Amy's Daughter Kathleen Running Proprietary Software

I have noticed a new trend in software license agreements. It is the inclusion of a provision that permits software companies to use the trademarks owned by its customers for its own marketing purposes. Specifically, many software license agreements now include a "license back" of sorts in rights to use the software licensee's name, logos, trademarks, service marks and "marketing materials" in the software company's own customer lists, RFPs, customer reference lists (for reference purposes), and in advertising or promotional materials.

I do not like these provisions and here's why.

Confidentiality

Many contracts include confidentiality provisions in light of the sensitive information that must be shared for a software provider to provide the contracted for software services. These confidentiality provisions may include within the designation of "confidential information" the mere existence of the contract between the parties.

If a client has any interest in not letting the world (and its competitors) know what software it is using to perform essential business functions, it should think twice before granting a software company free reign to advertise this fact to its potential new clients.

Non-Trademark Use

Assuming that a licensee is not concerned about third-parties knowing what software it is using to conduct business, referencing a client as part of something akin to a client reference list is arguably not trademark use and does not require permission from the trademark owner.

This assumes that the use of the client's name is in a manner "other than as a mark" as the Lanham Act describes it, is undertaken in good faith and does not create the impression that the licensee is endorsing the software company. I would also take the position that this type of "fair use" would not extend to a software company using a client's logos (aka design marks), trade dress or other commercial indicia in its marketing materials.

Freeriding

Finally, the market power of the respective players may make use of a client's mark by a software licensor very valuable. The fact that a large or leading player in a particular industry has taken an enterprise-wide software license with a particular vendor may be worth thousands of marketing dollars to the software company.

Where is the compensation for the software licensee? I have never seen a software licensee that offers so much as a de minimus discount in exchange for use of a client's name to promote its products.

Unless very narrowly drawn, I routinely remove these provisions from software licenses. There are of course instances in which market realities provide a client little leverage in negotiating certain software license provisions, but this is not one of the provisions that software companies will generally lose business over. There may be other cases in which a client sees some advantage to having the licensor-licensee association touted, but in my experience this is the exception and not the rule. Finally, there may be instances where a licensee sees absolutely no downside to the software company using the information and simply wants to be agreeable â but these folks are not trademark lawyers.

Here's Dilbert's take on software licenses:

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