How to Read a License Agreement

December 2nd, 2008

I read a lot of license agreements.  A few of them are concise and simple to figure out, but most are far too long and confusing.

It is not effective to read the agreements straight through from start to finish.  My eyes usually start to glaze over after about page 3, and after page 6 almost anything else within reach seems more interesting than the line I am on at the time.

A better way to read is to take it apart into sections.  Figure out the important points you need to know and go find those first, then go back and see how all the other words come together around the important elements.

I made a checklist to help me do this well.  When I get a new agreement I print out the checklist, then comb the agreement looking for all of these parts.  With that basic information in hand I can go back to the whole thing and pay attention to all the picky details.  As a bonus, once I force myself to find and write down the key terms I tend to understand them much more deeply.

Note that my checklist has lots of extra blank lines.  It is a work in progress and should ideally be modified every time to cover the special attributes of each deal.  Try it out and let me know what other essential terms should be included as “standard”.

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  • Wouldn't it be simpler just to use purely open-source software, then you know you won't be caught out be license gotchas?

  • Cabalamat, if the client wants to use non-open-source software, somebody has to review the license agreement; Jay's approach is a useful one.

  • It's also good to remember that open source does not mean “free for any purpose”. There are plenty of enterprise open source companies that provide their software (and support) under extensive license terms.

    Even GPL, the most “basic” flavor of open source, comes subject to license terms and groups like the Free Software Foundation have brought litigation to enforce terms.

    Thanks for the great question. A lot of people mistake open source for “I can do whatever I want with the code” and that just isn't so. Gotchas are everywhere for the unwary.

  • Pingback: Review contracts in sections - Jay Parkhill | Drafter's Choice()

  • Saul_Lieberman

    If there is a lengthy definitions section up front, skip it and refer back to it as needed. It will give you the context to understand any nuances in the definitions.And you won't get burned out before you get to the heart of the agreement.

  • Saul_Lieberman

    If there is a lengthy definitions section up front, skip it and refer back to it as needed. It will give you the context to understand any nuances in the definitions.And you won't get burned out before you get to the heart of the agreement.