A resale software license is where you the owner grant the right to another person (the reseller) to sell your software to other customers in a particular territory or sector of the market. The reason for this is to be able to access and sell to customers that you not normally able to reach by yourself.
1. Get your lawyer to write/review the software license
Always get a lawyer to draft your software license agreements based on your instructions on how you wish to commercialize your software. Sometimes you will have to sign the reseller's contract because of their bargaining power. Never sign the reseller's standard contract without having it reviewed and amended by your lawyer. The reseller's standard contract has been written to protect their interests and not yours.
2. Make sure you give the Reseller the rights needed to resell
A resale license permits your reseller to sell the software to other customers but not normally to use it themselves. In order to sell the software, the reseller will need to be able to advertise and promote it, and to demonstrate it to customers. Your software license should permit these activities. The ultimate end customer that the reseller sells the software to should just be granted a right to use the software for its normal purpose (and not to resell).
3. Define an appropriate Territory
Your license should specify the geographical area in which the reseller may resell the software. The reseller may have a strong sales network in a particular country or region and in such a case you may wish to grant the right to resell in this particular area. To maximize your sales, you may wish to appoint other resellers to sell your software in other territories and in doing so give them some form of exclusivity (as discussed below).
4. Be careful with Exclusivity
Some resellers may request to have exclusivity in their area. This typically means that no other resellers are granted the right to resell the software in the territory. You should only grant such exclusivity if you think the reseller will make enough sales to justify it. In the EU under competition law exclusivity generally can be only be granted to stop active sales in a territory from another reseller. If you decide to grant exclusivity it should be limited to a specific time period and it should only be extended if the reseller hits a specified sales target.
5. Watch out for Relabelling or Redevelopment
Relabelling means the reseller can label or brand the software under their own name and branding. This may make sense when the reseller has a powerful brand and you can benefit from higher sales by selling under this brand. If you decide to permit this you should specify carefully the circumstances in which it is permitted.
Redevelopment means you permit the reseller to change or further develop your software. This requires you to provide the source code to the reseller. This is unusual as normally in a software license you only license the object code. However, if there is an important commercial reason for doing this you should make sure that you own any redeveloped software and that you can license it to your other customers. The reseller should just be permitted to resell the redeveloped software to its customers in return for paying you a royalty.
Bernie Amarillo, Swiss entrepreneur, learned about the the do's and don'ts of software resale licensing the hard way. See the video.
Originally published February 28, 2020.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.
