The Explanatory Notes to Contracts 5, 6, 36 and 37 describe in detail some of the most important aspects to be considered in preparing distribution agreements in general.
Contract 7 provides for a situation in which software needs to be modified, customised or “converted” to be compatible with particular equipment being supplied by a distributor. This may arise where the software owner wishes to widen the market for its software so that it can operate on a wider range of systems (e.g. PC or Apple, etc.) and in so doing, the Software Owner can recoup more speedily the considerable costs of developing software. So, in addition to those distributors who are primarily involved in marketing software (see Contract 6) the Software Owner may also wish to appoint distributors who are primarily concerned with marketing established or known “brand name” systems, especially where such systems are sold in large numbers or already have a large customer base. An important contribution to the success in selling large numbers of systems is offering a range of compatible software packages and “Apps” (software applications) to their customers.
In order to obtain compatibility of such software with the systems which the distributor is marketing, the Software Owner may be required to “convert” the software for use on the system.
The conversion process may also be carried out by the distributor although, in order to do so, the distributor will first require proprietary information which the software owner may not be willing to disclose and secondly, once the software is converted, any defects in conversion will be the responsibility of the distributor. For these reasons therefore, it is advisable for the Software Owner itself to perform the task of conversion.
In this particular Contract, the Software Owner carries out the conversion, the distributor is then permitted to reproduce copies of the Converted Software from the master copy subject to attaching serialisation numbers to each copy for licensing, payment, audit and tracking purposes. The distributor is also required to virus scan the Converted Software (Clause 6(c)); to account to the Software Owner for the Converted Software element of a “bundled” price of a system (Clause 7(c)); and to provide first line support to its end-users, with the Software Owner providing back up support (Clause 11).
This Contract also provides for the distributor appointing dealers or sub-distributors and highlights the constraints placed on such parties vis-à-vis the software and support.