At Quexcel, our customers ask us a lot of questions about software licenses. These days, one question seems to be on people’s mind more than any other: “We have a Microsoft Open License Agreement and use the licenses purchased through this agreement at all our companies. Is that allowed?”
The answer to this question is a resounding: “No, that is not allowed.” It appears that for many Microsoft customers, this issue is and remains murky. The following is a clarification.
When you purchase software licenses, you enter into a contract – a legally binding agreement – with Microsoft. That agreement lists the Terms and Conditions which apply to both parties. The Open License Agreement states the following, translated into spoken English:
Under “Licensing”: Microsoft allows you, the customer, non-exclusive, non-transferable, global and limited rights to install and use the software.
In other words, you cannot transfer your right to use the software to a third party (by renting, selling, or loaning). But then things become tricky, because Microsoft defines “customer” as: Customer indicates the entity that entered into the agreement, or its affiliates. This suddenly makes the earlier determination of “non-transferable” a lot less clear. Because, in the same Open License Agreement, Microsoft defines an “affiliate” as follows (summary): A legal entity owned by a party, which is the owner of one party, or which has co-ownership with a party within a certain defined region… It is explicitly stated that ownership must be 50.1% or more.
Loosely interpreted, the customer might be a holding company with a number of subsidiaries, so called affiliates. Since Microsoft has granted permission for the customer to use its software, it also implicitly grants the same permission to the affiliates. Yet this is in complete opposition to the statement about “non-transferrable right to use”.
It would appear confusion reigns supreme, but we can clarify the matter once and for all. The purchase of licenses for use by a different entity is called “sublicensing”. The right to do so is stated in, among others, the Open Value and Open Value Subscription agreement: Customer may sublicense its Licenses for Products to any Affiliates located in Customer’s Defined Region, but Affiliates may not sublicense these rights and their use must be consistent with the terms contained in this agreement.
This right is not included in the Open License Agreement. All Microsoft agreements are legally exhaustive, which means all your rights are described. In other words: that which is not included, is not allowed.
We return to the issue at hand. You have entered into an Open License Agreement with Microsoft with one company, and want to use the licenses at various other subsidiaries or companies. This is not allowed. It would be sublicensing, and the right to do so is not included in your agreement.
We do feel that it would be better if an explicit prohibition on sublicensing were included in the Microsoft Open License Agreement, however, this is not the case at this time.
Do you have questions regarding Microsoft, or other volume licensing agreements or software contracts? Ask the experts. We are happy to assist you through “The Power of Knowledge”.
Author: Peter van Uden
founder of Quexcel, Software Licensing and Software Asset Management Specialist