Stuart J. Vogelsmeier, a member of the Firm, practices in the areas of health law, estate planning, and corporate law. He regularly prepares and negotiates managed care contracts and professional service contracts. Mr. Vogelsmeier lectures on health care issues, estate planning, and implementing e-mail policies in the work place.

A short time ago only researchers and inventors required legal assistance in the intellectual property area. Currently, license agreements for computer software impact almost every business.

Business owners depend on increasingly expensive and expansive technology. Software and frequent upgrades are often critical, and as costs for upgrades and specially designed applications increase, businesses must pay more attention to the agreement. The vendor's standard software license agreement is often one-sided. Sales representatives may "promise the world" but their promises cannot be found in the software license agreement.

Once a user has identified its software needs, and identified a vendor and a product, the user will be presented with an agreement.

Software/Hardware Description: Many agreements fail to specify the products and services purchased.

Term: Many users believe they are purchasing a perpetual license for the software, only to find that use is conditioned on license fees.

Number of Users: The agreement should specify any limitations on the number of users, remote users, pricing for new users, and future products. The agreement should authorize copying the software for backup purposes. If a user has numerous or future sites, these sites should be specifically identified.

Payment: Many agreements provide ambiguous pricing terms. Pricing should be simple and tied to specific milestones. Many agreements provide for a large payment at the time of execution and a final payment upon delivery. A better practice is to provide for final payment after installation and operation.

User Testing: A user should test the software before making the final payment. Testing may require a substantial time commitment. The agreement should specify the criteria for testing, the types of data to be tested and the remedies if the software is not satisfactory. The user should test the functions it believes are critical, not the functions recommended by the vendor.

Warranties: Among the warranties which may be expected are: (i) the media on which the software resides is free from physical defects; (ii) the software will have a specified performance or response time; (iii) the software will operate in conjunction with the user's hardware; (iv) the software is free from viruses; (v) the vendor has power and authority to grant the license; (vi) the software will comply with requirements for the year 2000 and leap years; and (vii) the software will perform pursuant to the user's manual. Most standard license agreements have explicit limitations on warranties that should be carefully reviewed beforehand.

Upgrades: The user will want promises regarding the rights to obtain upgrades or fixes of the software and the additional costs, if any, in order to avoid unexpected costs and surprises.

Support and Maintenance: What happens when the user's system crashes? When does support and maintenance begin? What specific support services are provided? What response time or priorities does the vendor employ when dealing with service calls? The agreement should specifically express the services included in the standard support fee.

The Implementation Plan: Often, the agreement contains a vague statement of the vendor's responsibilities regarding delivery, installation, and testing. Users need a timetable that identifies critical implementation milestones. Many vendors will require a commitment by the user to provide sufficient staffing to handle certain implementation tasks.

Source Code Escrow: New software vendors appear on almost a daily basis. What happens if your vendor goes out of business? A provision for the escrow and release of the source code is essential. Programmers easily understand source code and a user could continue to support the software even if the vendor goes out of business. The escrow agent will charge a fee for its service and this fee is often passed on to the user.

Hardware Configuration: What if unexpected hardware purchases are required in order for the software to properly function? The user should secure written assurances regarding the compatibility of the software and existing hardware.

Custom Software: Users often pay vendors to write custom software. Specifications and warranties for the custom software must be explicitly discussed and the ownership of the custom software clearly established.

Training: Training and education of a user's support staff and individual users entail a significant commitment of cost and time and need to be clarified. Some vendors provide training only at an out-of-town location. Often, the number of training sessions is limited.

Proprietary Information: Often, the software vendor will be exposed to proprietary business information of the user. However, the vendor should explicitly agree to keep this information confidential.

Out-Of-Pocket Expenses: The user should request reasonable limitations on travel, airfare, hotel, auto and meal expenses or at a minimum, a copy of the vendor's expense policy should be attached to the agreement.