Hidden Licensing Issues Could Cost You—Act Now

Let me tell you about a conversation that started with a simple phone call.

And ended with an IT company saving its business from potential disaster.

The owner of this IT company specializes in creating custom software and web applications.

Business was good, clients were happy, and projects were rolling out on time.

But there was a lurking issue that could have turned everything upside down.

The owner called me with a concern.

A concern that most business owners don’t think about until it’s too late.

It all revolved around a little-known danger hiding in plain sight:

Hidden licensing risks.

But why is this hidden? And why is it a risk?

Well, companies like his like to keep projects on track and budgets in check.

To do this, they often use pre-existing frameworks, libraries, and code snippets.

It's a smart move.

Why reinvent the wheel when there’s perfectly good code out there that can speed things up?

But, like many shortcuts, this one also came with its own set of risks:

(1) Every piece of pre-existing software comes with its own set of rules.

Licenses that dictate how the code can be used, modified, or shared.

The problem? These terms can sneak up on you.

The IT company was using components that had their own licenses.

And that could add unexpected obligations to their clients.

Suddenly, what seemed like a time-saver turned into a ticking time bomb.

(2) Imagine delivering a custom software solution to a client.

Only to have them discover that they’re required to share their proprietary code publicly.

Or worse, they’re hit with surprise fees because of some buried licensing clause.

You can't even call these minor hiccups.

These are issues that just blow up in people’s faces and then ruin months of planning.

Especially if a person is planning on selling or distributing a software piece.

(3) Here’s where things get really tricky: The clients had no idea what was under the hood of their software.

They didn’t know about the pre-existing components or the potential legal strings attached to them.

This lack of transparency left them vulnerable, reducing their control over the final product.

And exposing them to risks they never saw coming.

As any right agency, they couldn't allow this.

So, how did we turn this situation around?

By diving deep into the terms and bringing everything to the surface.

(1) Detailed Licensing Review:

We started by conducting a broad analysis of every pre-existing framework, library, and snippet of code the IT company was using.

This involved identifying the licensing terms attached to each component and assessing how these terms could impact their clients.

But we didn’t stop there.

We helped the company create a clear, detailed document that outlined every single license.

Along with the risks and restrictions that came with them.

This document was shared with clients before the project began, making sure of complete transparency from day one.

(2) Client Education:

Next, we focused on communication.

We encouraged the IT company to hold initial consultations with their clients.

This is to explain the implications of using pre-existing software components.

Clients needed to understand what they were agreeing to. No more hidden surprises.

We also added a specific clause to their contracts.

This is to explicitly state which pre-existing elements would be used and what their licenses contained.

This gave clients the information they needed to make informed decisions and plan accordingly.

(3) Customized Licensing Agreements:

In cases where using pre-existing components was unavoidable, we helped the IT company draft customized licensing agreements.

These agreements spelled out exactly how the software could be used, distributed, or sold, reducing the risk of future disputes.

And just to be safe, we included indemnity clauses to protect the IT company.

If a client failed to comply with the licensing terms, the responsibility, and any legal fallout, would be on the client, not the IT company.

(4) Ownership and Control Clauses:

Finally, we tackled the issue of ownership.

We introduced clauses that clearly defined the rights to both the custom and pre-existing components.

Clients needed to know exactly what they owned and what they were licensing.

These clauses also provided guidelines on how the software could be modified or distributed in the future.

By taking these steps and adding these clauses, we had a couple of things going for us:

(1) Better Trust With Clients:

By providing complete transparency and educating clients about potential risks,

The IT company built stronger, more trusting relationships with its clients.

(2) Better Reputation:

The company was committed to legal clarity and proactive risk management.

And that improved its reputation, attracting more high-value clients.

(3) Detailed Legal Protection:

The customized contracts and detailed licensing reviews made sure that both the IT company

And its clients were fully protected from hidden licensing risks.

And that reduced the likelihood of legal disputes.

(4) Improved Transparency:

Clients were fully informed about the software components used in their projects.

And that gave them better control and reduced the risk of unpleasant surprises.

In custom software development, it’s easy to focus on speed and efficiency.

But like any shortcuts out there, there are always hidden risks you need to watch out for.

So don't use pre-existing software components without understanding the risks that come with them.

Always conduct thorough licensing reviews, educate your clients,

And make sure your contracts are made to protect everyone involved.

For your next step, take a close look at your current and upcoming projects.

Are you using pre-existing components?

If so, conduct a detailed review of the associated licenses.

Make sure your clients are aware of any obligations or restrictions.

And finally, update your contracts to show this transparency.

And protect your business from potential legal pitfalls.

If you need my help with it, just reply to this with "REVIEW."

Why waste your time reviewing documents when you can focus on doing what you do best - creating quality software.