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Do you need a license for the technology your business uses?

No matter what industry your company is associated with, you probably rely on at least one form of technology for your day-to-day operations. This could include logging employee hours or managing payroll, or it could mean something more essential to the product or service you provide. You may have developed this technology yourself, or you may be using the technology someone else created. 

If you are using or plan to use someone else’s technology, you must have a license that grants you certain rights and places some restrictions on the use of that product. Even something as routine as a word processing program comes with a licensing agreement, and breaching this agreement could place your business in jeopardy. These contracts can be complex and challenging to understand, so for the protection of your company, you would be wise to learn about the contract terms that pertain to your business. 

What’s in a licensing agreement? 

A licensing agreement allows you limited uses of someone else’s technology or product, such as software, apps or business processes, by paying a fee or a royalty. You do not own the product; you are merely using it for a specific purpose. On the other hand, you want to be certain that the party offering the license truly has ownership of the product. Otherwise, you might find yourself facing a legal dispute with the true owner, who may demand payment for use of the product.  

The contract you sign may include any of the following terms as they apply to your situation: 

  • The licensor cannot allow other businesses in your territory to use or sell the same product. 
  • You may not be allowed to grant or sell others the use of the licensed product. 
  • The licensor will likely monitor your use of the product to ensure you are complying with the contract. 
  • You should be able to rely on the licensor for updates and maintenance on the product, especially if something goes wrong. 
  • Your contract may include a non-disclosure stipulation to protect the intellectual property of the licensor. 

As with any contract, your licensing agreement should contain details about certain contingencies, such as how to resolve contract breaches and what will happen if either party goes bankrupt or ceases operations. You should also be aware of any government regulations that apply to your industry and the financial stability of the company on whose product your business will rely. It is never a good idea to place such important matters in the hands of online templates. Rather, seeking professional guidance may provide more protection for your business.