5th October 2018 - Sam Gilbert

A Software Reseller Agreement is a legal agreement between the owner of a software (or authorised licensor) and a person or business that wishes to obtain the right to resell that software. The scope of the rights and obligations under Software Reseller Agreements will depend on the nature of the relationship between the parties and the objectives of the agreement.

Important Considerations for Software Reseller Agreements

Exclusive vs Non-Exclusive?

Exclusivity of dealings should be a key consideration when defining the rights of the reseller. If the reseller is given the exclusive rights to sell the software in a particular jurisdiction it means that you will be prevented from engaging with other resellers in that territory. Depending on the capability of the reseller and the relative bargaining powers between the parties, exclusivity may be a key negotiating factor in the reseller agreement.

Software Pricing

Depending on the nature of the relationship between the software owner, reseller, and end user of the software, pricing of the software may be dictated by either party to the agreement. SaaS reseller agreements may have firm pricing structures set in place for the end-user. In this case, the reseller simply acts as an introducer of potential customers to the software owner. However, it is important to ensure that resellers or software owners are not engaging in price fixing or other anti-competitive behaviour.

Intellectual Property Rights

 Typically, the software reseller will be granted certain IP rights to be able to properly carry out its functions and obligations properly. This means that the reseller is often granted a licence to use trade marks associated with the company or software. You should also ensure that the licence granted to the reseller is restricted to specified purposes and only during the term of the agreement. In addition, any improvements made to the IP resulting from the licence grant should automatically vest in the software owner. Lastly, the licence granted to the reseller should be revocable on the request of the software owner. This will ensure that any reputational damage that may be caused by the reseller’s use of the trade marks can be immediately stopped.

Warranties and Guarantees

 You should seek protection from the reseller against any unauthorised warranties or guarantees given to end users by the reseller. This can be done by way of an indemnity given by the reseller from any damages or loss caused because of the reseller providing warranties or guarantees for the software which go beyond those issued by the software owner. Further, the agreement should provide that any such act by the reseller constitutes a material breach of the agreement and thus will result in the immediate termination of the agreement.

No Conflict

The reseller should be prevented from engaging in competitive conduct or entering into other agreements that would likely result in conflict with the resellers obligation under the software reseller agreement. This should include the resale of other software products by other companies or other products that could impede on the business or promotion of the software. Lastly, the agreement should include an obligation on the reseller to not solicit customers or contact suppliers.

Essential Checklist Key Terms

• Rights and obligations between the owner of the software and the reseller
• Identify what is the subject matter of the Reseller Agreement
• Who owns the IP that underlies the subject matter?
• What is the scope of the rights?
• Is there an exclusivity commitment?
• Payment terms and renewals, how much will you pay?
• What is the Territory?
• Software updates and maintenance
• What are performance warranties and indemnities?
• Term of Agreement and Termination consequences

Ask: How will this agreement make money for each party?

Ask: What must each party do in order for this agreement to be worthwhile?

Ask: What does each party want or need from this agreement?

Take-Away Points:

• Ensure that your software reseller agreement is balanced and reflects the interests and needs of both parties;
• Create value through a “win-win relationship”;
• Consider the key issues in the agreement, such as exclusivity and territory;
• Make sure that the key terms, rights and obligations are clear and understandable. This will help to ensure the parties live up to their expectations.

Sam Gilbert, IP and Technology Consultant, B.A., LL.B  University of Technology, Sydney

 If you would like to know more about SaaS Software Reseller Agreements, please do not hesitate to get in contact with the team at W3IP Law on 1300 776 614 or 0451 951 528.
Disclaimer. The material in this post represents general information only and should not be taken to be legal advice.