Database license agreements: Definitions and best practices
The database license agreement: An introduction
Database License Agreement is an agreement used to protect the proprietary interests of the licensor while allowing the licensee to use the software and database as per the terms set out in the contract. In addition to being used for licensing our own databases, we use these types of contracts to license content and data from third party publishers.
A database license agreement will describe subject matter such as:
The agreement will contain terms such as "content license", "publisher", "database", "software", "web page" and "web URL address" . Licensors usually require lots of detailed provisions covering every conceivable use of the data by the licensee, including but not limited to: Companies will also seek controls on access to the database (e.g., username/password and IP address/location control), allow restrictions on use of the database be imposed by the licensor (e.g., number of seats, specific users or institution types), and seek to restrict copying and distribution. Usually there are a variety of restrictions on the licensee’s ability to use the data for commercial purpose, either directly or indirectly, with the licensor asserting moral rights, copyright infringement and contractual restrictive covenants when such restrictions are violated.
Database licensing models
The licensing models for commercial databases are not as well understood as software licenses. Commercial databases are generally distributed for a one-time license fee, typically a perpetual license. However, there are at least three different ways of distributing databases that have proliferated recently.
Perpetual licenses
Most people have an intuitive understanding of software licenses, mainly because the model has been around since the dawn of computing. The biggest difference is that databases are costly to create, and so the one-time licensing model is common.
Subscription-based licensing
In this model, access to a database is packaged as a subscription; customers pay a monthly fee for access. Subscription-based licensing is popular in the Internet and cloud computing environments. Perpetual licensing is rare here, mainly because these businesses run on thin margins that are sensitive to competition. In addition, equipment needs are less predictable. AExamples include NetSuite, Taleo, and Salesforce.com.
Open source licenses
Open source databases are those distributed without significant restrictions on their use. For example, the PostgreSQL engine, developed by the PostgreSQL Global Development Group, is available at no cost, with a very permissive license. Open source availability does not mean the software is free. In some cases, customers pay Support and Maintenance (S&M) fees. In many cases, you don’t even have to sign anything; all you have to do is download the code and take a look. The creator may publish S&M fees on a website.
Database licensing has its tradeoffs. The best approach will depend on the business model used to support the database product. Many factors influence the tradeoffs, including customer demands and the modeling of S&M services.
Essential parts to a database license agreement
Every database license agreement must contain a description of how the database may be used. For example, may an employee run reports against the database? Can an employee move records into the database? Are certain fields of the records read-only? May an employee in Florida access the database? Depending on the nature of the database, there may be rights provided to third parties. An example might be the right to provide product updates to customers on behalf of a client.
A database license agreement frequently contains restrictions on use, which may be far-reaching because the business model for licensing databases may entail wide distribution and usage. Restrictions typically include prohibitions on exporting or copying records except as required for normal, permitted use. A database license agreement may also prohibit the user’s disclosure of any data or information contained within the database. In addition, many data license agreements restrict the user from assigning rights granted to third parties.
Standard database license agreements will invariably contain a section on maintenance and support. Depending upon the agreement and the relative sophistication of the parties, the maintenance and support section may be fairly brief and refer to a separate maintenance manual or maintenance agreement that sets forth the specific terms. Generally speaking, the maintenance and support section will describe the availability of technical support and when corrections or updates are going to be distributed.
The ability of either party to terminate the database license agreement is an important element of the agreement. A database license agreement will ordinarily set forth the grounds for termination. For example, breach of the terms of the agreement may provide sufficient grounds for termination by either party. A generic database license agreement might state that either party has the right to terminate the agreement upon sixty days written notice to the other for any or no reason. At times it may be appropriate for either party to have the right to terminate the agreement immediately under certain circumstances. An example might be for the failure to pay fees owed.
The term of the database license agreement should also be carefully considered. Standard agreements will invariably include a term that indicates the duration of the agreement. Unless expressly stated, most likely the database license agreement is terminable at will. However, certain in-house agreements may be for a period of years, which is considerably different from a nonexclusive license for core records.
Database license agreement negotiation
Effective negotiation of a database license agreement requires an understanding of the unique characteristics of the database itself and of the internal stakeholders involved in its use. From start to finish, the process of negotiating a license agreement to use a database begins with an understanding of what the database includes, who will use it, how it will be used and how the license agreement has been drafted. Is the object of your negotiations information in the public domain? If so, you will be able to avoid the larger price tag that is generally associated with licensing a compilation of private information. Will your company’s sales force be authorized to access the database? How about your marketing department? With a basic understanding of the needs and wants of company departments, you will be well on your way to successful negotiations.
It is important to be clear on what terms are up for discussion and which are not. Generally speaking , restricting negotiations to matters of quantity, territory and price is preferable. Doing so will ultimately save time and strengthen your bargaining position because to the extent you keep the discussions focused on substantive terms, you will prove to be a less risky bet to the prospective licensor. A good way to limit the scope of your negotiations is to include a list of terms which are not subject to further negotiation. Personally speaking, I am not always comfortable with this approach because it can lead to increased mistrust and substantive negotiations even when both parties consider the application of limitation a necessary evil in order to advance the transaction. Still, it goes without saying that you should not negotiate matters such as confidentiality and choice of law. These will typically be non-negotiable items.
Legal issues involved in a database license agreement
When entering into an agreement to license the use of a database, there are a number of legalities that must be considered. After all, at the heart of most database license agreements is the interplay of intellectual property rights and contractual rights.
The contract may have conditionally imposed obligations to comply with statutory, regulatory or non-legal requirements e.g from Data Protection authorities or Regulatory Bodies such as Ofcom (Office of Communications in the UK).
The licensor (the person providing the database) needs to make sure that its own proprietary, or other, rights are properly reserved in the agreement, along with relevant restrictions on:
The purpose of licensing is to allow the licensee (the person receiving the database) to use the licensed material in a way that would otherwise infringe the licensor’s rights. In considering a contractual licence, it is also essential to consider whether the deal fits within any statutory or regulatory definitions of licensing. These could include data protection legislation, particularly in relation to information about individuals. A licence can only be granted to use personal data if it complies with the provisions in DPA. The DPA’s provisions state that unless the Data Subject grants permission for the personal data to be shared, the Data Controller may not do so unless there is lawful authority to do so.
The licensor should therefore monitor the use of its content by licensees to ensure that the material is not being used outside of the agreed parameters.
Database licensing trends and future
As more and more enterprises are embracing cloud-based solutions, future database license agreements will likely reflect this trend. Since software can be accessed through a server in a cloud environment, database license agreements for cloud-based software will include greater specificity regarding the physical location of the server. Cloud environments may also encourage a broader licensing scope. For instance, cloud environments may allow a single user to execute business transactions for multiple different companies; thus, there may be more instances in the future where a database user license agreement restricts use of a database to a single company.
Another current trend is the connection between artificial intelligence (AI) and database licenses. AI involves the development of computer systems capable of performing tasks that normally require human-like intelligence, such as visual perception, speech recognition, decision-making, and translation between languages. Current licensing agreements typically do not explicitly address the impact of AI on use of data in the database. Future licensing agreements will likely need to include greater detail regarding direct access to databases by AI systems. With AI becoming a more prevalent part of our work lives, database license agreements should contemplate the human users of a database , the devices that they use to access the database, and the programs executing on those devices.
Artificial intelligence also encompasses machine learning (ML), which is a specific application of AI based on the idea that algorithms can learn from data, identify patterns, and make decisions with minimal human intervention. Again, future database license agreements may need to include greater detail regarding the effect of machine learning on use of data in the database. For example, a database user license agreement will likely need to continue restricting access to the database by unauthorized users. However, there is the possibility that the current (and continued) restriction on access to the underlying data is no longer sufficient in a world where such data could be learned from the output of a machine learning system. This distinction that data may now be available through legal or illegal means could create new issues in the derivation of the data.
It is important to keep the above considerations in mind when negotiating a database user license agreement. For example, while employers may not have specific policies regarding the derivation of data from a database for the purpose of training and testing machine learning systems, data scientists should be cognizant of data sourced without express authorization.