Software has become an integral part of the construction world and its use is only growing. There are hundreds of software providers for project management systems, estimating, schedule tracking, BIM, accounting, project portal, dropbox, cloud service providers, the list goes on and on.

Typically, users of software are handed a lengthy agreement and asked to click their consent to the terms. We have all seen this type of agreement; anyone with a cell phone has likely absentmindedly agreed, with a click, to each software update. The writing is small.  The lines are spaced close together.  It goes on for page, after page, after page. The only distinguishing feature is occasionally the words are in all CAPS which feels bad-mannered and impolite.  Frankly, the first paragraph, if one gets that far, is enough to cure all insomniac tendencies one may have in a matter of seconds. These agreements are typically called End User License Agreements (EULA) and are the terms the user of a software program agrees to abide by in using the software.

There is a lot of important information hidden in all that small writing, such as: where a dispute is litigated (not always your home state); non-assignment without consent (i.e. if the software division or your company is purchased by another, you are required to update the terms of the agreement); indemnification; payment terms; termination; confidential information; etc.  That said, I believe there are the big four to be aware of:  1) scope of license; 2) support, aka updates/modifications; 3) security; and 4) limitation of liability.  This article and the three to follow will expand on these four concepts.  First, understanding the scope of your license and usage rights.

PART 1 – SCOPE OF LICENSE

Licenses come in all shapes and sizes.  The license can…be one or a combination of: annual/subscription based, term specific with renewals available, all-inclusive license, built-in technical support, optional support and software maintenance, hosting, perpetual license, consumption-based model, per-user license structure, internal versus external users, device based, flat fee, monthly billings, etc.

Understanding the breadth of the license and features offered with the software can help you utilize the software to its full potential without breaching the license agreement itself.

Determining the correct license type for your company is important. Estimating the expected use of software and potential growth of your company can either save or cost you money.  It is important to review and understand the options and the costs/benefits associated with each.

If a company uses the licensed software outside the limitations in the EULA, it can lead to unnecessary fees and costs. Violating the terms can be costly. Most programs have a ‘phone home’ feature. Simply put, this function sends information back to the developer regarding the use of the software (usually without the user’s knowledge). The software itself is telling the provider if you are using more licenses than you paid for. However, software providers are often big companies and the audit procedure takes time. Meanwhile, your company is now in breach of the EULA and the software provider can seek costs for the unauthorized use of multiple licenses for potentially years. Often these costs are higher than the cost of properly licensing the software to start.

Understanding and selecting the correct license is the best first step to successful use of the software itself. Involving your legal team before signing on the dotted line can help your company manage risk and allow for effective planning.

Stay tuned for Part 2 in Decoding Software Agreements – Security.