Software Reseller Agreement: What it Is and What to Include

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What is a Software Reseller Agreement?

A software reseller agreement is a legal contract between a software publisher and reseller. The agreement specifies the rights and responsibilities of each party involved in reselling the software to third parties.

Sometimes referred to as a software distribution agreement, this type of licensing agreement is created set clear legal and business terms on the obligations of both parties.

Third parties reselling software is not a new concept and it is key to make sure all terms are clearly outlined to ensure a successful relationship. Missed communication, poorly defined requirements, or loopholes could threaten even the best software resale deals, which is why it is always recommend to consult a technology lawyer when drafting or negotiating these types of agreements.

This is an article about getting the most from your software distribution agreement.

How Do You Structure a Software Reseller Agreement?

A reseller agreement for software can be structured as exclusive or non-exclusive.

• Exclusive Software Reseller Agreement: a software reseller agreement in which the reseller is the only entity legally allowed to resell or distribute the software, including the publisher and any of the publisher’s other resellers. However, it is common for an exclusive arrangement to be limited by a geographical area or industry.
• Non-Exclusive Software Reseller Agreement: Most mainstream software reseller agreements are non-exclusive. In these arrangements, the publisher is free to permit other resellers to sell the same software.

What’s Included in a Software Reseller Agreement?

Depending on the complexity, a software reseller agreement could include more specific topics, but at a minimum, it should include:

1. Applicable Law: There are some cases in which the publisher and reseller are in different countries. In these especially, there is a need to define under which jurisdiction the laws governing the agreement will be based.
2. Ownership Terms: As mentioned above, a software reseller agreement can be exclusive or non-exclusive. The publisher is the one who decides which type of agreement they want to offer, and it sometimes varies among individual sellers.
3. Intellectual Property Rights :Intellectual property rights are one of the trickiest, but most important points in a software reseller agreement. Suppose a reseller does not have express permission to use the trademark, or copyright. In that case, they could face copyright infringement or trademark infringement charges if there is a breach.
4. Payment Terms: As with many legal agreements, the financial terms should also be delineated in the software reseller agreement. If you are a reseller, this is the part you want to pay attention to. It will outline how you will be compensated.
5. Software Maintenance/Updates: Make sure you have support after the agreement. If you don’t, you could be left hanging once the agreement is signed. Typically, the SaaS publishing company is responsible for updating and maintaining software throughout the contract's lifetime. A schedule should be included.
6. Additional Services: As a reseller, if you will be responsible for end-user training, you’ll want to know ahead of time and be compensated accordingly. This should be agreed upon at the start and outlined in the software agreement.

Here is an article about some of the top software resellers in the market, according to users.

Gill D.

Ryenne S.

Sara S.

David W.

How Does a Software Reseller Agreement Work?

To set up a software reseller agreement, there has to be an interested party, the reseller, and a producing party, the publisher. The rest is a series of steps.

1. Meet with the software publisher to get a feel for the product and answer any initial questions.
2. Review terms and outline notes to prepare for the next meeting.
3. Meet with the publisher again and negotiate the distribution terms.
4. Hammer out the deal's details, such as promotional literature, patent or trademark information, payment information, and generally expected duties of both parties.
5. Consult a licensed lawyer to help draft the agreement.
6. Time to sign or take this last chance to renegotiate any contract terms.
7. If signed, you can now execute the agreement as outlined.

Here is an article about building a SaaS reseller business model.

Image via Pexels by Christina Morillo

Types of Software Reseller Agreements

There are three main types of reseller agreements: top-down, bottom-up, or the less common, three-party.

Top-Down Agreements

Suited for a more high-value customer or SME, top-down agreements spell out how the reseller contracts with customers. This usually takes the form of an agreed-upon schedule, and they are expected to include standard compliance provisions, such as:

• Anti-bribery
• Audit
• Information security
• Record-keeping.

Bottom-Up Arrangements

This arrangement may be necessary when working with a larger corporate customer. Still, in a nutshell, bottom-up agreements are a product of active negotiations between the customer and the reseller. While they may not work in every situation, they create a win-win for both publisher and seller.

Three-Party Contracts

A less popular form, the three-party contract, happens when a publisher wants to act as an intermediary between reseller and customer. While not impossible to work with, this arrangement is a bit improbable. Moreover, even with all of the stars aligned, agreements of this nature are complex and expensive undertakings.

Here is an article about reseller agreement formats.

Typical Payment Terms for Reseller Agreements

The most common payment terms for reseller agreements are margin, commission, or subscription.

• Margin: with margin-based payment terms, the reseller would purchase the original product and resell it for more than the purchase price. The difference between what the reseller paid and what they sold it for is called margin and represents the profit made per product.
• Commission: commission-based payment terms would be based on a license fee paid to the publisher, by the end-user. This is similar in set-up to a sales agent’s commission and is commonly used in a SaaS agreement.
• Subscription: this is one of those situations where knowledge can keep you out of trouble. If there is a subscription payment model for the end-user, what part of that payment is due to the reseller? This is different for every agreement; make sure it is part of your review checklist.

Here is an article about how to determine your reseller margins.

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With over ten years of intellectual property experience, I’m happy to work on your contractual matter. I am very diligent and enjoy meeting tight deadlines. Drafting memoranda, business transactional documents, termination notices, demand letters, licenses and letter agreements are all in my wheelhouse! Working in a variety of fields, from construction to pharmaceutical, I enjoy resolving any disputes that come across my desk.

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My career interests are to practice Transactional Corporate Law, including Business Start Up, and Mergers and Acquisitions, as well as Real Estate Law, Estate Planning Law, Tax, and Intellectual Property Law. I am currently licensed in Arizona, Pennsylvania and Utah, after having moved to Phoenix from Philadelphia in September 2019. I currently serve as General Counsel for a bioengineering company. I handle everything from their Mergers & Acquisitions, Private Placement Memorandums, and Corporate Structures to Intellectual Property Assignments, to Employment Law and Beach of Contract settlements. Responsibilities include writing and executing agreements, drafting court pleadings, court appearances, mergers and acquisitions, transactional documents, managing expert specialized legal counsel, legal research and anticipating unique legal issues that could impact the Company. Conducted an acquisition of an entire line of intellectual property from a competitor. In regards to other clients, I am primarily focused on transactional law for clients in a variety of industries including, but not limited to, real estate investment, property management, and e-commerce. Work is primarily centered around entity formation and corporate structure, corporate governance agreements, PPMs, opportunity zone tax incentives, and all kinds of business to business agreements. I have also recently gained experience with Estate Planning law, drafting numerous Estate Planning documents for people such as Wills, Powers of Attorney, Healthcare Directives, and Trusts. I was selected to the 2024 Super Lawyers Southwest Rising Stars list. Each year no more than 2.5% of the attorneys in Arizona and New Mexico are selected to the Rising Stars. I am looking to further gain legal experience in these fields of law as well as expand my legal experience assisting business start ups, mergers and acquisitions and also trademark registration and licensing.