Attorney Steve® Copyright & Software Lawyer - Due Diligence in Mergers & Acquisitions - Call us at (877) 276-5084.

Introduction

When two companies merge, there are numerous issues that must be addressed. One issue that is often overlooked but can have costly consequences is the review of software licensing agreements. These agreements dictate the terms and conditions by which software may be used, and failing to properly review them can lead to fines, legal issues, and even lost profits. It is essential to ensure that all software licenses are properly transferred, updated, or terminated as necessary during the merger process. This can be a complex task, but it is a crucial step in ensuring a smooth transition and avoiding any legal or financial implications down the road. So, don't let software licensing fall through the cracks during your merger process – take the time to review and update these agreements to protect your newly formed entity.  This article will discuss the importance of this review and provide practical guidance on how to ensure compliance. What

Merger Due Diligence

Software license agreements are an important part of any merger or acquisition process. The terms of these agreements can significantly impact the success or failure of the transaction, and limit potential liabilities.  One important area of consideration is copyright infringement of programs like Autodesk, Ansys, Siemens, Microsoft and others. In order to avoid potential claims of copyright infringement, it is essential that these software license agreements be reviewed as part of the due diligence process.

What is a Software License Agreement?

A software license agreement is a legally binding contract between the software licensor and licensee. The agreement grants the licensee the right to use the software in accordance with the terms and conditions of the agreement. These agreements typically include restrictions on the use of the software, such as prohibiting resale or redistribution, and often include provisions for indemnification of the licensor from claims related to the software.

Importance of Reviewing Software License Agreements

When reviewing software license agreements as part of a merger or acquisition due diligence process, it is important to understand the obligations of the parties involved. This includes understanding the scope of the license, the intellectual property rights associated with the software, and any limitations or warranties associated with the license. It is also important to ensure that the software license agreement is compliant with applicable laws and regulations. Failure to properly review a software license agreement may result in claims of copyright infringement of programs like Dassault (Solidworks), Hexagon (Vero), Adobe and others.

Software license agreements typically include a copyright clause that prohibits the unauthorized use, modification, or distribution of the software. If the licensee breaches the agreement, they may be held liable for copyright infringement.  This can result in significant financial penalties, as well as reputational damage.  This can be avoided with a solid software review and transfer of licensing to the new entity if needed.

Practical Guidance On Reviewing Software License Agreements

When reviewing software license agreements as part of a merger or acquisition due diligence process, it is important to consider the following:

• Ensure that the agreement is compliant with applicable laws and regulations.

• Understand the scope of the license, and any limitations or warranties associated with it including transfer restrictions.

• Confirm that the software is licensed for the intended use and not over-assigned for example. 

• Understand the terms of the software license agreement, including any restrictions on use, modification, or distribution of the software.

• Ensure that the agreement is in writing and signed by the appropriate parties.

• Understand the intellectual property rights associated with the software, and the copyright clause.

• Is the company to be acquired in the middle of a software audit review from a third party such as KPMG or others?

Conclusion

Software license agreements are an important part of any merger or acquisition process. It is essential that these agreements be reviewed as part of the due diligence process in order to ensure compliance and avoid potential claims of copyright infringement of programs like Autodesk, Ansys, Siemens, Microsoft and others. This article has provided practical guidance on how to review software license agreements in order to ensure compliance and avoid potential liability.

Contact a Software Due Diligence Attorney

Since 2004 our IP law firm has helped nearly a 1,000 clients - both small and large - handle software disputes, EULA compliance issues, software audits, and federal court litigation cases involving alleged willful infringement of copyrighted software.  We are a clear leader in the United States.  If your company is contemplating a merger & acquisition, and there are software-technology licenses at issue, contact us for a custom quote and to discuss your requirements and how we can assist. 

You can reach us at (877) 276-5084 or email us through our contact form.