1. fosterswift.com PROTECTING AGAINST THE UNKNOWN : How to Successfully Review IT Contracts to Increase Your Rights and Avoid Potential Liability Samuel Frederick Attorney P: 517.371.8103 E: sfrederick@fosterswift.com Nicholas Oertel Attorney P: 517.371.8139 E: noertel@fosterswift.com

2. Protecting Against the Unknown: How to Successfully Review IT Contracts to Increase Your Rights and Avoid Potential Liability May 5, 2015 IT CONTRACT REVIEW Three Types of Software Off-the-Shelf Software Customized Software Custom Software

3. Protecting Against the Unknown: How to Successfully Review IT Contracts to Increase Your Rights and Avoid Potential Liability May 5, 2015 Scope of License Use Rights The scope of the license defines the specific USE rights which software licensee acquires under the license agreement. Authorized Users A software license must identify precisely who is authorized to use the software.

4. Protecting Against the Unknown: How to Successfully Review IT Contracts to Increase Your Rights and Avoid Potential Liability May 5, 2015 Scope of License Permitted and Prohibited Uses A User may be limited to using the software for its own internal use or only in its primary business activity. If a license is limited in scope and the licensee acts outside the scope, the licensor can bring an action for copyright infringement.

5. Protecting Against the Unknown: How to Successfully Review IT Contracts to Increase Your Rights and Avoid Potential Liability May 5, 2015 Scope of License Exclusive vs Non-Exclusive Non-Exclusive License permits the user to use the software, but also allows the vendor to license the same software to other users. Exclusive License the user can use the licensed software, but the vendor is not permitted to license the same software to any other users.

6. Protecting Against the Unknown: How to Successfully Review IT Contracts to Increase Your Rights and Avoid Potential Liability May 5, 2015 Scope of License Software Disabling Devices Bombs and Bugs Software Audits In many instances unlicensed software may become part of an organization if there is not a policy preventing employees loading personal copies or sharing software applications

7. Protecting Against the Unknown: How to Successfully Review IT Contracts to Increase Your Rights and Avoid Potential Liability May 5, 2015 Scope of License Limitation of Liability Watch out and preserve your rights! The law allows the parties agreeing to limit their damages

8. Protecting Against the Unknown: How to Successfully Review IT Contracts to Increase Your Rights and Avoid Potential Liability May 5, 2015 Ownership of Software Physical Copies Who owns the rights in the software at your organization? US Copyright Act ownership of a physical copy of a work does not grant any ownership rights in any intellectual property embodied in the copy

9. Protecting Against the Unknown: How to Successfully Review IT Contracts to Increase Your Rights and Avoid Potential Liability May 5, 2015 Ownership of Software Sublicensing A right to sublicense allows the licensee to grant certain rights to third parties Modification Each party User and Vendor believe they each own the rights – be clear in contract about subsequent ownership rights.

10. Protecting Against the Unknown: How to Successfully Review IT Contracts to Increase Your Rights and Avoid Potential Liability May 5, 2015 Open Source Software What is it? Source code made available by owner to the public under a “public license” so that the source code can be read, modified and redistributed by users, subject to certain conditions

11. Protecting Against the Unknown: How to Successfully Review IT Contracts to Increase Your Rights and Avoid Potential Liability May 5, 2015 Term of License Time Period Renewal Bankruptcy of Licensor

12. Protecting Against the Unknown: How to Successfully Review IT Contracts to Increase Your Rights and Avoid Potential Liability May 5, 2015 Maintenance and Updates Updates Without proper updates the software can become obsolete Service Credits (if not performing) Negotiate performance/service credits Term 90 days and 1 year Availability

13. Protecting Against the Unknown: How to Successfully Review IT Contracts to Increase Your Rights and Avoid Potential Liability May 5, 2015 Fee Structure Breakdown of Costs Terms regarding license fee should be specific and complete. Refund Service Credits Partial Payments When milestones are met

14. Protecting Against the Unknown: How to Successfully Review IT Contracts to Increase Your Rights and Avoid Potential Liability May 5, 2015 Source Code Need For Source Code Vendor Concern Escrow

15. Protecting Against the Unknown: How to Successfully Review IT Contracts to Increase Your Rights and Avoid Potential Liability May 5, 2015 Assignment of Rights Financial Interests Vendor Assignments Users are reluctant to permit the vendor to assign the contract

16. Protecting Against the Unknown: How to Successfully Review IT Contracts to Increase Your Rights and Avoid Potential Liability May 5, 2015 Modifications Necessity And source of revenue (vendor)….and expenses (user) Issues Modifications should be highly defined and specified; performance; timelines ect.

17. Protecting Against the Unknown: How to Successfully Review IT Contracts to Increase Your Rights and Avoid Potential Liability May 5, 2015 Quality Representations and Warranties Ownership of IP Performance Response Time Warranties Capacity or Throughput Warranties Reliability of Warranties Disclaiming Warranties and Limitations of Liability

18. Protecting Against the Unknown: How to Successfully Review IT Contracts to Increase Your Rights and Avoid Potential Liability May 5, 2015 Trade Secret Protection Confidentiality provisions are a MUST. Vendor Rights Termination

19. Protecting Against the Unknown: How to Successfully Review IT Contracts to Increase Your Rights and Avoid Potential Liability May 5, 2015 Multimedia Licensing Acquisition of Rights Future Technologies

20. Protecting Against the Unknown: How to Successfully Review IT Contracts to Increase Your Rights and Avoid Potential Liability May 5, 2015 TOP TIPS IN NEGOTIATING IT CONTRACT Essential Tips for Each Contract! Always remember – its always negotiable.

21. fosterswift.com QUESTIONS? Samuel Frederick Attorney P: 517.371.8103 E: sfrederick@fosterswift.com Nicholas Oertel Attorney P: 517.371.8139 E: noertel@fosterswift.com