Master Services Agreements and software licensing

We’ve talked about master services agreements before – they’re overriding agreements often used for large projects, and they govern the supply of deliverables and services for multiple phases of the project and/or for multiple projects. 

Sometimes the customer will have its own standard master services agreement which they want to use to cover aspects of software licensing. Their master services agreement will have provisions which suit them, around risk and operational policies.

So can a master services agreement (MSA) be used to govern the purchase of software licenses? The short answer is yes – an MSA governs the supply of deliverables and the software can be a ‘deliverable’. Where the project involves customisation and implementation of software the customer will also want to cover these aspects under a master services agreement.

There are a few things to keep in mind and to address when using an MSA to cover software licensing. Of significance is to consider who is licensing the software to the customer. This will either be the supplier itself or a third party supplier.

If the software is licensed by the supplier itself, the customer can still benefit from using its MSA because, to the extent that the MSA and the license agreement are not in conflict, the provisions in the MSA (which have been drafted to suit the customer), around risk and operational policies and so on will be in place. Relevant parts of the license agreement could be incorporated into a statement of work or the license agreement could be attached to the statement of work.

If the software is licensed by a third party, there will not be the same opportunity to mould the license agreement into the MSA as there would be if the supplier was the licensor. There may or may not be any opportunity for the customer to negotiate the third party software license agreement. Nevertheless the customer can potentially still benefit from using its standard MSA with the supplier to govern the purchase of the license – even though the separate license agreement will apply. And the customer may have no choice but to purchase the software license through the supplier – this is quite often done via a purchase order and invoice but there may be benefits for the customer in specifying the third party software as a deliverable and having the MSA govern that supply.

The intellectual property provisions of the MSA will need to be addressed to check that these provide for licensed software to be a deliverable. Often in an MSA, the intellectual property in deliverables is owned by the customer (on payment or sooner) so if that is the case and licensed software is being supplied the intellectual property provisions would need to be modified.

Where third party software is not a separate deliverable but is incorporated into software that is being developed for the customer, separate third party license terms might apply. Care should be taken to identify and understand the basis of supply of any such items of third party software.    


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