How to create a Software Reseller Agreement

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What is a Software Reseller Agreement?

As its name suggests, software reseller agreements are used to stipulate rights and obligations between the owner, creator or seller of a piece of software and a person or business wanting to acquire the right to sell or license the software to a third party. Specifically, software reseller agreements contain the important terms and conditions attached to the rights and responsibilities of the reseller selling the software to third party companies. While these agreements can differ between one another, below are the most common key clauses that most software reseller agreements will include. 

Who drafts a Software Reseller Agreement? 

Typically, the creator or seller of the piece of software drafts the terms of the agreement as it states what rights and obligations will be attached to the party reselling the software to third parties. 

Who needs a Software Reseller Agreement?

These agreements are extremely important for all companies or vendors that sell software. Resellers who obtain your software will essentially be transferring your service and work onto their computer, phone or any other device. From an intellectual property point of view, it is, therefore, necessary for you, as the owner of this software, to maintain control over how it is used through issuing a software reseller agreement to control how this content can be resold to other parties. Software reseller agreements may also be a useful tool in deciding terms such as how much the reseller is to be compensated for selling the piece of software to the user or customer. Similarly, your clauses can also control software updates and maintenance responsibilities as well as any installation and software-related services. It is therefore important to ensure that your agreement is tailored to the type of services your company provides to consumers. 

What to include in a Software Reseller Agreement

Exclusive or Non-Exclusive Agreement – Typically, most software reseller agreements in the commercial market will be classified as non-exclusive, meaning that the creator or publisher may grant other parties the rights and license to resell the piece of software. However, under certain circumstances a software reseller agreement may be exclusive, meaning that there are limitations to which end users can acquire the piece of software. Essentially, this means that the publisher or any of its resellers are prohibited from reselling. 

Installation and other software-related services – It is important that your software reseller agreement addresses whether the reseller of the software is also responsible for providing supplementary services when reselling to third parties. Such services may include assistance with software installation or training. It is therefore crucial that your agreement addresses the potential obstacles that the purchasing company may encounter when utilising these various systems. 

Agreement Terms and Termination – At its most basic form, a software reseller agreement should stipulate the term or period of time in which the reseller is granted the license needed to resell the creator’s piece of software to third parties. While an initial term may be stated in the contract, this period may be extended for additional terms subject to the discretion of the creator and the fulfillment of certain performance milestones during the initial term. In addition, the software reseller agreement should also address the consequences of an expired term or termination. From an IP perspective, it is crucial that the contract states exactly what happens to the end users license renewals, who continues to own user data and what compensation is due to the reseller moving forward. 

Payment Terms and Renewal – Every software reseller agreement should stipulate payment arrangements. The specific payment terms will differ between contracts, however, if the license is based on a renewable subscription, the software reseller agreement should clarify whether the reseller is entitled to compensation in connection with additional add-on services that the end user chooses to purchase. Payment to the reseller is typically made at the time of purchase from third parties as the amount compensated will depend on these sales; thus, the value may be aggregated on a monthly or quarterly basis. This information will all need to be clarified within the Payment Terms clause of the contract.  

Conclusion 

When entering into an agreement to sell your software to third parties through a reseller authorised to distribute your license, it is crucial that your software reseller agreement details exactly what the reseller can and cannot do with your software. In order to best protect your company and your software’s IP rights, consult Zegal’s team of experts for assistance in tailoring the best contract terms for your business. 

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