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 liability.
Recommendations
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.
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