In short
A software licence agreement grants a customer the right to use software you own, without transferring ownership of it. It sets the scope of permitted use (users, devices, purposes), restrictions on reverse engineering and redistribution, and the consequences of exceeding the licensed scope. It's distinct from a SaaS agreement, which grants access to hosted software rather than a licence to install or run it.
Licence, not sale
A software licence agreement is built on a fundamental distinction — the customer is buying a right to use the software under defined conditions, not buying the software itself. Copyright in the software remains with the licensor. We make this explicit in the grant clause and reinforce it through restrictions on copying, modifying, decompiling or creating derivative works, subject to the narrow statutory exceptions in the Copyright Act 1968 (Cth) for interoperability that can't be contracted away.
Scope of the licence grant
The commercial value of the agreement sits almost entirely in how the licence scope is defined — exclusive or non-exclusive, perpetual or term-based, and limited by number of users, devices, sites or a named legal entity. We draft the metric that actually matches how the software is priced, because a mismatch here (for example, a per-device licence when the customer is really deploying per-user) creates ongoing compliance and revenue leakage problems for the licensor.
Restrictions and audit rights
Standard restrictions prevent sublicensing, reverse engineering, removing copyright notices and using the software to build a competing product. For higher-value licences, we include an audit right allowing the licensor to verify compliance with the licensed scope, with the customer bearing the cost of the audit if a material breach is found — a meaningful deterrent against silent over-deployment.
Maintenance, updates and support
We separate the core licence grant from any ongoing maintenance and support obligation, since these are often priced and renewed separately. The agreement should be clear about whether updates and new versions are automatically included in the licence fee or require a separate purchase, and what level of support response times the customer can expect.
Warranties and liability
Warranties are typically limited to the software performing materially in accordance with its documentation for a defined warranty period, with liability capped at licence fees paid and carve-outs for IP infringement claims arising from the customer's use within the licensed scope. We exclude liability for third-party claims arising from unauthorised modifications or use outside the licensed purpose.
Termination and effect on use
On termination or expiry, the customer's right to use the software ends and it must cease all use and destroy or return copies. For perpetual licences terminated for cause, we address whether the customer retains any residual right to use the last delivered version, since an outright termination of use rights on a perpetual licence can be commercially harsh if the breach is minor.
What the fixed fee covers
- Software licence agreement with defined grant scope and metric
- Restrictions on reverse engineering, sublicensing and unauthorised use
- Audit rights clause for higher-value licences
- Maintenance, support and update terms
- Warranty and liability clauses aligned to your risk position
- Termination and post-termination use rights
Mistakes we see
- Licence metric that doesn't match actual deployment, causing silent under-licensing
- No audit right, leaving over-deployment undetectable until a dispute arises
- Confusing a software licence with a SaaS agreement when the product is actually hosted
- Warranty periods left open-ended instead of tied to a defined term
- No clarity on whether updates are included in the licence fee
Who this is for
- Software vendors licensing on-premises or installed software
- Businesses licensing proprietary tools or platforms to third parties
- Companies acquiring software under a perpetual or term licence
- Vendors moving from ad hoc licensing to a standard licence agreement
Frequently asked questions
- What's the difference between a software licence and a SaaS agreement?
- A software licence grants a right to install and run software the customer controls, typically on their own infrastructure. A SaaS agreement grants access to software hosted and operated by the provider, with no installation by the customer. The risk allocation, data handling and service level considerations differ significantly between the two.
- Can we terminate a perpetual licence if the customer breaches it?
- Yes, but courts and commercial practice both favour proportionate remedies — for minor or curable breaches, terminate only after a defined cure period; reserve immediate termination for serious breaches like unauthorised redistribution or non-payment of licence fees.
- Do we need an audit clause if we trust our customers?
- It's less about distrust and more about protecting revenue as customers grow, add staff or open new sites without updating their licence. An audit right — even rarely exercised — gives you a formal mechanism to true up licensing as customer usage scales.
- Can the customer transfer the licence if they're acquired?
- Only if the agreement allows it. We typically prohibit assignment without the licensor's consent, which protects against the software ending up in the hands of a competitor through a corporate restructure, while allowing consent to be given for genuine internal group reorganisations.
- What happens to the licence if we discontinue the product?
- We recommend addressing this upfront — either a right to terminate on notice with a pro-rated refund for term licences, or a continued right to use the last version delivered for perpetual licences, so discontinuation doesn't become an unplanned dispute.
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