Unlock the Power of eSignature Legitimateness for End User License Agreement in United Kingdom

How to eSign a document: e-signature legitimateness for End User License Agreement in United Kingdom

typically a licensee or a user you you ask for the indemnification uh from a license or the idea being as is the licensee that you would look to the license or say hey if someone comes knocking on our door and says that's our software it's in your system and you're using it um you know pay us you're liable um that would be something the license aura should should should indemnify the licensing so it's quite reversed in that context and and pretty egregious welcome to the contract teardown show from law insider where legal experts tear down contracts from some of the most well-known companies and high-profile executives around the world in this episode ryan finn tears down a software license agreement from vordemo this agreement is fairly typical of licensing agreements that get stuck in a large company's pile and ryan focuses on how to translate the language into decision makers business speak there's balancing risk against business objectives in here so let's tear it down [Music] hey everybody welcome back to the contract tear down show from law insider i'm mike whalen the purpose of the show is exactly what it sounds like we take contracts we beat them up with smart friends like my buddy ryan finn over here ryan how are you today doing well it's friday right it's friday somewhere i feel for my australian friends who are already into the weekend i wish i was one of those people today guys we are going to look at a document as we do it is this document uh this is a pretty prototypical uh license agreement for software comes from a company called vortemo which is a bad guy from harry potter the sequel i'm pretty sure and we're going to go through this as you can see this one actually comes from law insider so you will see links in here that you can go look at similar language elsewhere but we're going to talk through this with my buddy ryan ryan first why this document why are we looking at this when are lawyers going to run into this either as drafting or as counsel to interpret this thing what's what's why is this representative of the typical document of this type yeah you know companies more and more your licensing software as a licensee so you're some business uh someone in the business gets excited about a product's functionality and they hey we gotta have it we gotta we gotta bring it into the fold and so hey quickly we need to sign up to take advantage of a price discount can you review the terms and and can we get uh access asap so that's that's how that's all the buttons uh don't get in the way lawyer so uh but ryan why you uh you're you're working in-house tell me about your background uh if you're running into these kinds of documents uh what what's your experience with this yes so i i am an attorney i've bounced around some some operations and legal rules i'm currently at boeing in our contract risk management function um and so it's just review terms and conditions mitigate risk and and do so quickly so it's a it's a high volume uh supply chain support function yeah it's an interesting background to think about these contracts and we're going to talk about that a bit and especially we'll talk about how you translate some of these documents into corporate decision makers speak because that's ultimately what this contract function is that you're dealing with but we're going to go through you've identified some sections that you want to talk about let me start up at the very beginning because i think this is an interesting little paragraph i i don't see this a lot but in the introduction vortimo gives this is what we do it's sort of an expectation setting paragraph he's uh and it says in here uh vordemo assists you to record augment search recall scrape enrich and export web pages that you have browse what do you think about this paragraph do you like this intro this is what we do kind of paragraph well i think you know when you're when you're analyzing contracts the context of what you're really bringing into the fold as far as what the product does is is just vital i mean there's no you know risk analysis a part of well what does it apply to from from a product functionality standpoint and you don't always see that in that opening paragraph and to be honest um i just thought that was interesting what the product does but you're always going to be looking to something more and you know formalized specifications or documentation to get into the nitty-gritty because you know the one sentence here's what we do uh take it at that there's always there's always stuff behind closed doors and and the devil's in the details right of okay well what does that look like from from from a product architecture standpoint and so um i think it's a pretty cool product but yeah you would never rely on that one sentence to get a whole grasp of the entire context sure and it's an interesting paragraph to say i'm going to set expectations right now it's sort of written for people uh not for lawyers which is interesting it doesn't have all the heretofores and where and after so way to go vordemort volder really harry potter too uh getting down to section seven on the feedback so we've talked about this uh but we had a long conversation with john grant about agile software development and one of the things that we know that software companies are going to do is change right they're going to make iterations and part of that is a feedback loop down in seven there's a specific section about feedback and how feedback works it says you can submit to vordemo via our contact us page your suggestions enhancement requests recommendations or general feedback and we'll see if we can fit it into our development roadmap and then in parentheses it says no promises which i really like you know again this is consistent with agile software development what do you think about this paragraph as something included in the software agreement yes so obviously you know it's fun to be able to think that you may contribute to a software's development particularly if it comes back in and benefits your you know your business case your your need but you know this paragraph is is quite broad in that you're granting and then you know an entire rite of information that you might provide in the form of you know full ownership and the paragraph goes on from a licensing standpoint so the risk is what happens if an employee or someone you know has an idea for for feedback and in terms of hey the product would be cool if it did that but did this but there's always a risk of including information that leans into the proprietary sort of lane of things and so although it's nice to think hey um let's contribute to vordemort's product development the risk of potentially including your own company's proprietary information and signing up to a paragraph which says no matter what you say we basically own it and can use it uh forever in perpetuity so uh the benefit of contributing their product roadmap probably outweighed by the risk of saying things you might not want to sign away an entire um right to so in that case you know you want to pretty much strike that entirely and say um if we if we if we are so inclined to to you know give suggestions for your road map um we're not going to include a broad right for you to own everything we say so it's just a little bit of a risk there hey everybody i'm mike whalen i hope you're enjoying this episode of the contract tear down show real quick i want to ask you to do me slash you really a quick favor look down below you'll see a discount code to join the law insider premium subscription when you do that you get access to more content like this you'll see webinars daily tips on contract drafting not to mention access to the world's largest database of sample contracts and clauses it will help you write better contracts faster if you want to do it right now there's a code below so get there also if you're part of a larger team if you're in house or in a law firm just email us we're at sales law insider.com we'll make sure you get a deal as well come join us in the community the code is below let's get back to the show boy that's interesting i would have never thought of that and and so really you know you're adding the parentheses no promises on both sides which i think is interesting uh jumping down to uh number nine third party components part a uh it talks about the third party software stuff it says anybody they may be third-party beneficiaries of this license with the ability to directly enforce the provisions pertaining to their third-party software you need to comply to those additional terms so you might be signing up for sort of a vague a vague obligation here what do you think about this section yeah modern software is you know there's so many third-party open source components um apis i mean it's you know the modern product is constantly evolving and there's a lot of hybrid hybrid approaches to compiling both proprietary software that you make in house or that you are sub-licensing to a licensee from you know from third-party sort of sources and so what's that in of itself is not a red flag but oftentimes you'll see the proprietary offer like vordemo saying hey we're gonna we're gonna throw in third-party software we're gonna you know mix it in but if there's any issues um any problems with the product any problems with liability you can go right to them and find them and negotiate and figure it out with them it's sort of like a disclaimer to say hey we're you know we're just not really liable for anything and so um you know i think the proper stance for a company reviewing that is to say if we're paying you um whatever proprietary combinations of software that you mix in that's kind of on you to to uh to seek out contribution or liability from them but we're negotiating between you and me so um the idea you can disclaim everything away that you package in just doesn't doesn't really make sense for a licensed z right uh jumping down to the duration and termination this is probably pretty typical i would assume uh but they've got an automatic renewal of of the subscription right uh if you want to avoid it in two a2 it says if you want to avoid that renewal you got to let us know notify us in writing at least 30 days prior to the last day of the initial period if we receive no termination notice your subscription plan will renew automatically uh i could list off all the subscriptions in my house that i just magically discovered in my bank statement later do you think this kind of statement should be included in a document like this what's raising your red flag here yeah here's an instance where as as an individual user or licensee you might not have the ability to negotiate um and we often we all have our auto renewals hit and we wish we canceled our i won't name a subscription for for fear of uh calling them out is not worthy of a renewal but i mean in the case of you know companies are hard times sometimes within their ecosystem managing those auto rentals obviously though you don't want to be paying a really high pill for a license fee if you missed that i think that 30-day window is just fairly small so i think it's pretty good practice as as an enterprise to say we just don't sign up for auto renewals it's the cost of forgetting to to miss uh miss that deadline by days is too much for as opposed to an individual where it's maybe not quite the same fear and similarly uh jumping down to i think looking at the architecture of this document we're down in 3 2 b under termination it says termination for breach without prejudice to any other rights vordemo may terminate this license effective immediately upon written notice to you if you fail to pay any portion of the fees within the agreed period or you breach any other provision of this license i'm assuming these big companies are relying on these kinds of software's uh you know effective immediately termination that might get you in trouble what do you think about this section yeah as an enterprise if you're and again it always depends right the nature and the importance really of the software to your supply chain or ecosystem um you really want to be careful about a minor breach allowing for a wholesale termination uh and so you know care periods are pretty common hey give us a notification you know let us let us cure within you know 30 days or whatever it might be and even pushing for more than that but the idea that a minimal breach or you know missing a single payment can terminate your entire license that can be pretty disruptive to the enterprise and supply chain or whoever is using it so uh at a minimum a pretty extensive cure period and then a maximum you know limited material breach that would that would justify a wholesale termination is good to push for yeah and i i mean maybe this is a general principle but it really feels like a lot of this language they might have taken from a consumer-based software and then said let's just apply it to this company and you're seeing sort of the holes of how how this situation is totally different right yeah it's vastly different i mean you just don't have leverage as an individual in the same way you do as the enterprise but i mean so many license agreements that you run across you don't know where they've come from what they've been sourced and patched together with but you see language that clearly is just sort of a frankenstein of the internet of license agreements and and it's not a not a one size fit all especially if you are an enterprise with with the ability and a lot of protection needed from from a risk standpoint this is where we insert the informal uh commercial for law insider.com look at the discount information below under 12 go into warranties we've got the all caps section that we need the software is provided on an as is basis consequently vortimo makes no and disclaims all warranties and conditions of any kind whether express implied statutory etc and so on uh again appropriate for this context again as an individual um you're a little bit left in in the dark with some of your your warranty remedies as an enterprise you expect a pretty full-blown warranty and what you really need is you know first of all the as is language entirely entirely removed but you know the idea being however you describe the software from a functionality standpoint whatever the specs say it features and functions that it performs at a minimum what we get is going to be what you describe as you're sending over and so the idea that you can disclaim any you know warranty and give it on an as a basis particularly if the investment is high and i don't know the the numbers for this um license fee but the more you're spending you would not expect just to hold the bag if it shows up and it's just not not what they said it was so right down in 13 continuing with the theme here uh the liability this is the limitation of liability the liability of vortimo for faulty execution of the software as well as all damages suffered by the licensee or you whether direct or indirect is a result of malfunctioning of such such software will be limited to vortemo rectifying the malfunction within a reasonable time and free of charge um as long as they get the notification uh what do you think about this this is a pretty limited limited liability yeah liability is always that uh hey you know let's get to the liability section i mean certainly it's it's a red it's a hot button it's it's the mo probably the most contested it's not always the case where you know you need an unlimited liability if you're a licensee and the supplier needs to play for everything direct and indirect i mean there's some pretty industry standard direct versus indirect damages disclaimers and part of it depends honestly on i think the price that you're paying um you know you can you know you hear the 1x 10x cap all these sort of if you're paying 50 000 for a software the difference between one and one and 10x um won't be significant if you're you know if you're paying 10 million dollars for an enterprise software so the number the value of the license fee in and of itself is is a variable but i think in this case what you're looking at is just a wholesale liability limitation that just basically says all we have to do come in is fix is the malfunction itself um not even the damage is potentially caused by the malfunction just our software isn't working we'll fix that and oh yeah it wreaked havoc in your in your network or you know as an example and and we're not even going to have to um be on the hook for damages purely just to fix a malfunction so it is a really um really unacceptable from an enterprise standpoint liability provision and so it would need it would need some beefing up for sure well and and relatedly the indemnification clause is always uh hotly contested uh down in 14b it says that you're going to indemnify vordemo against any claim for alleged infringement of any intellectual property right or any other right of a third party arising out of the use of the software by you i'm thinking about the earlier section about your relationship with third parties seems like you're taking on a lot of risk here yeah so this was an interesting one because typically uh as a licensee or a user you you ask for the indemnification uh from you know from the supplier for the from the license or um you know the idea that a third party might see an infringement of their own ip intellectual property and you know as a licensee you can be on the hook for your use of that as a form of infringement it's not as common but the idea of being as the licensee that you would look to the license or say hey if someone comes knocking on our door and says that's our software it's in your system and you're using it um you know pay us you're liable um that would be something the license or should should indemnify the licensing and so it's quite reversed in that context and and pretty egregious i think from the standpoint of uh i know we need to flip that entirely and and that would be an area of of grave concern i think as as a licensee to want to switch that context the last thing i wanted to talk about was down in 19 support and maintenance this is i mean i think we all know with these software deals that it's often the support and maintenance stuff that that's the business model right a lot of these software's that's where they're getting money out of these companies uh in a and b it talks about general support go look at the website this is where our support function will be listed and it says or other such website as may be confirmed from time to time and then in b it talks about the premium plan software email support as per the details communicated to you on download of the software under the premium plan so in general we're sending people off to things that can be periodically updated this is a huge money section of these contracts what do you think about just sending people out yeah you hit it on the head i mean those the the terms of the support and maintenance particularly if it's being paid for and it usually is as an enterprise um you know that's not something we want to go to see oh by the way and by the time you get to that link it's it's been changed to say we we don't even have phones to answer you so those are terms you'd want to to see review and have really um statically applied within the contract and not subject to unilateral change and i did find that you know the email reference too as email that was even worse perhaps um so again this is an area where as an individual right you're not probably going to go to apple and negotiate or any software provider there are support terms it is what it is but as an enterprise you certainly would you would hope to to review those terms and review execute as part of the agreement and not have a link that can be changed unilaterally uh or if if it can be changed some sort of a notice or degradation sort of um lack of degradation warranty but that's even it's got to be a part of the contract if you're if you're an enterprise licensee right well and as we wrap up i i always like to sort of take this out from general principles and i've i've heard some themes in this about how you know what applies from an individual to a company and and what your leverage is and those are important principles but one of the things i wanted to talk to you about in your function is you're having to translate a lot of this contract language into corporate speak for decision makers that might think differently about these risks you know about what they're taking on with the cost-benefit analysis they might think differently about this stuff than a lawyer would they might quantify risk and say i want to take this on so tell me about sort of translating these documents for decision makers what kind of principles can we pull from a document like this yeah you always hear the um you know from the business hey can you put that in business speak i don't i don't speak legalese and um you know at the end of the day business is about you know making decisions on quantitative matters i mean it's lawyers might not be you know conversant in net present value or hey do we have a you know positive internal rate of return and that's kind of some you know corporate finance stuff that isn't always on the table regardless even in the standard business meeting but the idea being you know we need to make decisions from data um and as much as possible an attorney you're hoping to turn things from a qualitative risk to a quantitative and that is a challenge because you know probab risk in the large part is about probability and probabilities about statistics um and so you're you're trying to get things into a way that business partner can speak and understand and there is that gap that you sort of have to to move into um you know everything is relative and that goes back to the beginning of hey what is what does the supplier provide um you know the relativity of well what else is available in the marketplace right what's our leverage and so context and risk is all about context and context is all about probabilities and so you're trying to understand what is the probability of a risk event on this provision um and what would be the outcome of that risk event right i mean if there's a one percent chance of a five dollar negative outcome you're you probably don't want to die in that hill and so you have to kind of get into dollarizing risk and opportunity um and then fundamentally you have the cost-benefit analysis of do we have other options if this is the only player in town and in it that's often the case we might want to negotiate for our standard positions but unfortunately we don't have another option and we obviously can't state that at the negotiating table but that's got to be a factor so i think for lawyers there's always that difficult jump to get into the quantitative space but they do it already when they say things like well it depends right you know well what does it depend on you know this court might decide this way but the analysis can't just be limited to this court typically decides things this way you got you got to go all the way as far as you can to a quantitative model which requires tracking contract outcomes but in the large part it's just about well what is the probability of event occurring times the negative dollar outcome um and how do we sort of weigh leverage as to other suppliers so all that is is trying to get more into the language that business understands and less out of you know governing law and jurisdictional matters that lawyers sometimes like to just kind of stay in that qualitative lane so yeah and i know this is a thing that you like to nerd out about a lot uh it's it's i'm presumably helpful in your function but obviously in law school we don't get a lot of that training about how to think like business people uh do you have any you know thoughts on resources that lawyers might be able to jump to to sort of get a start on this kind of thinking maybe add some context to their advice to be able to say this is what a quantitative risk looks like i mean even that term right to be able to quantitate risk any tips on resources that they might be able to start with well i wouldn't suggest getting you know going getting your mba or emba but a lot of those concepts um do translate and apply i think you're seeing a general shift in the marketplace overall where lawyers are needing to speak metrics needing to speak return on investment and and quantify risk it is a difficult transition because the average lawyer is is such a qualitative person hey i don't like numbers i'm going to go to law school i have to start thinking about numbers and math again and it's not to say that a lawyer needs to be conversant in again net present value and and really in depth but there just has to be a um if nothing else an ingraining in the context of what this deal and provision represents um in in dollar terms as much as possible and that just comes a little bit from practice but the marketplace is really opening up to that data-driven i think computational law and more and more so i think it's just about having to kind of seek out those resources and and start from from baby steps but some of it is just you know i you kind of give the example of if you're in a museum and full of fresh water fountains you're probably not going to sell 10 bottles of water if we're at the last truck stop for the next hundred miles in the desert that's gonna sell for ten dollars and so everything is relative and so you have to just kind of grasp that cost is relative to benefit that a contract is in exchange your economic value for risk and and if if all risks are are shut down then you gain no benefit so having to understand risk is a natural part of business growth and how do you manage that so um you got to facilitate opportunity as a business attorney otherwise you're you're the land of no um and the legal department sometimes have yeah the common complaint from uh from clients is that my lawyer doesn't understand my business so definitely some homework to do there so uh ryan if people want to get in touch with you to follow up about how you're working through these things what kind of resources you're using to learn how to better speak to business people and and do that translation work what's the best way to reach out to you you know linkedin or twitter um going going a little bit more uh social media um active i think that you know and that goes towards a lot of people and resources that you you run into if you if you follow sort of communities and particularly around being a data driven you know attorney with with a conversant enough in business to be able to facilitate so um anyways i love linkedin and twitter these days i think there's so many so many high quality attorneys and people in this in this space that are really um doing some pretty cool stuff so yeah that would be probably the best way indeed and we'll include links to that as well as to this particular document you just need to go over to law insider.com resources you can find the show notes to this episode also if you want to be a guest on the contract tear down show just email us we're at community law insider dot com i'd love to hang out with you thank you ryan for hanging out with me today and we will see a plug-in too we're having a newly newly arrived outlaw insider man the access to the provisions and contract templates to you know for that analysis and comparison is is pretty awesome so i was i was impressed there's a lot of use there it's uh there's my my vlog the checks in the mail ryan thank you for joining us we'll see you guys on the next contract teardown show thank you ryan [Music] [Applause] thanks 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