What are Things that Service Providers should insist in its Authority to Use the Customer’s Licensed Materials
In a Service Agreement, the Vendor or the Service Provider is usually being given a license to use the materials of the customer in order to deliver the agreed services.Under this Agreement, the Service Provider gains access to the Client’s Licensed materials.
Gaining access to the Client’s Licensed Materials has legal repercussions. It is necessary for the rights of the Vendor to be clearly spelled out in the Service Agreement to protect its rights.
How to Protect the Right of the Service Provider in Using the Client’s Licensed Materials
Protecting the rights of the Service Provider is essential in a Service Agreement. It should be stressed that the client has the right to sue any person or company illegally using its own software.
Foremost, service provider should insist that the use should be royalty free and worldwide. It is understandable that the license will be non sublicensable and non assignable since customers have the right to protect their IP as well, but it is very important that the right of the service provider to use the Customer’s licensed materials shall be royalty free and worldwide for the following reasons:
1. It should be worldwide because the service provider ‘ s affiliate which may be required to use the licensed materials may be located in another country. This scenario is very common in multi-national companies where the services are being rendered offshore by an affiliate of the service provider. This set up will give the service provider its needed flexibility in its authority since a limited right will cause a serious problem since the service provider is subject to restrictions that may refrain its affiliate to use the licensed materials in order to deliver the services.
2. The grant of license must be royalty free. Service provider should insist that any use of customer’s materials must be royalty free to ensure that it will not bear any additional cost in using the customer’s licensed materials.
3. The Vendor or the Service Providers should ensure that there will be a provision in the contract that customer shall defend and hold the Vendor or the Service Provider free and harmless from any losses, liability or damages arising from any third party action of intellectual property infringement filed against the Vendor or the Service Provider due to the latter ‘s use of customer’ materials.
To avoid any problem while a service agreement is being enforced, service provider shall negotiate that the three foregoing items be included in the contract.
Your take
What does your company do to protect its right in using your client’s licensed materials?
