Licensing Agreements: Do's and Don'ts - Endnotes

1. Alberta, fortunately, has very little statutory or case law regulating software licensing and has a significant number of software developers working in a global economy.

2. His success may be attributed to his adoption of the method of negotiations described in "Getting to Yes, Negotiating Agreements Without Giving In", Roger Fisher and William Ury of the Harvard Negotiation Project, Penguin Books.

3. Section 2(b) of the draft will be the release of the Licensor by the Licensee; the release must be bilateral. The cartoon appearing below the First Draft and other cartoons are reproduced with permission of the cartoonist or the American Bar Association.

4. David Mellinkoff, Legal Writing: Sense & Nonsense, (St. Paul, Minnesota, West Publishing Co., 1982) (hereinafter "Mellinkoff") at p. 130.

5. Mellinkoff, at p. 58.

6. See R. Goldscheider, "The Environment of Licensing Negotiations: From a Lawyer's Point of View" in R. Goldscheider and G.J. Maier, eds., 1989 Licensing Law Handbook (New York: Clark Boardman, 1989) (hereinafter "Goldscheider and Maier") p. 3 at p. 4.

7. R.C. Dick, Q.C., Legal Drafting, 2nd ed. (Toronto: Carswell, 1985) (hereinafter "Dick") at p. 8.

8. See Dick, at p. 117 where he lists six conventional rules for paragraph sculpture.

9. Mellinkoff, at p. 1.

10. See Dick, at p. 73, quoting from R. Dickerson, The Fundamentals of Legal Drafting (Boston and Toronto: Little, Brown and Company, 1965) at p. 98. Dick provides a helpful discussion of the various types of definitions.

11. Mellinkoff, at p. 26.

12. See Dick, at p. 125.

13. Mellinkoff says at p. 126: "The explanations for wordiness in legal writing do not justify keeping it that way."

14. Dick suggests at p. 126 that this insecurity may result from inadequate training. This is true to some extent, but many adequately trained and skilled drafters still suffer from this insecurity.

15. Dick provides, at pp. 126-7, a list of "couplets" and "triplets" which could be reduced to a single word. The usual drafting jingles that surround the word "releases" is included in that list.

16. Mellinkoff, at p. 18.

17. Mellinkoff, at p. 187.

18. Mellinkoff, at p. 19.

19. Reproduced with the permission of Borland International, Inc. Another company has produced what they call the "Bloodthirsty License Agreement" and the following is an extract from that agreement (I would give credit if I knew where it came from):

Bloodthirsty License Agreement This is where the bloodthirsty license agreement is supposed to go, explaining that Interactive EasyFlow is a copyrighted package, sternly warning you not to pirate copies of it and explaining, in detail, the gory consequences if you do.,/p>

We know that you are an honest person, and are not going to go around pirating copies of Interactive EasyFlow; this is just as well with us since we worked hard to perfect it and selling copies of it is our only method of making anything out of all the hard work.

If, on the other hand, you are one of those few people who do go around pirating copies of software you probably aren't going to pay much attention to a license agreement, bloodthirsty or not. Just keep your doors locked and look out for the HavenTree attack shark.

Honest Disclaimer We don't claim Interactive EasyFlow is good for anything - if you think it is, great, but it's up to you to decide. If Interactive EasyFlow doesn't work: tough. If you lose a million because Interactive EasyFlow messes up, it's you that's out the million, not us. If you don't like this disclaimer: tough. We reserve the right to do the absolute minimum provided by law, up to and including nothing.

This is basically the same disclaimer that comes with all software packages, but ours is in plain english and theirs is in legalese.

We didn't really want to include any disclaimer at all, but our lawyers insisted. We tried to ignore them but they threatened us with the attack shark ... at which point we relented.

20. Mellinkoff, page 100.

21. D.G. Henderson, Q.C., "Patent Licensing: Problems from the Imprecision of the English Language" (1970), 4 Ottawa L. Rev. 62 at p. 66 (hereinafter "Henderson").

22. Ibid.

23. C. Reed, "Limiting Risks in International Transactions: UK and EEC" (1991) Centre for Commercial Law Studies, University of London, at p. 21 ff. (hereinafter "Reed").

24. Shifley, Charles W. & Hulbert, Bradley J., "`Best Efforts' May Not Be The Best Advice", 9 March 1992, Vol. XXVII No. 1, les Nouvelles 37 at 39. This article provides an interesting analysis of "best efforts" clauses providing a summary of legal decisions, practical examples of difficulties caused by the phrase and suggested improvements.

25. Forms and Agreements on Intellectual Property and International Licensing, 3rd Edition, L.W. Melville, Clark Boardman, Callaghan, New York, 1979, Revised 1993, Para 4.17 at p.4-28.

26. National Broach & Machine Co. v. Churchill Gear Machines Ltd., [1967] R. Pat. Cas. 99 (H.L.), cited in Henderson at p. 74.

27. See Henderson, at p. 71. See also PRC Realty Systems v. National Association of Realtors, Inc. 766 F. Supp 453 (E.D. Va 1991) at p. 459.

28. 797 F. 2d 1222 (1986) cert. dismissed, 1075 Ct. 877 (1987).

29. The art of the drafter is taxed by the need to differentiate between bug fixes, corrections, improvements of existing functionality (e.g., speed), addition of new functionality (e.g., supporting writing to optical disc (revisions, new versions, new releases, accessories, port-overs (e.g., from IBM PC to Macintosh) upgrades to new versions or releases of operating systems. Section c.5. Software Licensing Compendium, volume 1 - "Packaged Software License Provisions", Third Edition, American Intellectual Property Law Association, 1992, edited by "Fish and Richardson", Boston MA and Washington, D.C..

30. See Henderson, at p. 75.

31. See Note 32, above. Rights which will not extend beyond the termination date should be stated as well. See United States v. Radio Corp. of America, 117 F. Supp 449 (D. Del. 1954).

32. See R. Goldscheider, "Minimizing Disputed Licensing Agreements: A Challenge in Creative Negotiations and Draftmanship" in Goldscheider and Maier, p. 33 at p. 49.

33. Let us assume that Dreadful Drafter has handled elsewhere warranties of title and non-infringement and any statutory rights to reject the Licensed Software.

34. R.S.A. 1980, c. S-2, ss. 17(2) and 17(4).

35. Sale of Goods Act, R.S.O. 1990, c. S-1, s. 15.

36. Sale of Goods Act, 1979 (U.K.), 1979, c. 54, s. 14.

37. For examples of the many articles and cases discussing this issue, see W.P. Andrews, Jr., "Limiting Risks in International Transactions: Current Legal Issues in United States Domestic Transactions for Computer Goods and Services" (Address to the World Computer Law Congress, April 18-20, 1991), ("Andrews").

38. The National Conference Commissioners on Uniform State Laws in 1987 appointed a Study Committee on Computer Contracting.

"Part of the Charge to that Study Committee was to recommend whether or not any legislation specifically for computer contracts should take the form of amendments to Article 2, a new article within the ambit of the Code, or a free standing statute. See "UCC Survey: Developments on the Fringe". The Business Lawyer 146, August 1991 at p. 1812.

39. "UCC Survey: Software Transactions on Uniformity". The Business Lawyer; Vol. 46, August 1991 at p. 1829 (hereinafter "UCC Survey").

40. Working Draft No. 3.0 of the Model Software License Provisions developed by American Bar Association Section on Patent and Trademarket and Copyright Law, Committee on Computer Program (the "Model Software Agreement") provides in Section 6.06 the following:

"LICENSOR DISCLAIMS ANY AND ALL OTHER WARRANTIES, CONDITIONS, OR REPRESENTATIONS (EXPRESS OR IMPLIED, ORAL OR WRITTEN) WITH RESPECT TO THE LICENSED SOFTWARE OR ANY PART THEREOF, INCLUDING ANY AND ALL IMPLIED WARRANTIES OR CONDITIONS OF TITLE, NONINFRINGEMENT, MERCHANTABILITY, OR FITNESS OR SUITABILITY FOR ANY PURPOSE (WHETHER OR NOT LICENSOR KNOWS, HAS REASON TO KNOW, HAS BEEN ADVISED, OR IS OTHERWISE IN FACT AWARE OF ANY SUCH PURPOSE), WHETHER ALLEGED TO ARISE BY LAW, BY REASON OF CUSTOM OR USAGE IN THE TRADE, OR BY COURSE OF DEALING. IN ADDITION, LICENSOR EXPRESSLY DISCLAIMS ANY WARRANTY OR REPRESENTATION TO ANY PERSON OTHER THAN LICENSEE WITH RESPECT TO THE LICENSED SOFTWARE OR ANY PART THEREOF."

Copies of this valuable resource can be obtained for a nominal amount from myself or the editor, D.C. Toedt III, Arnold, White & Durkee, 750 Bering Drive, Suite 200 (77057), P.O. Box 4433, Houston, Texas 77210-4433.

If English law applies, Devco could not disclaim a warranty that Devco has the right to sell/supply. See Reed, at p. 14, citing Section 12 of the Sale of Goods Act, 1979, note 36, above and Section 7 of the Supply of Goods and Services Act (1982) (U.K.), 1982, c. 29.

41. In a recent case, the court had no problem accepting a complete disclaimer contained in a signed contract where the licensee, Firestone, was a large sophisticated corporation. See Bridgestone/Firestone Inc. v. Oracle Corp., No. C-91-1420-DLJ, 2 CCH Computer Cases, para 46,519 (U.S. Dist. Ct. N.D. C.A. 8/1 1991, as digested by Software Law Bulletin, Oct/Nov 1991 at p. 211.

42. Bank of British Columbia v. Turbo Resources Ltd. (1983), 148 D.L.R. (3d) 598 (Alta. C.A.).

43. UCC 2-719 (2) as mentioned by UCC Survey, p. 1851.

44. See UCC 2-719(3) as mentioned by Andrews at p. 14. With the U.S. law in mind the Drafter should consider the various tests for unconscionability articulated under Section 2- 719(3) as referred by Andrews at p. 14.

45. See Reed, at p. 14. With English law in mind, the drafter should review the standards of "unreasonable" as set out in Schedule 2 of the Unfair Contract Terms Act, 1977.

46. Hawaiian Telephone Company v. Microform Data Systems, 829 F. 2d 919 (9th Cir. 1987).

47. For example, see the Model Software Agreement, Section 6.07.

48. Ibid.

49. Ronald B. Coolley, "Importance of Termination Clauses", les Nouvelles, December 1990, 169 (hereinafter "Coolley"), referring to Nicholas Laboratories, Ltd. v. Almay, Inc., 723 F. Supp 1015 at 1017-1018 (S.D.N.Y. 1989), aff'd 900 F. 2d 19 (2d Cir 1990).

50. Henderson, at p. 79, citing British Repetition Ltd. v. Formento Ltd., [1961] R. Pat. Cas. 222 (Ch.).

51. Coolley, at p. 169.

52. Coolley, at p. 171.

53. Dick, at p. 167.

54. Dick, at p. 167.