Third-Party Software Licensing Agreements in Federal Contract Bids


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To remain in accordance with the Federal Acquisition Regulation and properly handle federal contracts, the company must ensure that third-party software licensing agreements do not cause infringement or violations with the owner. To win a bid, the owner of a company cannot commit intellectual property offenses.

Some federal contracts occur with the IT sector when the owner or management owns intellectual property through a piece of software. When this happens, there are third-party agreements in effect. Other agreements arise with an IT company to develop and manufacture software and various programs necessary for sale or to start a project. The federal contract bid may involve either the government’s need for certain solutions to problems or when a third-party software may solve the issue. Though sometimes the company may create the necessary fix, a third-party result becomes needed. To prevent possible infringement, a lawyer should assist with the situation.

Third-Party Software Situations

Many companies that are part of a federal contract hire outside services or individuals to help with the contract needs. This may result in a license agreement with third-party companies, vendors or entities. Then, the software may pass directly to the government agency. However, another situation may arise where the company may procure the software and then the third-party vendor agrees to certain terms. When dealing with the government or another company, the vendor may place restrictions on what is possible or data rights. These terms may limit what the agency or company may accomplish without further funds or another agreement in place.

What Is Third-Party Software?

Many business contracts exist and complete with third-party software. These programs and applications supply a company with a developed software from another company or entity than the initial program. So, one business creates an application, hires another to supply a component needed for the contract and business interaction, and the contracted government agency profits form the combination of the two. This requires that both companies work together and detail out an agreement that explains who owns what or which person or entity is to have payment for what. The entitled rights of the software may remain with the third-party vendor, or the owner could sell them to another.

Handling deals with third-party software is often complex. This may require the services of an accounting, tax and IT professional as well as a lawyer to facilitate agreements and contractual documents. Both the initial company and the new company that has the government contract must mete out the specifics of the deal. Then, the government agency will use the software and applications for either a combined or separate purpose as specified in the contract. The solution may remain permanent or have only a temporary fix for the problem. Any adjustments may incur additional fees by the company or third-party vendor.

Licensing Agreements Explained

When a third-party vendor becomes involved in federal contracts, the company or individual is usually not directly contacting or communicating with the agency. The company that bid and won the contract will speak to the vendor and acquire the license rights. This usually happens through a sale between the vendor and the entity that supplies the software. Then, limited or exclusive rights pass to the purchasing company and are then part of the contract with the government agency. Though these transactions, it is possible for one program to work with another by combining efforts. If the business is unable to create the software inhouse, the vendor is essential to these deals.

The rights to the software are necessary to use it legitimately. If the company attempts to steal or misappropriate the program, this is an intellectual property violation. If the business infringement is brought to light, numerous penalties are possible. Additionally, if any changes are necessary, the company would need to communicate with the third-party vendor again and sort out these modifications. The rights to the software do not usually include alterations or the possibility of changing the code of the software. By keeping communication open, it is possible to ensure the government agency has what it needs to resolve a matter or further business transactions and sales.

Software Licensing Legal Help

For legal entanglements with third-party vendor licensing agreements, it is often necessary to hire a lawyer. The legal representative may need to unravel any confusion or clarify which party owns what rights to the software. Additionally, the lawyer may need to analyze contracts between the vendor and the company to ensure the sale is valid.

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Disclaimer: While every effort has been made to ensure the accuracy of this publication, it is not intended to provide legal advice as individual situations will differ and should be discussed with an expert and/or lawyer.

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