Avoid Ambiguity in Microsoft Licensing Agreements

Spiral in the sand

CTOs who have read Microsoft’s volume license agreements and product use rights documentation know that Microsoft has a special place in its heart for contractual “gray area.” To some extent, that fact likely arises from the practical impossibility of trying to accurately capture all the technical parameters that could affect license rights.

Enterprise IT architectures are dynamic, incorporating constantly evolving technologies. A license agreement that is too tech-specific runs the risk of being difficult or impossible to enforce when the industry starts moving to new platforms. However, that does not explain everything when it comes to Microsoft’s contracts.

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How to Avoid Ambiguity in Microsoft Licensing Agreements

In many places, those agreements include ambiguous or practically unenforceable language, where I struggle to think of a good-faith reason to do so. Two examples:

• …You may not use the products for commercial hosting services.
Microsoft includes this prohibition in the Universal License Terms section of the Product Use Rights. However, nowhere does it commit itself to a definition of what constitutes “commercial hosting services,” thereby saddling its customers with essentially all the often substantial risk associated with making that determination for themselves.

• …Microsoft will work with Enrolled Affiliate in good faith to determine how to accommodate its changed circumstances in the context of this agreement.
Lawyers call that an “agreement to agree,” and it is essentially nothing more than expectations-setting language that would be unenforceable in the event of a dispute. The above passage is taken from a section in Microsoft’s form Enterprise Agreement addressing what happens to a company’s licensing obligations in the event of an acquisition, merger or divestiture.

Our experience is that Microsoft affirmatively prefers such language. According to its licensing experts, such terms allow Microsoft to work “collaboratively” with its licensees to formulate solutions to new challenges during the term of an enrollment as needs arise. I find that explanation to be dubious. The primary effect of contract ambiguity forcing the parties back to the negotiating table is that it gives Microsoft’s sales team another bite at the apple. If Microsoft is really so willing to work to meet the needs of its customers, then perceived contract rigidity should be no concern – a rigid contract can be amended by the parties’ subsequent agreement just as easily as a vague one. More importantly, though, having a set of clear default rules to govern the relationship yields predictability to the relationship, and predictability always, in our experience, is going to be in a licensee’s best interest.

When it comes time to sign or renew any volume licensing agreement with Microsoft, companies should push hard to secure Microsoft’s agreement to replace vague contract language with definitive terms that can meaningfully inform their IT plans and priorities. Microsoft often will resist those changes, but they can pay dividends in the future, especially to the extent that the terms in question touch on core business operations.

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