Technology Contracts Glossary

Introduction ====================

This is an online glossary of words often used in connection with technology, internet and software contracts.

Many other glossaries and dictionaries discuss the precise meaning of a word, but don’t explain its context or why it is important in a practical setting.

This glossary tries to break from that approach. It attempts to define each word simply, for business people, and in many cases explains why the word is used or important. Of course, feel free to contact me with any errors or corrections.

A ====================

Acceptable Use Policy (AUP)

A policy governing use of a web site or web services by end users. AUP’s typically prohibit sending unsolicited bulk email (spam), impersonating others, and distributing harmful content (such as infringing or defamatory content) or functionality (such as software code containing viruses).

Acceptance (of a Deliverable)

The approval of a Deliverable, which often is a condition to payment for preparation of that Deliverable. In an Independent Contractor Agreement or Software Development Agreement, it often is important to specify in detail the requirements or criteria for acceptance of the workperformed. Many contracts include a provision for “deemed acceptance” inwhich the work product is considered accepted if the work is not accepted orrejected within a set time period. In other words, the work is considered to be accepted, even though no acceptance is formally given under the agreement.

Acceptance (of an Offer for a Contract)

See Formation of Contract.

Access to and delivery of Work

Access to a Work itself is separate from the legal rights to use it. For example, you may own a book, but may not have access to it if it is locked up in your friend’s office. Many people draft contracts with rights to use a Work, but don’t provide for access to the Work itself, such as a license granting a right to use upgrades but no obligation to deliver them.


In the U.S., a signature can be acknowledged or notarized by a legally authorized person known as a notary public or notary. Acknowledgements are most often used in real estate transactions, such as sales or mortgages of real estate, and in estate planning, such as trusts, wills or related documents. Some Assignments and exclusive Licenses of Intellectual Property should or can be recorded with government filing offices. These include Assignments or exclusive Licenses of Patents, Trademarks and registered Copyrights. Having an Acknowledgement of the signatures on the document means that the signatures on the document are taken on their face to be valid, and do not need to be proven (in legal terms, prima facie valid). This in turn makes it easier to legally enforce the documents. Also known as Notarization.

Advance against Royalties

An advance of money to a creator of a Work, which is hoped to be Recouped by later Royalties generated from sales of the Work. For example, a publisher may advance money to a creator (such as a book author or music recording artist) to enable the creator to create the Work. That advance is typically recovered by the publisher out of royalties received from the sale of the Work. In a sense, an advance against royalties is similar to a loan, since the goal is for it to be paid back. Unlike a loan however, no interest is payable and the advance is paid back if and only if here are enough sales (and therefore Royalties) to recover the advance. The publisher takes the risk if sales are inadequate. In the book industry, publishers speak of whether a book has “earned out” its advance or not. See also Cross-Collateralization and Recoupment.


(1) A persons or entity that owns the stock or other ownership interests of other entities. The most common definition of an Affiliate is a person or entity who “controls, is controlled by or is under common control with” another party. Parent companies, subsidiaries and sister companies all can be Affiliates of one another. In agreements with large companies, it is important to specify whether the benefits and burdens of the agreement apply to all Affiliates of the large company. (2) In internet marketing, a person who acts as a sales representative for a company and undertakes online advertising and promotion in order to receive sales commissions, often through automated tracking of specially coded Links.


Lawyer jargon for “the total amount you get when you add up several amounts.” For example, the “aggregate payments” under a contract could be the sum of royalties, development fees and expense reimbursement.

All Rights Reserved

A form of notice of claim to Copyright protection under the Buenos Aires Copyright Convention, which has essentially been superseded by the Berne Convention. See Ius Mentis, The phrase “All rights reserved”. See also Some Rights Reserved.

Alpha (version of Software)

A rough preliminary release of software, which may include major errors (bugs), which may not include all features, and which generally is not eleased to end users for testing. See also this comprehensive article about the Software Release Life Cycle.

Application Programming Interface (API)

A group of specifications (including structured formats for creation, storage and transmission of data) used by programmers to interface software programs or online services.

Application Programming Interface (API) License

A contract containing a License to use an API. API Licenses may require the programmer to register and obtain a “developer key” to access the API, and may place quotas on the volume of use of the API (e.g., number of queries or calls to an API).


A method to resolve disputes outside of government-run court systems. In arbitration, the parties hire one or more private arbitrators (often retired judges or expert lawyers) to hear testimony and make a decision. Supporters of arbitration say that it makes resolving disputes cheaper, quicker and less expensive, but many litigation attorneys do not agree. Arbitration is frequently used in international disputes, in a desire to avoid the potential biases of a court system in a particular country.


The person to whom a contract is assigned.

Assignment (of Intellectual Property rights)

The transfer of Intellectual Property rights. This is most often phrased as a transfer of “all right, title and interest in and to” the specified Intellectual Property rights. In many cases, the Assignment of certain Intellectual Property rights must be filed and recorded with a government filing office (such as the U.S. Patent & Trademark Office or the U.S. Copyright Office) in order for the Assignment to be valid against claims by others in the future. Contrast with a License (permission to use) and a Work Made for Hire.

Assignment and Delegation (of Contract)

The transfer of the rights and obligations under a contract from one of the parties to a third person or company. Contracts are considered personal property (like a chair or an automobile), and as such are transferable like other personal property. This transfer with respect to a contract is called an assignment. (Technically, rights are assigned, and obligations are delegated, but many contracts do not make this distinction.)

Assignment, Backup

An Assignment of Intellectual Property rights which is effective if a transfer of a Work as a Work Made for Hire is not legally effective.Because only certain Works can qualify as a Work Made for Hire under U.S. Copyright law, it is very common in work for hire agreements to include an Assignment (of Intellectual Property rights) as a backup. That way, if the rights to the work product do not transfer under the statute as a Work Made for Hire, they will be transferred by an Assignment in the contract. In other words, if a transfer under the law is not sufficient, then it is supplemented by a transfer under the contract.


The party to a contract who is assigning it to another person or company.

Attorneys Fees Clause

A contract provision that the winner of any lawsuit can recover its legal fees from the loser. Such a clause should be used with care, and only with the advice of an attorney, because it can have significant and potentially extremely expensive consequences. For example, if a small company is the loser against a large company, the small company might be required to pay enormous legal fees of a large company.


The identification of particular person(s) as the author or creator of a Work. Many Open Source Software Licenses contain Attribution requirements, meaning that the licensed software must contain a notice that names the author(s) of the software. For software distribution, the attribution is contained in an “about box” in the software, or may be separately contained in a README file.

Audit Clause

A contract provision that enables a party receiving payment from the other party to audit the books and records of the other party pertaining to the payment. This is frequently used in Royalty-bearing licenses. Such a clause often requires that the audit can be performed only on reasonable prior notice during business hours, and in the event that an audit reveals an underpayment by more than a specified percentage, the party who underpaid also will pay for the reasonable costs of the audit.

Autorenewal (of Contract)

A contract provision that says the contract will be automatically renewed for a certain period, unless notice of non-renewal is sent prior to renewal. Autorenewal provisions are used when companies desire a long-term relationship, but want to have periodic “outs” to leave the relationship if circumstances change. They can create unintended consequences. For example, if prices need to increase upon renewal, the price change formula needs to be contained in the agreement, otherwise the out of date prices may be locked into the agreement when it renews.

B ====================

Backup Assignment

See Assignment, Backup.


In the U.S., a legal process available to a company whose liabilities exceed its assets, enabling it to conduct an orderly liquidation of its business assets or to reorganize by eliminating or restructuring claims against it. Companies generally can file under two chapters of the U.S. Bankruptcy Code. (Title 11 of the United States Code). First, they may file under Chapter 7, which is solely for liquidation and in which an independent trustee will be appointed. Alternatively, they may file under Chapter 11 and the company’s management generally will remain in control. Chapter 11 can be used to conduct an orderly liquidation or to reorganize by eliminating or restructuring claims against the company. Other legal proceedings are available to companies just short of bankruptcy.

Bankruptcy Code Section 365(n)

A statute that protects Licensees in the event that a Licensor of certain Intellectual Property rights files for Bankruptcy. Contracts that are ot fully performed by both parties (i.e. that are known as “non-executory” under Bankruptcy law) are subject to “rejection” (in other words, termination) in Bankruptcy by a Bankruptcy trustee. Section 365(n) provides an exception, which benefits licensees of certain Intellectual Property from licensors who declare bankruptcy. It permits the licensee to keep the license as it existed at the time of the bankruptcy filing, to enforce exclusivity and, if the contract has proper legal provisions, to access supplementary rights (such as computer source code in escrow). To keep the license, the licensee must continue to pay any Royalties provided for in the contract and the licensee cannot obtain ongoing positive performance from the bankrupt company, such as ongoing software Updates or Maintenance and Support. Section 365(n) has gaps. It covers Trade Secrets and U.S. Patents and Copyrights, but does not cover Trademarks, most other Intellectual Property or most foreign Intellectual Property, or any future improvements and modifications (e.g. future software upgrades).

Berne Convention for the Protection of Literary and Artistic Works

An international treaty that governs Copyright rights, under which each country recognizes Copyrights of residents of other nations that have signed the treaty. Among other things, the Berne Convention eliminates many of the requirements for formalities such as Copyright Notice and registration. Also called Berne Convention. See the treaty text.

Berne Convention Implementation Act of 1988

The statute under which the United States joined the Berne Convention, on March 1, 1989. Among other things, this statute made certain copyright formalities, such as the use of a Copyright Notice, optional in the U.S. for some purposes (but they are still recommended).

Best Efforts

A level of diligence, or effort, exercised by a party in its performance of a contract. Best efforts” has different meanings, depending on whether or not it is coupled with exclusivity. “When the best efforts obligation is coupled with an exclusive agreement, the level of diligence is akin to a fiduciary obligation, … the highest duty found in the law, comparable to what an attorney owes a client or a doctor owes a patient.” In a non-exclusive agreement, the meaning of best efforts is not clear, and may or may not be equivalent to Reasonable Efforts or to a higher standard. J. Pink, Divining the Meaning of “Best Efforts,” California Lawyer (Jan. 2008). (The term is also used in California Uniform Commercial Code Section 2306(2) with respect to contracts for exclusive dealing of goods.) Contrast with Reasonable Efforts.

Beta (version of software)

A release of software for end user testing, which usually includes all features, but may include minor errors (bugs). With the growth of web services and desktop software that can be updated over the web, some beta versions can be offered for years on end, blurring the distinction with commercial releases. See A Long Winding Road Out of Beta, by Paul Fasta, on ZDNet. See also a comprehensive article about the Software Release Life Cycle.

Beta Agreement

A contract for an end user or other evaluator to use Beta version software for testing. Because Beta software generally does have errors (even if they are only minor errors), these contracts are used to limit the liability of the company releasing the software. For proprietary software that will be publicly released later on a public launch date, beta agreements may include a Non-Disclosure Agreement, to preserve confidentiality before the launch. Open Source Software is not released under a beta agreement because the Open Source Software agreements already contain liability limitations and the software obviously is not kept confidential.


A one-time payment for completing an action under a contract (such as bringing a qualified prospective customer to the other party). Compare against Revenue Share.

Breach (of Contract)

Violation of contract obligations by a party, which can result in Termination of the contract and imposition of money Damages. Lawyers focus on “Material Breach,” in other words violation of significant provisions of an agreement that formed the basis of the bargain of the parties. Also known as Default.


A type of “agreement” to which the user agrees (or agreement is implied by law) merely by visiting a web site. It is typically not negotiable. This type of “agreement” has not been enforced consistently by the courts, so other types of agreements such as Clickwrap agreements and Manually Signed agreements are more popular for important contracts.


One of the simplest, shortest and most permissive of the Open Source Licenses. It does not contain a Reciprocity Clause. Also known as the Berkeley Software Distribution license. The Open Source Initiative publishes a template for the BSD license.

Bundling and Integration (of technology)

The combination of technologies (especially computer software). Many innovative products and services require the combination of technologies from several companies. Technology transactions often include requirements for technologies or computer code to be technically integrated or bundled with other material. Bunding and integration are often used as synonyms, but bundling also can refer to inclusion of a product on a disk or in a package without any technical combination.

C ====================

California Labor Code Section 2870

A statute providing that an employee’s inventions are not Assigned to the employer if they are developed entirely on the employee’s own time, and without using the employer’s equipment, supplies, facilities, or trade secret information. This does not apply, however, to inventions that either (1) relate at the time of conception or reduction to practice of the invention to the employer’s business, or actual or demonstrably anticipated research or development of the employer; or (2) result from any work performed by the employee “as employee” of the employer. If an employment agreement with a California employee requires the employee to assign any invention, then the employer must also (at the time the agreement is made) provide a written notification to the employee that the agreement does not apply to an invention which qualifies fully under the provisions of Section 2870. As a result, this notice generally appears in California Employee Invention Assignment & Confidentiality Agreements.


Lawyer jargon for an exception or loophole to a requirement. Some contract provisions may need one or more carve-outs to deal with special situations.

Choice of Forum Clause

The selection of a specific court to hear disputes concerning a contract. Though many technology contracts include a choice of forum clause, courts may override that choice due to public policy or other reasons.

Choice of Language Clause

For international transactions in which the agreement may be translated into other languages, the agreement may specify which language governs the interpretation of the agreement.

Choice of Law Clause

The selection by the parties in a contract of a particular country’s and state’s law to govern the interpretation of a contract. Lawyers prefer a specific choice of law in a contract so that the contract can be interpreted clearly. If the parties reside in the same Jurisdiction, and the contract does not have a choice of law clause, then the law where the parties reside will probably apply. If the parties reside in different Jurisdictions, then potentially two different laws (e.g., law of California and law of France) may apply, which may require two different lawyers for an interpretation.


A type of online agreement in which the user clicks an “I Accept” button or similar mechanism to accept and complete the Formation of Contract. It is typically not negotiable.

Commercial Availability

The date on which a product is available in production form for sale or license to the public. Contrast this with Alpha and Beta releases, which mostly are made to a limited audience of “beta testers,” although more and more beta releases are made to the general public. Also called General Availability.

Communications Decency Act (CDA)

Section 230 of the Communications Decency Act, 47 United States Code Section 230, protects internet content providers from legal liability (such as Defamation claims) for third-party materials that they publish online, as well as for liability due to filtering content. It is an important protection to online publishers of User Generated Content.

Confidentiality Agreement

See Non-Disclosure Agreement.

Conformity (to a Specification)

The standard generally used for Acceptance of work product under an Independent Contractor Agreement, Software Development Agreement or similar agreement. The work product needs to   “conform” or meet the Acceptance requirements, which are usually written up as a Specification or requirements document. Although some agreements use a standard of  “strict” conformity, it is more common to use a standard of  “substantial” conformity to the Specification. This is to prevent the parties from getting stuck on minor details.

Consequential Damages

Damages that arise as an indirect result (as a “consequence”) of an act. For example, the failure to deliver a part to a factory for manufacturing could be a direct act and could result in direct Damages. Shutting down the factory because there are no parts in inventory is a consequential damage resulting from the failure to deliver the part. California Commercial Code Section 2719(b)(3) permits the exclusion of consequential damages in most sales contracts. Consequential damages are routinely waived in technology contracts, with a few common exceptions, using a Consequential Damages Waiver.

Consequential Damages Waiver



All contracts require the exchange of consideration, i.e., something of value, in order to be legally effective, subject to very few exceptions. This requirement appears in many contracts with the language, “for one dollar and other good and valuable consideration, the receipt of which is hereby acknowledged.” Although some consideration is required, the actual amount of consideration can be very small, as small as a “peppercorn,” according to law treatises. Even an exchange of mutual Covenants can be sufficient consideration. See also Formation of Contract.

Conspicuous (disclaimer in contracts)

Under California Commercial Code Section 1201(b)(10), “”˜Conspicuous,’ with reference to a term, means so written, displayed, or presented that a reasonable person against whom it is to operate ought to have noticed it. Whether a term is “˜conspicuous’ or not is a decision for the court. Conspicuous terms include the following: (A) a heading in capitals equal to or greater in size than the surrounding text, or in contrasting type, font, or color to the surrounding text of the same or lesser size; and (B) language in the body of a record or display in larger type than the surrounding text, or in contrasting type, font, or color to the surrounding text of the same size, or set off from surrounding text of the same size by symbols or other marks that call attention to the language.” This is the reason why some contract language and other legal disclaimers are in all caps type. As one bloggerput it, we have “a terrible typographic decision enshrined in the conventional wisdom legal documents because it fits within the safe harbor defined by a widely used statute.”

Consulting Agreement

See Independent Contractor Agreement, which shares many of the same issues and features.


A type of Intellectual Property right that protects the “expression” of an idea that is “fixed in a tangible medium.” In plain language, this means words on paper, songs recorded on a compact disc or .mp3 file, paintings on canvas, code written in a programming language stored on a hard disk, or motion pictures on film or DVD’s, and so forth. For example, the words are the expression, and the paper is the tangible medium.

Copyright Notice

The legal notice that a Work is subject to Copyright protection. Since the U.S. joined the Berne Convention, a Copyright notice is no longer required in order to preserve a Copyright for Works published after March 1, 1989. However, use of a copyright notice still imparts many useful legal benefits. For details, see U.S. Copyright Office, Circular 1.


(1) In contracts, counterparts means copies of the same signature page signed separately by different parties. For example, if three parties are not present to sign the same signature page, each party can sign copies of the signature page and exchange those with other parties. Each signed page is a “counterpart” copy. Contracts, particularly more complicated ones, often include a “counterparts clause” that might read as follows: “This Agreement may be executed in counterparts, each of which will be deemed an original, but all of which together will constitute one and the same instrument.” (2) In prosecution of Patents and Trademark registrations, a “foreign counterpart” means an application to register the same rights in a different Jurisdiction. For example, a U.S. Patent application may have foreign counterpart applications in Japan and Canada.


A legally enforceable promise to act or not take action in the future.

Covenant Not to Sue

A Covenant that is essentially the same as a non-exclusive license to Intellectual Property, but unlike a license, is generally personal to the recipient of the covenant and not assignable by the recipient (See also Assignment and Delegation). Covenants Not to Sue are sometimes provided in patent transactions instead of non-exclusive Licenses. Also called a Non-Assertion Covenant.

Creative Commons

A non-profit organization that develops and provides forms of Open Content licenses and provides a means to dedicate Works to the Public Domain.


An approach by which amounts owed under one contract are repaid by amounts to be paid under a separate contract. This approach is used for multiple book contracts with the same author, for example. If an Advance against Royalties has not been Recouped for a book, the publisher may Recoup the Advance from Royalties to be paid under the contract for a second more profitable book.


Treating a default (or Breach) under one contract as a default under a separate contract. This approach is often used in debt financing agreements. If a borrower under an agreement concerning its collateral for a loan breaches that agreement (e.g., sells an asset without the bank’s permission), the default under that agreement is also deemed to be a default under the loan agreement, thereby enabling the bank to demand repayment of the loan. This concept is used sometimes in complex technology transactions where a breach of obligations in one agreement, such as a Maintenance and Support Agreement, also results in breach of another agreement, such as a License agreement, or triggers an action under another agreement, such as release of an escrow under a Source Code Escrow Agreement.


A type of Indemnity in which parties to an agreement provide an Indemnity to the other party(ies). For example, a Cross-Indemnity may be used in situations where each party is responsible for separate activities in a relationship (such as a joint venture) and that party wants to protect the other parties from any third-party lawsuits arising from those activities.


In one contract, the License by one party to the other, and vice versa. For example, in a Patent Cross-License, each party could Grant a License the other for its entire Patent portfolio. See also Patent Pool.

Cure (of contract Breach)

To perform or stop performing some action so that a party to a contract is no longer in Breach. Many contracts have a Cure Period. Some breaches may not be able to be cured, such as a false representation that the party was in compliance with law at the time the contract was signed.

Cure Period

The time period in a contract that a party in Breach has to Cure the Breach, after which the other party may terminate the contract.

D ====================


The monetary amount awarded by a court (or an arbitrator) to reimburse a party to a contract due to the other party’s Breach of the contract. The basic form of damages is to reimburse the party for “the benefit of the bargain,” the value that the party would have obtained if the contract had been fully performed. Damages are also known as a form of “legal” relief because historically they were awarded by a court of “law,” as compared to “equitable” relief such as Injunctions which were issued by courts of “equity.” Also called Money Damages or Monetary Damages.

Damages, Mitigation of

A party who has suffered injury due to another person is not entitled to recover Damages to the extent the Damages could have been avoided with reasonable efforts or expenditures. For example, a party who has been harmed by another party’s Breach cannot just “let it ride” and allow the injury to continue.

Damages, Punitive

A monetary amount awarded to punish a party and to deter similar activities by others. Punitive damages can far exceed the value of a contract, and thus often are covered by a Limitation of Liability in a contract. Also known as Exemplary Damages.

Dedication to the Public Domain

See Public Domain, Dedication.

Defamation, Libel and Slander

In the U.S., defamation is the communication to a third party of an untrue statement of fact (or a statement which appears to be fact rather than opinion) that confers a negative image of a person or company. Slander is defamation by spoken word, and libel is defamation by written word. In the U.S., truth is a defense to defamation, “public figures” receive less protection from defamation than private individuals, and the Communications Decency Act (CDA) Section 230 provides some immunity for online publishing of defamatory statements. Defamation, libel and slander are treated differently in Europe and the rest of the world.

Definitive Agreement

Many contracts are preceded by written documentation, such as emails, mail, Requests for Proposals (RFP’s) and Term Sheets, that are not intended to be legally binding. Those documents are usually intended to facilitate negotiations, but not to document or memorialize the final contract. The final, written, legally binding contract is commonly called the definitive agreement or definitive written agreement.


See Assignment and Delegation.


The work product to be delivered by one party to the other under an Independent Contractor Agreement, Software Development Agreement or the like. Deliverables are often listed and matched up with Milestones and Payments due, under a Milestone Schedule.

Derivative Work

In Copyright law, a Work that is “based on” one or more preexisting Works. For the full U.S. definition, see 17 United States Code Section 101. In technology contracts, software and internet law, Derivative Works are crucial, because software and documents are extremely easy to modify and update in electronic form, even in very minor ways, resulting in Derivative Works. The right to make Derivative Works can be very important in Software Development Agreements and other Licenses.

Design Patent

A type of patent that protects product designs that are functional. Many patent lawyers believe design patents are easy to design around and have low value.

Digital Millennium Copyright Act (DMCA)

The Digital Millennium Copyright Act, Public Law 105″“304, Oct. 28, 1998, amended the U.S. Copyright law to add protections against circumvention of copyright protection mechanisms, see DMCA (Anti-Circumvention), and statutory immunity from Copyright infringement for certain online service providers, see DMCA (Online Service Provider Immunity).

Direct Damages

Monetary Damages from one party to the other party due to one party’s Breach of a contract. Direct damages are often subject to a Limitation of Liability in technology transactions.

Disclaimer of Warranties

Some Warranties are implied by law (Implied Warranties), even if the parties do not mention them in their contract. Implied Warranties must be disclaimed in order to eliminate them. See California Commercial Code Section 2316. A very simple disclaimer of warranties might read: “SELLER HEREBY DISCLAIMS ALL IMPLIED WARRANTIES, INCLUDING THE IMPLIED WARRANTIES OF MERCHANTABILITY AND FITNESS FOR A PARTICULAR PURPOSE.”

DMCA (Anti-Circumvention)

The Digital Millennium Copyright Act (DMCA) conveys copyright law protections to technological measures (such as encryption) that control access to copyrighted Works, such as movies on DVD and software. This is called “anti-circumvention”; in other words, it prohibits cracks and workarounds to the protection measures. The DMCA also contains limited exemptions to permit circumvention for purposes of Reverse Engineering for Interoperability.

DMCA (Online Service Provider Immunity)

The Digital Millennium Copyright Act (DMCA), Section 512 of the U.S. Copyright law, provides for immunity from copyright infringement t online service providers who register a designated agent with the U.S. Copyright Office and who follow statutory procedures when they receive a complaint of copyright infringement. Section 512 provides significant protections to online businesses and web site operators who publish User Generated Content on their sites.


Documents that accompany software or other technology and explain how to use it. Many times documentation is overlooked or not handled properly in technology transactions. In other cases, it is simply swept up in the definition of technology or software in the agreement.


The time period during which an online system is not available for productive use by customers. Scheduled Maintenance is often excluded from measurements of downtime.

E ====================

Electronic Signatures

Signature of an agreement using an electronic device or electronically enabled method, as opposed to a Manual Signature (or “wet” signature). Electronic signatures are governed by, among other things, the Electronic Signatures in Global and National Commerce Act (or E-Sign Act), a U.S. federal law, and the Uniform Electronic Transactions Act (UETA), a law adopted by many U.S. states. The federal and state laws overlap in many respects.

Electronic Signatures in Global and National Commerce Act (E-Sign)

A federal electronic signature law, which partially preempts the state law governing electronic signatures, codified at 15 United States Code Chapter 96.

Employee Invention Assignment and Confidentiality Agreement

A type of agreement very common in Silicon Valley in which an employee discloses prior inventions, assigns any Inventions and Works made during employment to his/her employer (subject to California Labor Code Section 2870), and agrees to hold confidential any information of his/her employer.

End User License Agreement (EULA)

An agreement by which a publisher (such as software publisher) licenses to end users the right to use software and disclaims certain liabilities. Historically these were Shrinkwrap agreements, but now are moving to Clickwrap agreements, as the distribution of software migrates from offline retail channels to online. EULAs typically are not negotiated. In most cases, Enterprise License agreements and high priced end user licenses still are negotiated with a Manual Signature.

Enterprise License

An agreement to License use of technology (especially software) to an entire company and/or its Affiliate companies. Contrast with Site License and Per-Seat or Concurrent User License.

Entire Agreement Clause

Contract provision in a Definitive Agreement that states that the Definitive Agreement supersedes all prior documents, discussions and negotiations, and that the Definitive Agreement contains the “entire agreement” of the parties.

Epidemic Failure

A failure that applies in common to multiple units of a product, as opposed to isolated failures.

Equitable Relief

A type of relief issued by a court. The main type of Equitable Relief is an Injunction. Contrast with Damages.


(1) In complex contracts or contracts with large companies, an escalation process is used so that disputes are discussed and resolved by senior executives before either party commences Arbitration or goes to court. (2) In Support provided by a customer call center (or contact center), an escalation process is used to raise customer problems through various tiers of support personnel for resolution.


See Source Code Escrow.

Escrow Release Trigger Events

In software licensing, the events that trigger the release of a Source Code Escrow. The events can include bankruptcy, insolvency, ceasing to operate the business, ceasing to offer the licensed product, or ceasing or defaulting in the support of the licensed product. Some escrow release trigger events may be problematic under U.S. Bankruptcy Law.

Evergreen Contract

See Autorenewal.

Exclusivity and Non-Exclusivity

An exclusive License is a Grant of rights to Intellectual Property that is limited to only one company or person. A non-exclusive License is a Grant of rights to Intellectual Property to multiple companies or persons. A license grant may be considered “semi-exclusive” or “limited exclusive” when a company grants exclusivity to a limited number of other companies or persons, instead of a single company or person. It is good practice to specify whether a License Grant is exclusive or non-exclusive. It is also essential to avoid overlaps in exclusive and non-exclusive License Grants. To avoid overlaps, exclusivity may be limited to a particular country or other territory, by Field of Use, or in other ways.

Exemplary damages

See Punitive Damages.

Exhibits and Schedules

The attachments to a contract. The terms are often used interchangeably, although exhibits tend to be form agreements, policies and longer documents, and schedules tend to be shorter lists of information, exceptions and other brief information.

Expiration of Contract

The ending of rights and obligations of a contract when its term expires, either as specified by the contract or by law.

Export Control

Software containing encryption functionality and other sensitive technologies may require an export license pursuant to U.S. law, before being shipped to specified countries or even certain foreign nationals within the U.S.

F ====================

Fair Use

Exceptions to the exclusive rights provided by Copyright law, for example for scholarly or critical uses. In the U.S., fair use is defined by four factors in the U.S. Copyright Act, 17 United States Code Section 107, as well as court cases.

Field of Use

A provision in a License that limits the exercise of the License to certain uses (e.g., for use with certain types of equipment but not with others, such as home audio equipment versus professional audio equipment used in theaters). Most often used in Patent Licenses.

Force Majeure

An event or condition that prevents one or both parties from performing the contract, such as war, epidemic or failure of communications facilities. Force Majeure may excuse a party’s non-performance under the law and if specified under a contract.

Formation of Contract

Three elements are needed to form a contract: (a) an offer by one party of all Material terms to a contractual relationship; (b) clear acceptance by the other party(ies) of the offer; and (c) an exchange of Consideration. There are a few exceptions to this general rule, but they generally don’t apply to technology transactions.


Free and Open Source. A more precise and lawyer-like word for Open Source Software. (Although the term “Open Source Software” does not necessarily include code other than source code, i.e., object code, this glossary uses Open Source Software interchangeably with FOSS, for ease of understanding by readers.) See Open Source Software.

FOSS License

See Open Source License.

Further Assurances Clause

An agreement by one party to take further actions requested by another party. It is used in short term agreements or short form Assignments in case one party needs future assistance from the other party. For example, a further assurances clause is used in an Independent Contractor Agreement or Assignment of Intellectual Property in case the hiring party needs the contractor to sign a document (such as a patent application) after the project is completed.

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General Availability

See Commercial Availability.

GNU General Public License (GPL)

A well-known Open Source License that includes a Reciprocity Clause. Many leading Open Source Software programs are licensed under the GNU General Public License (GPL), or its related license for code libraries, the GNU Lesser General Public License (LGPL), also known as the Library Public License. Despite such popularity, corporate users of GPL software are wary of the possible impact of the Reciprocity Clause on their businesses.

Governing Law

See Choice of Law Clause.

Government Contracts

Under U.S. federal contract law such as the Federal Acquisition Regulations (FAR) and Defense Federal Acquisition Regulations Supplement (DFARS), the federal government may obtain restricted rights, government purpose rights or unlimited rights to Intellectual Property. It is important for a government contracts lawyer to review government contracts and advise on restrictive rights legends for Software, Documentation and other licensed technology, to ensure that the proper language is used for desired level of rights to be Granted.


The voluntary passing over of Intellectual Property rights from one party to the other. It is best to specify the Intellectual Property rights granted such that they match up as desired to the rights created by law. For example, the holder of a Patent has the right to exclude others from making, using, or selling products or processes covered by the patent. A grant can match up to one or more of those rights. Likewise, the holder of a copyrighted Work can control the rights to copy, distribute, publicly display, public perform, transmit, and create Derivative Works of, that copyrighted Work. A grant can match up to one or more of those rights, for example, grant a right to copy and prepare Derivative Works internally, but not to distribute, publicly perform or publicly display the Work.

Grant Back

If Intellectual Property rights are Assigned from an Assignor to an Assignee, the Assignee may grant back (i.e., grant a License back) to the Assignor so that the Assignor can use some of the rights that were Assigned. An analogy (using tangible property and not Intellectual Property) would be for me to sell my car to you, with the understanding that you will let me drive it on Saturdays. Also called a license back.

Granting Clause

The provision in a License agreement in which Intellectual Property rights are Granted by one party to the other. This is often the core clause in a License agreement.

Gross Revenue

The total money or other value received by a party in connection with the sale or licensing of a product or service. Under a Royalty-bearing License agreement, Royalties can be calculated based on Gross Revenue, and Royalty participations on that basis are done in deals in the Hollywood motion picture and entertainment industry. Royalties based on gross revenues are very rare in technology transactions.


A promise made by a person or company (such as a parent company, and known as the guarantor) to answer for the obligations of another party (such as a subsidiary). Loans to or contracts made with small companies may require a personal guaranty by the founders of the company.

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The number of requests for a file from a web server, for example, to display various files as part of a web page. Because a web page can consist of many files and can trigger file requests from many different web servers, and because many of those files are trivial (such as minor graphics), hits are not a reliable measurement of traffic to a web site.


An approach to cross-referencing two documents or files (or the content within them), which is implemented by technology. The most well-known type of hyperlink is the HTML hyperlink used on web pages, and also available in word processing and Adobe pdf documents. For example, see the specification of hyperlinks described in T. Berners-Lee and D. Connolly, “Hypertext Markup Language – 2.0 (RFC 1866).” Contrary to popular belief, HTML is not the only way to implement hyperlinks. There is also a broad but little-known hyperlinking protocol based on Extensible Markup Language (XML) called XML Linking Language, or XLink. The concept of hyperlinks precedes the development of the world wide web by decades, originating in the work of computer pioneer Vannevar Bush (by his essay “As We May Think” published in The Atlantic magazine) and as further developed by digital visionary Ted Nelson and his Xanadu Project. Also called a Link.

Hyperwrap Agreement

A type of agreement in which the terms and conditions are incorporated via a Hyperlink. The Hyperlink needs to be sufficiently obvious that it is is legally “Conspicuous” to the parties. See Enter the Hyperwrap Agreement.


Acronym for Hypertext Markup Language. It is the main approach for coding text and other content for use and reading on web pages via web browsers.

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Incidental Damages

Damages that are in addition to the main Damages due to contract breach. Incidental damages suffered by a seller of goods due to a buyer’s breach “include any commercially reasonable charges, expenses or commissions incurred in stopping delivery, in the transportation, care and custody of goods after the buyers’ breach, in connection with return or resale of the goods or otherwise resulting from the breach.” California Commercial Code Section 2710. Conversely, Incidental damages suffered by a buyer of goods due to a seller’s breach “include expenses reasonably incurred in inspection, receipt, transportation and care and custody of goods rightfully rejected, any commercially reasonable charges, expenses or commissions in connection with effecting cover and any other reasonable expense incident to the delay or other breach.” California Commercial Code Section 2715(1). Such damages generally are understood to be less significant than Consequential Damages.


A “contract by which one engages to save another from a legal consequence of the conduct of one of the parties, or of some other person,” as defined in California Civil Code Section 2772. Most often, this means protecting a third person from a lawsuit by payment of money. It can also include other actions, such as assuming the legal defense of a lawsuit. Here is the usual case. By contract, one party (first party) can provide indemnity to the other party (second party) to cover the second party for claims and lawsuits by other persons against the second party arising from the first party’s acts or omissions. The indemnity would require the first party to defend against those claims and lawsuits against the second party (e.g., by hiring and paying a lawyer to handle the defense), and to pay any damages, arbitration awards and settlement amounts that the second party would otherwise have to pay to the third person. Because indemnities provide for financial coverage for claims by others, they are similar to insurance. Indemnities are often hotly negotiated by lawyers, to the confusion of clients who don’t understand that indemnities can result in huge costs and liabilities. Also called Indemnification.


The party who provides Indemnification. Also called an indemnifying party.


The party who receives Indemnification. Also called an indemnified party.

Independent Contractor

An entity or a person who performs work for someone other than an employee. Taxing authorities use a multiple factor test to determine whether a person is an employee (withholding taxes and benefits must be paid) or an independent contractor (these taxes and benefits are not paid).

Independent Contractor Agreement

An agreement between a hiring party and a person or entity performing work for the hiring party. The agreements generally include a description of the work timetable and requirements, a grant or transfer of rights of the work product to the hiring party (which most often is a Work Made for Hire arrangement), representations and warranties, required insurance and Limitations of Liability. The specific Deliverables, Acceptance criteria, Milestone Schedule and Payments due for a project often are listed on a Statement of Work attached to the agreement. Complicated or long term engagements may include several Statements of Work.

Indirect Damages

See Consequential Damages.

Industrial Designs

Intellectual property protection available in various countries for design elements of functional products. See also Design Patent.

Inflation Adjustment Clause

A provision in a contract by which the pricing is automatically adjusted for inflation. In long term contracts, this enables the parties to provide for some automatic pricing adjustments without resorting to complicated formulas or renegotiating the price. The adjustment is often based on changes to the Consumer Price Index (CPI), but sometimes is based on changes to the Producer Price Index (PPI).


The unauthorized exploitation of Inventions or material that is protected by Intellectual Property law (particularly Patent, Trademark or Copyright law), in a manner that violates one of the legal rights to such Inventions or material.


An order by a court to take or not take an action required by a court. Violation of an injunction is a serious matter, and can result in fines and even jail time for criminal contempt of court. Because of the power of an injunction, contracts often specify this relief only for breaches of confidentiality or to stop infringement of Intellectual Property rights.


Required insurance can include general liability insurance, workmen’s compensation insurance, errors and omissions insurance, as well as umbrella liability coverage.

Integration (of contracts)

The combining of several contract documents together into a single legal instrument with a single interpretation. In many cases, the documents will specify which documents and contract provisions govern in case of conflicts among the documents.

Integration (of technology)

See Bundling and Integration (of technology).

Intellectual Property

Legal rights to intangible property such as Patents, Trademarks, Copyrights, Trade Secrets, Moral Rights and Industrial Designs. Intellectual Property rights may exist due to statutes or common law (law arising from judicial decisions in court cases). Generally, Intellectual Property rights are specific to each Jurisdiction (for example, U.S. and German Patent rights are separate).

Internal Use

A limitation in a License so that a licensee may utilize the rights (such as copying and distribution) within its organization, but not for distribution, performance or display to customers or the public.


The ability of multiple devices, computer software programs, or systems to work together. In the U.S., it is defined as “the ability of computer programs to exchange information, and of such programs mutually to use the information which has been exchanged,” for purposes of Reverse Engineering, in the Digital Millennium Copyright Act (DMCA), 17 United States Code Section 1201(f) (4). See also DMCA (Anti-Circumvention).


Any “art or process (way of doing or making things), machine, manufacture, design, or composition of matter, or any new and useful improvement thereof, or any variety of plant, which is or may be patentable under the patent laws of the United States,” according to the U.S. Patent & Trademark Office Glossary.


See Intellectual Property.

Ipso Facto Clause

A contract clause that says the contract can be terminated or modified by one party if the other party files for bankruptcy. Under the U.S.Bankruptcy Code, this clause is generally not enforceable. For example, if the ipso facto clause is a trigger for termination, the bankruptcy court would not permit termination.


Cannot be terminated despite subsequent events. This term is often used in Granting Clauses of License agreements.

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Joint Ownership

Ownership of an asset, such as a Patent, by two or more parties. In some technology transactions where the value involved merits it, it may be better to take joint ownership of the Intellectual Property instead of a License, for example if Bankruptcy is a concern. Also, the parties should specify whether each party has an obligation to account to the other for any licensing or other revenues from the jointly owned asset, and the parties also should agree on rights, responsibilities and cost sharing for filing of any Patent applications and filing lawsuits to enforce the patents.


(1) The territory over which a political, governmental or supra-governmental power exercises legal authority. (2) The territory or topic area over which a court exercises its legal authority. See also more than you want to know about jurisdiction. Intellectual Property lawyers will speak of “jurisdictions” in contracts rather than “countries,” because Intellectual Property rights are conferred by many different legal authorities. For example, trademark rights can be conferred by (or their legal rights can be registered with) U.S. states, the U.S. federal government, and supra-national organizations such as the European Union (EU). “Jurisdiction” then becomes a handy single term to refer to these various legal authorities.

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Knowledge and data required to do or make something, particularly business or manufacturing processes or technical equipment. It can include formulae, designs, drawings, procedures and methods, as well as accumulated skills and experience of technical and engineering personnel, e.g., knowledge of how to “fine-tune” a machine or adjust a manufacturing process for optimal results. Know-How generally is protected as a Trade Secret by means of a Non-Disclosure Agreement. Also called knowhow.

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Lanham Act

The U.S. Trademark Act, a federal law, codified at 15 United States Code, Chapter 22. It restricts Trademark Infringement, Trademark dilution and false advertising, among other things.

Legal Relief

See Damages. Contrast with Equitable Relief.

Liability Cap

A limit on the Damages that one party can recover against the other in event of Breach of a contract by the other Party. Sometimes called a dollar cap or a ceiling on Damages. This is most often stated as a dollar amount or a formula, for example, limiting liability to “amounts paid or payable under this agreement.”


See Defamation, Libel and Slander.


A permission, such as a permission to use an asset, such as Intellectual Property. Contrast the limited permission by a license with the all-encompassing transfer of rights by an Assignment.

Limitation of Liability

A limit on the Damages that one party can recover against the other, which may include both a Liability Cap and a Consequential Damages Waiver.

Liquidated Damages

Specifying a dollar amount of Damages in advance, because the calculation of Damages would otherwise be difficult or impossible. Under general contract law, liquidated damages that are intended as penalties or are unduly high in order to punish the other party are not enforceable. Liquidated damages are rare in technology transactions, except for minor infractions in service level agreements.


Adaptation of a product to meet a local country’s laws, language and customs (e.g., local currency) and customer preferences. Typically, a localization would be a Derivative Work of the underlying Work.

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Maintenance and Support

Updates made and distributed to software after release to correct problems, improve performance or adapt the software to a different environment (e.g., to newer versions of an operating system or other software). May be provided remotely by telephone, web, or email or on-site. Often support cases or incidents are entered into an online trouble ticket system for tracking and resolution. May include minimum Response Time for support assistance. Support to end user customers may be provided by different personnel as Tier 1 (First Level), Tier 2 (Second Level), and even Tier 3 (Third Level) or higher. Generally, Tier 1 support refers to support provided directly to an end user, most often over the telephone, and Tier 2 and Tier 3 support refer to support provided by product development and engineering staff to the Tier 1 support personnel, sometimes with discussion directly with the end user customer. Tiered support is a way to triage issues by severity and to allocate different levels of expertise in resolvin issues.

Maintenance and Support Agreement (or Plan)

A contract to provide Maintenance and Support of software, particularly for enterprise software. A Maintenance and Support Agreement for consumer software often will be sold as a pre-packaged plan.

Maintenance Fees

Fees for Maintenance and Support of software, typically on a subscription basis. For example, an annual subscription that uses a flat fee or a fee based on a percentage of the price of the underlying software license.

Maintenance, Scheduled

Maintenance that has been scheduled in advance, typically for an online remote system during recurring off-peak times (such as Sunday nights between 1:00 am to 4:00 am), in order to minimize impact on end users during business hours.

Manual Signature

A signature in ink by hand, the old fashioned way. Also called a wet signature. Manual signatures may be accompanied by an Acknowledgement (notarization).

Mask Work

A type of protection for integrated circuit etching masks under the Semiconductor Chip Protection Act of 1984, 17 United States Code, Chapter 9. This right is often included in comprehensive definitions of Intellectual Property, but has little importance or relevance beyond the semiconductor industry.

Material, Materiality

Lawyer jargon for “important” or “significant.”


A dispute resolution approach that is an alternative to the courts or Arbitration. Rather than presenting the facts to a judge or arbitrator and asking that person to make a binding decision, in a mediation the parties present the facts to a mediator who attempts to help the parties compromise and reach a mutually agreeable settlement. In some contracts, mediation is required before resorting to the courts or Arbitration.


The combination of two or more legal entities into a single surviving entity by operation of corporate law. See California Corporations Code, Sections 1100-1113. A merger or consolidation in most cases can result in a transfer of contracts automatically by operation of law upon consummation of the merger.


A defined point in a sequence of activities under a contract, in particular, in the development of technology. Milestones may be either dates (e.g., January 10, 2015) or defined events (e.g., Completion of Beta Software, with or without an estimated date of January 10, 2015).

Milestone Schedule

An attachment to a contract that lists Milestones, and often lists corresponding Deliverables and Payments due. For example, for a Milestone of Completion of Beta software, the corresponding Deliverable could be the Source Code of the Beta software, version 0.1, with a corresponding payment due of $100,000 (which payment might be subject to testing and Acceptance).

Moral Rights

Rights to claim authorship or attribution of a Work and to prevent the modification or destruction of a Work, among other things. The concept of Moral Rights originated in France. Moral Rights most commonly apply to visual Works such as paintings or murals, but are not limited to those Works. Because in many cases these rights cannot be assigned, contracts often require a disclaimer of moral rights.

Most Favored Nation (MFN) Clause

An agreement in a contract not to provide better terms to other persons in other contracts. MFN clauses must be used with care, because an MFN clause in one contract can have ripple effects on other completely separate contracts, for example, requiring a price adjustment in one of the contracts. It is best for the contracts and companies covered by an MFN clause to be reasonably comparable. Otherwise, a small contract may be the tail that wags the dog of a larger contract, if the small contract triggers MFN terms in a large contract. MFN clauses may apply retroactively (in the past) and prospectively (now and in the future). May also be called a Most Favored Customer (MFC) Clause, when the MFN treatment is extended to a customer.

Mutual Obligations

Obligations that apply equally to both parties. Some negotiators like contracts to contain mutual obligations to prevent one party from gaining an unfair advantage. If one party faces unique circumstances, then there may be good reasons not to have mutual obligations.

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Natural Intellectual Property

Practical control of access to an asset, regardless of any intangible legal rights. The concept is captured by the old (and often inaccurate) proverb that “possession is nine-tenths of the law.”

Net Revenue

Generally defined as Gross Revenue less specified deductions, such as refunds, returns, discounts, distribution fees and the like. Net sales is a similar concept.

Non-Assertion Covenant

See Covenant Not to Sue.

Non-Competition Clause

A contract provision in which a party agrees not to compete with the other party, possibly within defined businesses and territories. Non-competition clauses are generally considered to be based on a pure contractual agreement, not on underlying Intellectual Property law. As such, non-competition provisions are void in California (with exceptions), per California Business and Professions Code Sections 16600 to 16602.5. Certain types of non-competition restrictions can be based on underlying Patent law or Trade Secret law, such as an Exclusive License of Patents or Trade Secrets in which the Licensor does not retain any rights.

Non-Disclosure Agreement (NDA)

An agreement in which one or both parties may disclose their confidential information and Trade Secrets to the other, and the other agrees to keep it confidential and not to use it for any purpose except the purposes specified in the NDA (such as evaluation of a potential business relationship). NDA’s may also require that the existence and terms of the NDA itself also be kept confidential. A fully signed NDA is often a precondition to any detailed discussions or negotiations of a technology transaction. Also called a Confidentiality Agreement. A Non-Disclosure covenant may also appear as a section within a license or other agreement, even if there is no separate NDA.


See Exclusivity and Non-Exclusivity.

Non-Solicitation Clause

An agreement of one party not to solicit the employees, consultants, suppliers or customers of the other party for employment or business. Unlike Non-Competition Clauses, non-solicitation clauses generally are enforceable in California.


See Acknowledgement.

Notice of Breach

Contracts often require a written notice of Breach so that the party in Breach is aware of the Breach and has the opportunity to Cure it within the Cure Period.

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Object Code

Computer program code in machine readable form, and typically not in human readable form. Some contracts refer to object code as binary form.


An expression or action by a person seeking a contract (offeror), made to the person with whom they desire the contract (offeree), conveying a desire for a contract and the material terms on which (offeror) would be legally bound.

Open Content

Content, such as text, audio or video, that is made available under a License similar to an Open Source License, i.e., with minimal restrictions on the right to use, distribute and prepare Derivative Works.

Open Content License

A License to Open Content. Popular Open Content Licenses include the Licenses available from Creative Commons as well as the GNU Free Documentation License which is used by the Wikipedia online encyclopedia. (There is also a specific form of license named the “Open Content License”).

Open Source License

A License to Open Source Software, particularly the right to use, distribute and prepare Derivative Works of it.

Open Source Software

Software licensed on a non-exclusive and non-discriminatory basis, with mandatory access to Source Code, and with the right to make and distribute Derivative Works. The Open Source Initiative (OSI), a California non-profit publishes a more detailed and precise definition, the Open Source Definition (OSD), and reviews and approves licenses for compliance with the OSD. Open Source Software is generally the same as Free and Open Source Software (FOSS), and for simplicity, this glossary uses “Open Source Software” for both. The word “free” means “without restrictions,” not “without charge”; in the words of the Free Software Foundation, “think of free as in free speech, not as in free beer.”


A contract that confers on a party the right, but not the obligation, to take an action. For example, the holder of a stock option has the right, but not the obligation, to purchase the stock. Options are not limited to money. A party could obtain an option to receive an Exclusive License, for example.

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Page View

The loading of a single page of a web site. Loading a single page may require loading several files, such as separate files of text, graphics (e.g., logos and banner advertisements), and even functionality (e.g., email or other forms). In other words, loading a single page may result in several Hits. Page Views are often used as a metric in online advertising agreements.

Parties (to a contract)

A natural person or legal entity that is bound by a contract formed via Contract Formation.

Pass-Through Provisions

Contract provisions that are required by one contract to be inserted into another contract. For example, a License agreement with a License from a Licensor to a Licensee may include pass-through provisions that must be placed into any contracts between the Licensee and its customers. Similarly, a distribution agreement from a manufacturer to a distributor may contain pass-through provisions that must be contained in an agreement between the distributor and its sub-distributors. Pass-through provisions must be drafted with care and attention to practicality because the requirements in one contract may have to be inserted into many other agreements. Also called flow-down provisions.

Patent Pool

An organization in which several Patent owners agree to license their Intellectual Property to the organization (or directly to one another), either without charge or for a royalty.


Rights granted by statute to inventors, enabling them exclude others from making, using or selling the Invention claimed in the patent. Patents require a written application and a review process by U.S. Patent and Trademark Office ( They also require expensive search, application and maintenance fees. The rights are valid in the U.S. only for 20 years after the application filing date. After that date, the rights go into the public domain and cannot be extended. (Inventors also can file corresponding applications, and pay additional government fees, to register their patents in many other countries around the world.) Often defined also to include applications, continuations, continuation-in-part (CIP), divisions, extensions, reissuances, and renewals.


In Software Development Agreements and Independent Contractor Agreements, payments may be linked to performance of certain Milestones or to Acceptance of Deliverables after they are delivered to and tested by the hiring party.

Per Incident

Often used in support plans, in which payment for support is made per incident. An single incident may cover a group of related issues, but it also may be defined somewhat arbitrarily based on actual experience.


Forever. A term used to specify the duration of a License.

Per-Seat or Concurrent User License

A pricing formula in enterprise Licenses for a certain number of users, who are not individually named and who may change from time to time. This enables a Licensee’s staff to share the licensed resources to a certain degree.

Personally Identifiable Information (PII)

Information that may be used to identify an individual person and that may describe sensitive matters for that person, such as financial or medical information. In the California security breach notification statute, California Civil Code Section 1798.29(e) defines “personal information” as “an individual’s first name or first initial and last name in combination with any one or more of the following data elements, when either the name or the data elements are not encrypted (1) Social security number. (2) Driver’s license number or California Identification Card number. (3) Account number, credit or debit card number, in combination with any required security code, access code, or password that would permit access to an individual’s financial account. (4) Medical information. (5) Health insurance information.” It goes on to define “medical information” as “any information regarding an individual’s medical history, mental or physical condition, or medical treatment or diagnosis by a health care professional” and “health insurance information” as an individual’s health insurance policy number or subscriber identification number, any unique identifier used by a health insurer to identify the individual, or any information in an individual’s application and claims history, including any appeals records.”

Privacy Policy

A written policy, which is usually legally enforceable, governing the online collection and use of Personally Identifiable Information, among other things. The California Online Privacy Protection Act of 2003 requires operators of commercial web sites and online services that collect “personally identifiable information” (as defined) from individual consumers residing in California to post conspicuously a privacy policy on specified pages of their sites (including the home page).

Privacy Safe Harbor

A framework developed by the U.S. Department of Commerce and the European Commission (“EC”) for U.S. companies to demonstrate that they handle personal data in compliance with the “adequacy” standard for privacy protection under the EC’s Directive on Data Protection. According to the U.S. Department of Commerce, participation by businesses is voluntary, participants may avoid interruptions or prosecution by European authorities under European privacy laws, and they must agree to privacy requirements for notice, choice, access, and enforcement, and must state publicly that they adhere to the safe harbor. See U.S. Department of Commerce Safe Harbor Overview.

Proprietary Rights Notices

Notices on a Work of claims to Intellectual Property rights, such as Patents, Copyrights and Trademarks. In contracts, parties are often required not to deface or remove the Proprietary Rights Notices from a Work, because doing so might impair the legal protection of the Work.

Public Domain

Intellectual Property (and in particular, Copyrights) that is not protected by Intellectual Property Laws, and thus not owned or controlled by anyone. Instead, it is considered “public property” for use by anyone.

Public Domain, Dedication to

A deliberate act that causes a Work or Invention to lose its Intellectual Property protection and therefore become part of the Public Domain. The act of dedication may be different for various types of Intellectual Property.

Public Domain Works

Works that are in the Public Domain, and therefore available for use by anyone. However, due to different legal protections in different countries, a Work may be in the Public Domain in one country, while not being in the Public Domain in another country.

Punitive Damages

See Damages, Punitive.

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Quality Control

A contractual requirement to maintain the quality of goods and services to a specified standard or at least a reasonable standard. Quality Control provisions are required in licenses of Trademarks, otherwise the Trademark owner’s legal rights to the Trademark may be diminished or lost altogether.

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README directory or file

A directory or text file often included in software distributions, which, in the tradition of Alice in Wonderland by Lewis Carroll, instructs the user to read it. README directories often contain Licenses or Attribution notices for Open Source Software.


Lawyer jargon for an “objective” standard, meaning it is determined by a judge or a jury, as opposed to a “subjective” standard determined by a party itself. The word “reasonable” is used in contracts to address minor differences without resorting to pages and pages of legalese.

Reasonable Efforts

A level of diligence, or effort, exercised by a party in its performance of a contract. This is the basic level of diligence used to perform a contract. Contrast with Best Efforts.

Reciprocity Clause

A provision in an Open Source License which requires that, in order to receive a License to the Open Source software, any changes made and distributed to the Open Source Software must also be licensed under the same License. The best example is the GNU General Public License (GPL). There is no charge to receive a license to software licensed under the GPL, and that licensed software can be freely changed. However, if the changes are distributed, the GPL requires that the changes also must be licensed under the GPL, which means that other people have the free right to use, modify and distribute the changes. Also called a Reciprocal License Clause.


The filing of a legal document with a government filing office, and acknowledgement of same by that office, often to create legal proof of the time of filing. It is often recommended to record exclusive licenses of Patents, registered Trademarks and Copyrights. Also called Recordal.


In simplified terms, withholding funds from ongoing payments in order to recover earlier overpayments. The term originates from Bankruptcy law, in which creditors of a bankrupt company seek to withhold current payments in order to recover earlier overpayments (which otherwise would not be recoverable in bankruptcy). In contrast to setoff (another term from Bankruptcy), recoupment refers to payments within the same transaction or contract. In licensing transactions, the recoupment concept applies when a licensee (such as a book publisher) makes an “advance against Royalties” to a licensor (such as a book author), and then withholds future payments (e.g.,royalties on book sales), until the advance is recouped, or “earned out.”


Returning money or other consideration that has already been paid. Specifying that payments are refundable, or requiring refunds after a long period (such as a lengthy guarantee), can result in revenue recognition issues for the vendor under accounting rules.

Registered User (of registered Trademark)

Certain countries outside the U.S. require all Licensees of registered Trademarks to be registered with the government of that country.


(1) In technology contracts, remedies are often specified and limited to repair, replacement (or for services, reperformance) or refund. May also include cost of replacement. In some cases, indemnities may be the sole remedy for errors that impact third parties. (2) In legal terms, a general term encompassing both Legal Relief (Damages) and Equitable Relief (Equitable Relief).

Representations and Warranties

Representations are statements as to a past or existing fact, a snapshot at a particular time. Warranties are ongoing promises that a fact will remain true over time.

Request for Proposals (RFP)

A written document used in procurement to request vendors to make detailed bids, which often include draft contracts.

Reservation of Rights

See All Rights Reserved and Some Rights Reserved.


A contract exception intended to protect a party against claims that its staff has misused confidential information. Residuals may be defined as “information in non-tangible form that may be retained in the unaided memories of persons who have had access to the confidential information.” Common examples in which a residuals clause would be useful are knowledge gained by reviewing source code or detailed technical information.

Response Time

A term used in Maintenance and Support Agreements to specify the time period in which the company providing Maintenance and Support must respond o a problem request.

Revenue Share

A Payment formula in which parties agree to share in the ongoing revenue (usually Net Revenue) from a customer or other source of revenue. Contrast with Bounty. Often abbreviated as “Rev Share.”

Reverse Engineering

Analysis of a device or computer software to determine how it functions. Although reverse engineering may be an Infringement of Intellectual Property rights, in order to promote competition, certain laws permit reverse engineering for purposes of Interoperability with other devices or software. In the U.S., the Digital Millennium Copyright Act (DMCA) prohibits circumvention of access controls to Copyrighted Works (e.g., unauthorized breaking of passwords or encryption), but it contains an exception to permit circumvention for purposes of enabling Interoperability with an independently created computer program. See 17 United States Code Section 1201(f). See also DMCA (Anti-Circumvention). In Europe, the Computer Programs Directive (changes pending as of May 2009) permits some reverse engineering for Interoperability. Because technology contracts often try to prohibit the licensee from reverse engineering the licensed devices or software, it i important to know that there are legal limitations to those prohibitions.

Right of First Negotiation (ROFN)

A contract right that requires the owner of an asset to notify the holder of the ROFN of the owner’s intent to market the asset. Then, for a limited time the parties must negotiate exclusively with each other. The holder has no assurance that it will conclude a deal with the owner. (The owner generally is obligated to negotiate in good faith, and cannot simply terminate negotiations in bad faith to avoid the ROFN.) Once the ROFN period expires, the owner is free to market the asset to others.

Right of First Offer (ROFO)

A contract right under which the holder of the ROFO has right to make an offer to the owner of an asset before the owner can complete a deal with a third party regarding that asset. This right forces the ROFO holder to “name its price” for the asset. The owner of the asset has a specified time period to accept or reject the ROFO holder’s offer, and if the owner rejects the offer, the owner can complete a deal with a third party for the asset, as long as that deal is not at a lower price or more favorable terms than the holder’s offer. This right also imposes less of a marketing burden on the owner than the Right of First Refusal, since the owner is not required to accept the holder’s offer. The owner controls the timing of any deal and need not reduce its asking price in order to accept the holder’s offer; even if the holder’s offer is reasonable and market-based.

Right of First Refusal (ROFR)

A contract right under which the ROFR holder cannot force the owner of an asset to complete a transaction, but if the owner decides to sell, the owner must take the deal to the holder before anyone else. The holder has the first right to the transaction on the terms offered (or any better terms that the owner later offers to others, such as lower price). For example, the holder of a right of first refusal to purchase land cannot compel the owner (the grantor of the ROFR) to sell the land, but if the owner desires to market the property, the owner must take its terms first to the holder. This imposes a burden on the owner, because other potential buyers will not want to waste time talking with the owner if they know another party has a right of first refusal and can “take away” the deal. Also, if the owner receives an offer from a third party, the owner must notify the holder, who could then match the offer. If the holder matched the offer within the right of first refusal period, the holder could close the transaction. In effect, the ROFR limits the owner’s potential marketing and negotiations with others.

Right of Integrity

The Moral Right of a creator to block the modification of a Work that he/she created.

Right of Last Refusal (ROLR)

A contract right under which the ROLR holder has the right to match the last third-party offer made to the owner of an asset. Compared to a Right of First Refusal, the holder gets the last word on any offer. Rare.

Right of Paternity

The Moral Right of a creator to receive proper Attribution for a Work that he/she created.

Royalties, Minimum

An amount that is payable regardless of whether sales were sufficient to generate that amount in royalties during the period. Minimum royalties are a means for a Licensor to obtain some minimum payment, while retaining some rights to upside revenue when the actual Royalties exceed the minimums.

Royalties, Minimum Working Clause

A contract requirement to generate the amount of sales that will result in Minimum Royalties, and if not, the License will terminate. This provision is more difficult for the Licensee to meet than Minimum Royalties. Minimum Royalties can be paid whether or not the sales are there, and the Licensee can continue to “buy” the License, even if the Licensee puts in minimal effort to achieve an upside. With a Minimum Working Clause, the Licensee must put in the sales effort, and not just pay the Minimum Royalties, which is more likely to result in Royalties on the upside.

Royalties, Running

Royalties that are accounted and paid periodically (such as monthly or quarterly), based on product sales or the like. Running royalties based on a percentage of the Net Revenue of a product are very common in Licenses.


Compensation for the right to exercise Intellectual Property rights. Royalties most often connotes Running Royalties, but also may include Minimum Royalties.

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Scheduled Maintenance

See Maintenance, Scheduled.


See Exhibits and Schedules

Self Help

The ability of a party to retrieve assets or obtain remedies by taking practical business action. Self help can be legally problematic if it results in breach of the peace (e.g, violent repossession of tangible property); or if it has not been disclosed or agreed in advance (e.g., use of timers or access mechanisms to remotely “shut down” a computer system used by a customer who has not paid).

Sell-Off Period

Used in licenses in which physical products are produced (e.g., audio CDs or printed paper books). The licensee may have a limited time period after termination of a License agreement to continue to complete work in process (in other words, the products in the manufacturing pipeline) and sell off the work in process and inventory. Also called Wind-Down Period.

Service Level Agreement (SLA)

A Covenant in a contract to provide a level of service (LOS) to meet a specified metric. An example would be a minimum Uptime Guarantee for a web service. Service level agreements often are not free-standing agreements, but instead are contained within Maintenance and Support Agreements or other service agreements.


In simple terms, withholding of payments under one transaction, contract or circumstance in order to recover debts owed under another transaction, contract or circumstance. Set-off rights are generally part of the law, such as California Code of Civil Procedure Section 431.70, and generally are not stated in technology contracts. Cross-Collateralization can be viewed as a type of explicit set-off in a contract.

Severability Clause

A contract provision that confirms a court’s power to delete or even modify terms in a contract that are illegal or unenforceable. Sometimes referred to as a “blue pencil” clause particularly for non-competition agreements, because editors at one time used blue pencils to markup text being edited.

Severity Level

The importance of an error in a technology product or service, which then may determine the required Response Time and level of effort to remedy the error. Used in Maintenance and Support Agreements.

Shrinkwrap Agreement

A type of agreement developed for personal computer software sold offline, in which the end user agrees to the agreement by the act of breaking the shrinkwrap or other packaging. It is typically not negotiable. This type of agreement becomes less and less important as software distribution migrates to the web, where Clickwrap and Browsewrap agreements are common.

Single Point of Contact (SPOC)

A person appointed by a party to a contract to be the contact person for interactions with the other party. A single point of contact is especially important when two large organizations need to communicate with each other efficiently. The most complex agreements may even include several single points of contact in different areas, such as customer support, engineering, and legal, as well as a main business contact. Colloquially spoken of as “one throat to choke.”

Site License

A License that covers all personnel located at a particular site, usually for a single fee. Contrast with Enterprise License and Per-Seat License.

Six Sigma

A process improvement methodology intended systematically to identify and reduce unexpected variation in processes (such as business processes) with the goal of improving quality. Invented by Motorola and adopted by General Electric, DuPont and other major corporations.


See Defamation, Libel and Slander.

Software Development Agreement

An agreement similar to an Independent Contractor Agreement, but more focused on software development, and with more detail concerning the software development process.

Software Development Kit (SDK) License

An agreement to permit use of a set of software tools for the development of software.

Sole Remedy

A provision in a contract that limits the Remedies that a party may pursue against the other party. For example, a services agreement may limit the buyer’s Remedies to refund or re-performance of the services, and exclude Remedies such as Damages for breach of contract. Or, Indemnification may be specified as the sole Remedy for Breach of third-party claims, which would exclude any Direct Damages for Breach of contract (in other words, one party would defend a second party and pay for the claims made by a third party against the second party, but the first party would not be liable for breach of contract to the second party).

Some Rights Reserved

A phrase used by the Open Content organization Creative Commons to indicate that some rights to a Work are available for unrestricted use, while others are reserved to the creator.

Source Code

The high-level, human readable form of computer program code. In proprietary licensing models, source code may be very valuable because it would enable other persons such as competitors to Reverse-Engineer, modify and duplicate a company’s proprietary software products. In Open Source License models, this type of Reverse-Engineering and modification is encouraged, and therefore in those models, the emphasis is on requiring licensees to make the source code available.

Source Code Escrow

An arrangement in which proprietary Source Code is deposited on a confidential basis with an independent third party escrow agent, and released upon certain Escrow Release Trigger Events. Source code escrows are important in proprietary licensing models in which the licensor does not wish to release its Source Code to others, or has not received a sufficient payment to justify such release, and instead has released only Object Code. The licensee, however, may be concerned that it will have no ability to maintain and repair the software in the event the licensor ceases to exist, files for bankruptcy, or defaults in its Maintenance and Support obligations. A source code escrow is a common approach to reduce these risks. However, in practice, these source code escrow may not be updated frequently enough, and the code may not have sufficient documentation to be usable after a source code escrow release. One approach for those issues is to use a “verified” source code escrow, in which the escrow agent (or a thi d-party consultant) examines and verifies the usability of the Source Code. Although this sounds good in theory, it may not be practical depending on the situation. Some software owners with a large customer base of licensees create a “master” source code escrow with a single escrow agent, and simply add each customer as a beneficiary of the master escrow. Source code escrows generally are unnecessary for Open Source Software.


The written requirements for software or another technology to be developed.

Statement of Work (SOW)

In a services or technology development project, a document that describes the technology to be developed, Specifications and requirements for Acceptance of the technology, Deliverables, Milestones, Milestone Schedule, and Payments. Companies frequently use a single “master” agreement, and then attach multiple statements of work for specific projects. Statements of Work are often attached to Independent Contractor Agreements and Software Development Agreements. Also known as a Schedule of Work, Task Order, or Work Order.

Statute of Limitations

A limitation on the time period that someone can bring a legal claim against someone else, for example, a time limitation on one party filing a lawsuit against the other party to the contract for breach of that contract. Some contracts include a “private” statute of limitations that contractually shortens the time limit for bringing a claim or filing a lawsuit under the contract.

Strict Conformity

A standard by which work product or Deliverables are measured against Specifications or other Acceptance criteria. “Strict” means that the work product must conform or comply to a detailed level, possibly even without small defects. Although it is often requested, in many situations, this standard may not be realistic and can even be counter-productive.


The hiring of a third person to do some of a party’s work under a contract. Subcontracting may be considered a delegation of the party’s obligations under the contract.

Sublicense, Sublicensing

The further outbound Licensing to other persons of rights received in a License. The rights sublicensed out cannot be broader than the rights received.

Substantial Conformity

A standard by which work product or Deliverables are measured against Specifications or other Acceptance criteria. “Substantial” means that the work product must conform or comply without any major or Material deviation, even it does have small defects.


An entity who holds or who has “succeeded to” the assets, rights, and obligations of another entity, for example, the surviving entity of a Merger of two companies.

Support Plan

A Maintenance and Support Agreement for mass market products. Generally pre-packaged and non-negotiable.

Supremacy Clause

Article VI, paragraph 2 of the United States Constitution, which establishes the Constitution, federal statutes, and U.S. treaties as “the supreme law of the land” in the U.S. The Supremacy Clause is important to technology transactions because many important Intellectual Property rights (such as Patents, Copyrights, and federally registered Trademarks) and other important online activities (such as electronic signatures and liability for User Generated Content) are covered by federal statutes, and certain Intellectual Property is governed in part by U.S. treaties, but contract law is generally covered by state law. Even though federal law and U.S. treaties are supreme over state law, working out the areas of conflict and overlap is very complicated.

Survival (of Rights or Contract)

The continuing effectiveness and enforceability of rights or obligations under a contract, even after it terminates or expires. Because surviving rights often can survive indefinitely, it is worthwhile to check the contract provisions that describe them.

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Term (of Agreement)

The time period during which an agreement is in force.


The ending of a legally enforceable contract, usually due to an act of one of the parties, such as sending a termination notice. Certain terms and conditions of a contract may remain in force after Termination if the contract contains a survival clause, see Survival (of Rights or Contract). Contrast with Expiration.

Termination for Cause

The termination of a contract due to Material Breach by a party or some other event specified as a proper cause for termination. In employment agreements, termination for cause may be set forth in much greater detail than other agreements, because such a termination may result in loss of bonuses and other benefits.

Termination for Convenience

The right to terminate a contract for any reason, or no reason, at any time. There is no need to prove breach by the other party. It can cover many problems in an agreement, since the party with the right to terminate can do so at any time, and isn’t locked into a long-term relationship. Also called Termination at Will. Contrast with Termination for Cause.

Term Sheet

A short summary of the high-level business points of a deal, such as subject matter and products, services and Intellectual Property rights affected; financial terms; and duration. Most term sheets are one to five pages long. Term sheets most appropriately should not be legally binding. If a so-called term sheet covers all of the Material terms and conditions of a deal, and is legally binding (i.,e., meets the requirements for Formation of Contract), then it is more properly a contract, not merely a term sheet. With the proper language, it is possible to sign a term sheet without making it legally binding. Also called a Letter of Intent (LOI), Deal Memo, Memorandum of Understanding (MOU), and Heads of Agreement.

Terms of Service (TOS) or Terms of Use

The contractual terms and conditions a governing access to and use of web sites or web services. For a web site, these are often provided as a Browsewrap. They often include an Acceptable Use Policy (AUP) whether or not the policy is identified by that name.


The geographic area in which contract rights or Intellectual Property rights may be exercised.

Third Party Beneficiary

A person or entity who has an enforceable interest in a contract between two other parties. In the words of California Civil Code Section 1559, “a contract, made expressly for the benefit of a third person, may be enforced by him at any time before the parties thereto rescind it.” Third party beneficiaries generally have the right to consent to any changes that affect their interest in the contract. Contracts may specify that no third party beneficiaries exist under them.

Time and Materials Pricing

Pricing for services that is based on an hourly rate plus reimbursement for expenses such as the purchase of equipment and supplies.

Time of the Essence Clause

A contract provision that invokes a strict legal interpretation of all time deadlines in a contract. Although this provision may seem like boilerplate, it can have important implications if the parties later disagree on timing of activities or events in connection with a lawsuit or arbitration.

Trade Secrets and Proprietary Information

Trade secrets are information (and the ideas contained in it) that has economic value and that is kept secret, and are protected as such under state law. Proprietary Information includes trade secrets, but may include other confidential information that does not rise to the level of protection of trade secrets.

Trademarks, Service Marks, and Trade Dress

Trademarks are words or symbols (such as a graphic image of a logo) to identify the source of goods, and distinguish the goods or services from those offered by another person. Service Marks are trademarks, but apply to services and not products. Trade Dress is product design or configuration that is distinctive enough to act as a trademark.

Trademark Notice

A legal notice indicating the name of a Trademark or a Service Mark, the ownership status (whether registered in the U.S. Patent & Trademark Office or not), and the name of the owner. For Trademarks and Service Marks that are registered in the U.S. Patent & Trademark Office, the encircled-R symbol can be used beside the mark and the owner’s name. Until a Trademark or Service Mark is so registered, only the TM symbol can be used in the notice. Proper use of a trademark notice for a registered Trademark or Service Mark can enable the owner to receive enhanced damages and other remedies against Infringement of the Trademark or Service Mark.

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Uniform Commercial Code (UCC)

The law that governs sales of tangible personal property as well as a variety of financial instruments and financing transactions. Attorneys look to it by analogy when dealing with technology transactions concerning intangible property such as Intellectual Property rights. (There have been attempts to create a similar law that applies explicitly to intangible property, but none of them has been widely accepted.) The UCC is called a “uniform” law because a template was proposed for adoption by each U.S. state, and the states adopted the template with their own unique state-specific variations. In California, the UCC is called the California Commercial Code.

Uniform Computer Information Transactions Act (UCITA)

A uniform law proposed to cover commercial software licenses, since Article 2 of the Uniform Commercial Code generally applies to tangiblegoods, and not intangible goods such as software. However, UCITA was controversial and not broadly adopted. As of May 2009, only Virginia and Maryland have adopted it.

Uniform Electronic Transactions Act (UETA)

A uniform electronic signature law adopted by various U.S. states, including California. Under the Supremacy Clause, the state laws adopted based on UETA are partly preempted by federal electronic signature law, such as E-SIGN.

United Nations Convention on Contracts for the International Sale of Goods (CISG)

A treaty that creates a unified international law for the sales of goods, regardless of Choice of Law of a particular Jurisdiction. It entered into force as a treaty, and therefore federal law, subject to the Supremacy Clause, on January 1, 1988. CISG is similar to the Uniform Commercial Code enacted by various states of the United States. Article 6 of CISG provides that “The parties may exclude the application of this Convention or, subject to article 12, derogate from or vary the effect of any of its provisions.” The application of CISG is almost always excluded in international technology agreements with U.S. parties.

United States Copyright Act

This statute governing Copyright law in the United States is codified at Title 17 of the United States Code.

Universal Copyright Convention (UCC)

An international treaty that governs copyright rights. It has largely been superseded by the Berne Convention, once the U.S. joined the Berne Convention and enacted the Berne Convention Implementation Act. Although the acronym for the Universal Copyright Convention is “UCC,” in the U.S. this acronym more commonly refers to the Uniform Commercial Code.


Minor changes to software after it has been delivered, such as a minor error correction, bug fix, or patch or minor enhancement to functionality or performance. It also may be defined as changes to code versions to the right of the decimal point (e.g., from version 1.1 to 1.2). Updates are provided under Maintenance and Support Agreements, or may be freely available. Contrast with Upgrade.


Major changes to software after it has been delivered, such as major new features or major enhancements to functionality or performance. Upgrades are sometimes defined as changes that are sold separately. They also may be defined as changes to code versions to the left of the decimal point (e.g., from version 1.0 to 2.0). Upgrades are sometimes provided under Maintenance and Support Agreements, or may be purchased separately. Contrast with Update.

Uptime Percentage

The percentage of time during which an online system is available for productive use by customers. Often, Scheduled Maintenance will not be included when calculating an Uptime Percentage.

Uptime Guarantee

A contractual assurance that an online service provider will maintain a certain Uptime Percentage, often with service credits as the Remedy for any Breach of the guarantee.

User-Generated Content (UGC)

Content created and uploaded by and-user customers, such as forum postings, blog comments, user-written product reviews, and uploaded amateur and home videos. See also Communications Decency Act and DMCA (Online Service Provider Immunity).

Utility Patent

See Patent.

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Vendor Lock-in

Creation by a vendor of barriers and switching costs to prevent its customers from moving to a different vendor. For example, a vendor may adopt proprietary standards, interfaces and API’s in its products that make it difficult for customers to move to another vendor. Open Source Software and customer demands for Interoperability can counteract vendor lock-in.

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Warranties (in general)

See Representations and Warranties.

Warranties, Express

Warranties that a seller makes explicitly to a buyer. See California Commercial Code Section 2314. Sellers must use care to avoid inadvertently creating express warranties in sales copy. Contrast with Implied Warranties, which can apply regardless of what the seller communicates to the buyer, unless the seller expressly disclaims them with a Disclaimer of Warranties.

Warranties, Implied

Warranties that are read into a contract by law, even if they do not appear in the contract. To exclude an implied warranty, the contract must include a Disclaimer of Warranties. Implied Warranties under the Uniform Commercial Code include the implied Warranties of Merchantibility (California Commercial Code Section 2314) and Fitness for a Particular Purpose (California Commercial Code Section 2315). See also Disclaimer of Warranties. Contrast with Warranties, Express.

Withholding Taxes

Royalties paid on sales made outside of the U.S. may be subject to withholding taxes (by the countries where the sales were made) when the Royalties are brought into the U.S. Many countries have tax treaties with the U.S. that reduce or eliminate withholding taxes. In many cases, the party paying the Royalty will “gross up” the payment so that the withholding tax does not reduce the net amount to be received by the licensor.


Original expression that is protected by Copyright law. This law recognizes several types of Works, such as anonymous works, collective works and compilations, Derivative Works, joint works, pseudonymous works, works of the United States Government, and Works Made for Hire. In addition, Works of authorship are defined to include categories such as literary works; pictorial, graphic, and sculptural works; motion pictures and other audiovisual works; and sound recordings. See 17 United States Code Section 101.

Work Made for Hire

A specific type of Work under the U.S. Copyright Act, in which the party who hires a freelancer or consultant owns the work product and even is considered the author, if the requirements of the statute (which include a written contract) are met. For more specifics and limitations, see the definition in 17 United States Code Section 101.


Revised April 6, 2011. Broken links updated June 5, 2012.