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Chapter 27 - Software Licensing and Maintenance Contracts

27.5 Contractual provisions for software license agreements

27.5.11 Software terms and usage information

General IT terms and conditions can be found at the following link:

This table provides general software licensing terms and descriptions:

Software term Usage/need to know
Acceptance of COTS Governed by terms and conditions of license agreement.
Custom software Acceptance upon written notice of acceptance or 60 (could vary) days after installation or implementation date, whichever better favors the project's complexity. Any notice of rejection will explain how product fails to substantially conform to the functional and performance specifications of the contract. If contractor unable to remedy deficiency within 60 (could vary) days of notice of rejection, the Commonwealth shall have the option of accepting substitute software, terminating for default the portion of the contract that relates to such custom software or terminating the contract in its entirety for default.
Future releases If improved versions of any software product are developed by supplier and are made available to other licensees, they will be made available to the Commonwealth or agency at the Commonwealth's option at a price no greater than the Contract price.
License grant Non-exclusive, perpetual, transferable license, state may use in the conduct of its own business and any division thereof.
License for government purposes Allows the Commonwealth (including local governments) to use the intellectual property (IP) as long as it is for a "government purpose." Term should be clearly defined in the RFP and contract. A supplier may have an incentive to permit sharing a government purpose license where there is a possibility of future modifications or support and maintenance. Government purpose licenses should address:
  • Redistribution rights - Who to?
  • Modification rights - Can the Commonwealth or agencies modify IP or create derivative works without the supplier's permission?
  • Length of a license - Does agency need a fixed number of years or non-expiring?
  • IP indemnification/copyright infringement - Include rights and obligations of both parties in the event of IP infringement/ copyright infringement issues. The Commonwealth should have the right to own or have a perpetual license to any customizations it pays for, performs or enhancements it may create to supplier's software. If the Commonwealth has a license for any such customizations or enhancements, then the Commonwealth also should have the right to modify these at its own discretion.
Maintenance Correction of residual errors will be considered maintenance - will be performed by contractor at no additional charge for duration of contract. If error caused by State's negligence, modification - Contractor can charge on time and material basis - rates in accordance with SOW.
Procurement of COTS/ancillary services Standardized licensing agreements, contractor retains COTS software enhancements or derivative works. Contractors should maintain ownership over deliverables related to the maintenance, installation and configuration of COTS software.
Procurement of standardized IT services (Hosting, Disaster Recovery Services) Be sure that Commonwealth or agency receives appropriate use rights through the licensing of IP embedded in the service.
Procurement of consulting services with customized deliverables Unless the Commonwealth or agency has a compelling need to exclude contractors from using the deliverables, a license back to the contractor may facilitate competition and resolve negotiation of terms.
Procurement of system integration services May involve COTS software, custom deliverables with newly created IP with pre-existing contractor IP. (May want to use combination of categories of ownership approach.)
Right to modify/copy May be copied to perform benchmark tests, archival or emergency restart purposes, to replace a worn copy provided that no more than the number of copies specified in the SOW are in existence at any one time w/o prior written consent of contractor. State may modify for its own use and merge into other program material provided does not conflict with third party license agreement.
Sole source escrow issue with COTS software Large suppliers less likely than smaller suppliers to provide the Commonwealth with a source code escrow.
  • Clearly state need for source code escrow in RFP including whether the Commonwealth or the purchasing agency will bear the administrative costs of an escrow agreements or for collecting the source code.
  • If determine need source code escrow - allow proposers to suggest parameters for escrow.
  • If source code is not supplied ensure that ownership of the source code is held in "escrow" on the customer's behalf if the supplier for some reason is unable to provide maintenance in the future. (In which case, other support arrangements could be made.) There are a number of independent "escrow agents" available.

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