
Open license agreements can specify the territory where the licensee can use the IT product, for example, a particular state. When the agreement does not define the territory of use, the product can be used in any territory.
Adhesion Agreement in International Practice
An EULA (End User License Agreement) is a legal document executed between a software developer and an end user. It defines the conditions under which the user can use the program, protects the developer’s interests, allows him to control its use and distribution, and provides legal guarantees for users.
License agreements can be executed in two ways:
1. On paper with the signatures of the parties.
2. Electronically, when installing the software – these are the so-called click-through agreements.
Most people are familiar with the format when they are asked to make a choice: accept or reject the terms of the license agreement for using the software. Most license agreements have rules for using the application that prohibits users from distributing it in ways harmful to the developer. Some agreements also prohibit open criticism of the software or the developer company.
Contact us
If you have any questions or disputes regarding the registration of IT agreements in Belarus, we will be happy to help! Our long-term experience in divident payment will help you resolve any disputes in this area.
- +37529366-44-77 (WhatsApp, Viber, Telegram);
- info@ambylegal.by.
