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Drafting an integrator license agreement involves clearly defining the right to use the software and the right to sublicense: what the integrator may do with the software, whether they may integrate and resell it, for what fee, and how warranties and indemnities run through the chain from supplier to end customer. The basis is copyright on software (Art. 10, paragraph 1, sub 12 of the Copyright Act). The distinction from a standard license lies in the sublicense: without an express right to resell, the integrator may not provide the software to their customers.
The short answer
- Scope: define what the integrator is allowed to: use, modify, integrate, and resell.
- Sublicensing: regulate the right to grant sublicenses and which conditions are passed on.
- Remuneration: fixed amount, per sublicense or royalty, with a right of control.
- Indemnification: a guarantee that the software does not infringe the rights of third parties.
- Liability: limit and distribute liability parallel through the chain.
Drafting an integrator license agreement: what belongs in it
A usable agreement clearly defines rights and clearly divides risks. These elements must not be missing.
- Definition of the software. Describe exactly which software, versions, and updates are covered by the license, including any source code or only object code.
- Scope of the right of use. Exclusive or non-exclusive, for which territory, which duration, and which permitted actions such as integration and modification.
- Sublicensing conditions. Under what conditions may the integrator grant sublicenses, and what obligations does it pass on to its customers, such as usage restrictions and a prohibition on reverse engineering.
- Remuneration and reporting. The price structure, the payment terms and, in the case of royalties, the method of calculation and a right of audit of the records.
Intellectual property and indemnification
Copyright and the indemnification form the heart of the agreement. Here you determine who bears the risk of infringement.
- Ownership of the copyright. Stipulate that the supplier remains the rights holder and that the integrator only acquires a right of use (Art. 45h et seq. Copyright Act).
- Warranty against infringement. A guarantee from the supplier that the software does not infringe any copyright or other third-party rights.
- Indemnification. An obligation of the supplier to compensate the integrator in the event of an infringement claim, with an arrangement for the defense of such a claim.
- Pass this on to the end customer. Ensure that the integrator can provide a comparable indemnity to its customers without promising more than it receives itself.
Allowing the chain to cover the liability
The integrator sits between the supplier and the end customer and therefore bears risk in two directions. If he promises his customer more than the supplier guarantees to him, the difference remains with him. Therefore, ensure that the warranties, limitations of liability, and indemnities run parallel as much as possible. If the supplier limits his liability to, for example, the fee paid, mirror this in the sublicense agreement with the end customer. Also, regulate what happens to ongoing sublicenses when the main agreement ends, so that the integrator's customers do not suddenly find themselves without usage rights. This exit arrangement prevents the termination of the supplier relationship from rendering the integrator in default towards his own customers.
A practical example
A system integrator wants to incorporate a planning module from a software company into its own business software. In the integrator license agreement, it stipulates that it may integrate the module non-exclusively and sublicense it per customer for a fee per user. The supplier guarantees that the module does not infringe on third-party rights and limits its liability to the annual fee. The integrator mirrors this limitation to end customers in its own terms and conditions and includes an exit clause whereby existing sublicenses continue for another year after termination. When the supplier later wanted a price change, the integrator was not left empty-handed facing its customers thanks to these agreements.
Honest recommendation
For a small, non-exclusive license without resale, using a standard package from a reliable supplier, you can often draft the agreement yourself using a good template. A lawyer is not strictly necessary in this case. However, as soon as you start sublicensing, integrate the software into your own product, or agree on exclusivity and royalties, legal review pays for itself. In that case, be sure to have the sublicense terms, the indemnification against copyright infringement, the limitations of liability, and the exit clause checked. These are the points where an integrator can get caught between supplier and end customer. A watertight agreement costs less than a claim you cannot pass on.
Want to read more? View the integrator license agreement, and delve into what an integrator license agreement is and having an integrator license agreement drafted.
Frequently Asked Questions
A definition of the software, the scope of the right of use (exclusive or not, territory, term, permitted acts), the sublicense terms, remuneration with a right of inspection, a warranty and indemnification against infringement, limitations of liability, and an exit arrangement for current sublicenses.
Because the integrator may only resell the software if he has the right to sublicense. Without that provision, he infringes the supplier's copyright. Moreover, the provision regulates which usage restrictions he must pass on to his customers.
Include a guarantee that the software does not infringe any third-party rights and an indemnity whereby the supplier holds the integrator harmless in the event of an infringement claim, including the defense of such claim. Ensure that you can pass on a similar indemnity to your end customers.
An agreement regarding what happens to ongoing sublicenses when the main agreement ends. Without such an arrangement, the integrator's customers suddenly find themselves without usage rights, and the integrator is in default towards them. A transitional period is often agreed upon.
Ensure that warranties, limitations of liability, and indemnities run parallel. Do not promise your end customer more than the supplier guarantees to you. If the supplier limits its liability to the fee, mirror this in your sublicense terms.
That depends on what the integration requires. For use and distribution, object code is usually sufficient. If you want to modify or maintain the software yourself, access to the source code is required, possibly via an escrow arrangement in case the supplier ceases to exist.
Describe the basis (for example, per active user or per sublicense), the rate, the reporting period, and the payment term. Include a right of audit so that the supplier can review the records, and stipulate how disputes regarding the settlement are resolved.
