Demo/Eval Agreements

Almost every large software purchase is predicated on the ability of the end user to review the product. When you’re buying something of that magnitude, it’s not unreasonable to have that testing time.

But vendors don’t just deposit software at even their most favorite customer’s facility without assurance that the software is going to have some sort of contractual fence protecting it from release, abuse or misuse. So the typical pattern for a customer to test software is a one-two contractual punch of a non-disclosure agreement (NDA) in addition to, or part of, an evaluation agreement.

We’ll talk NDA’s in the near future – today is about the eval.

Evaluation agreements (also called Demo Agreements) are used for GA software, not just software still in development or otherwise limited or restricted in some way. So invariably, the contract presented is a repurposed software license… which does, actually, have the right type of terms and conditions necessary to effect the temporary relationship desired.

The problem, however, is that temporary relationships have a tendency to become permanent simply by inattentiveness. And a contract that’s designed to be temporary has probably been given less review attention at the outset of the relationship. Which means that a long-term eval/demo agreement is essentially a possible perpetual license agreement. Combining the lesser review attention with the possibility of perpetuality, and you get a bad deal from the customer perspective.

The fix, of course, is diligence. Remember that each interaction between vendor and customer has the chance to last much longer than originally intended… the chance to apply to things never initially considered. And it is for this reason that many contract professionals have a negative visceral reaction to eval or demo agreements. The business people believe that it’s “just a demo”, and the contracts folks know that it can become so much more.

When reviewing an eval agreement, the most effective solution is to place a termination date in the agreement itself. This will cut short the demo/evaluation process (which the business folks must be aware of), but it will at least prevent the eval from becoming the more permanent software license for the purchased product. Of course, this doesn’t stop someone from amending the agreement to make it last longer, but at least there’s the chance that the someone will also at least ask the question of why there was termination for the eval in the first place.

If you have the time or wherewithal, evals should be reviewed in as much depth as any other normal software license agreement. This allows you the flexibility to slip into a longer term relationship without worry about the terms and conditions of the underlying agreement (and without additional review/negotiation time/expense). But it does require a more extensive up-front investment of time, which is often problematic for organizations that don’t have a lot of contract reviewing staff or are paying outside counsel for time to review agreements that might never lead to a purchase.

Oh, and by the way, NEVER accept any type of eval agreement without the same IP Indemnification clause you would get in any other software license. If you’re going to install the software at your organization, you need the same protections that you’d need from purchased software. Arguments from the vendor that the customer is not paying for the software and is thus not eligible for protection should not be paid any attention.

Whatever the solution that is right for you, just remember that the eval is just as binding as any other agreement… the term “eval” isn’t meant to describe the agreement.

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