The purpose of this article is to focus on various types of IT contracts that exist in the practice, with short explanation of major differences between them. It also offers few explanations that may help developers and start-ups to understand what type of IT contracts suits them the most and which contractual terms/provisions should be addressed specifically.
There are different ways of software exploitation that can be realized through different forms of IT contracts, but we may say that there are four principal types of IT contracts on the market: Software Licenses Agreements; Cloud Computing Agreements; IT Professional Services Agreements or Combination Agreements.
The most common is the Software Licenses Agreement which includes end user licenses, distribution contracts, assignments, and work-for-hire-agreements. In all those contracts, the customer gains at minimum a right to reproduce (right to make copies) or optionally, he might receive other copyright license rights such as right to arrange, modify or create derivative works; right to distribute (important for software distributors); right to publicly perform a copyrighted works (it is only relevant for software which has audio or visual content); the right of public communication, including the interactive making of the work available to the public etc.
Contrary to this, Cloud Computing Agreement provide the customer remote access and right to use software only. Cloud services do not involve a software license if the vendor keeps the software and hosts the server computer itself. On other hand, if the customer hosts the software, it does need a license, since it has to make copies of the software.
There are two more types of cloud services. The first one is “Platform-as-a-Service” (PaaS) where the vendor hosts the software platform and the customer installs its applications and uses them, and “Infrastructure-as -a-Service” (IaaS) where vendor hosts server computer and other hardware infrastructure, and the customer installs both platform and application software on that infrastructure and uses them.
IT Professional Services Agreement provides tech support, website development, software maintenance and technology consulting, whereas Combination Agreement provides some combination of software, professional services and cloud services.
The best way to avoid arguments in a business relationship is to write down and define all terms and conditions including business expectations under respective type of the contract. The good contract not only prevents lawsuits and protects you in the event of disagreements, but more importantly, makes certain boundaries between the parties and helps parties to maintain their professional relationships. IT contracts are very specific primarily because of its subject (software) itself and require necessary technical and IT legal knowledge during the negotiations and drafting, as the consequences of missing contracts or improper contracting of certain provisions (for example warranties for function, IP warranties, limited liability etc.) can cause enormous damage.
