Commonwealth's Cyber Law E-Government Advisory Roundtable's
Software and Website Development Work Group
January 18, 2002
Table of Contents
- Introduction and Scope
- Development Agreements and Their Importance to the Commonwealth
- How Web Site Development Differs From Pure Software Development
- The Essential First Step: A Requirements Document
- Procurement Basics
- Commonwealth Terms and Conditions
- Statewide Information Technology Services Contract: ITS07
- Categories of IT contractors on ITS07.
- What Does A Contractor's Presence On ITS07 Mean?
- How Do I Contact an ITS07 Contractor?
- What Can I Negotiate with the ITS07 Contractor?
- Requests for quotes under ITS07
- Scope of Work under ITS07
- Contractor¹s Obligations
- Legal Issues That Should Be Addressed In The Scope Of Work
- Ownership of Intellectual Property
- Termination or Suspension of Contract
- Records Retention.
- Indemnification, Attorneys¹ Fees, and Limitations on Liability
- Choice of Law
- Automatic Data Transmission
- Licensee Remedies
- Integration Clause
- Requests to License Back Commonwealth-owned
Intellectual Property to the contractor
- Reporting And Resources
- Exhibit A: Reporting And Resources
- Exhibit B: Language Modifying Confidentiality And Return Of Records Provisions
- Exhibit C: Preservation Of Commonwealth¹s Assignment Rights
- Exhibit D: Frequently Asked Questions
- Exhibit E: Minimal Warranties
I. Introduction and Scope
Every year, the Commonwealth¹s agencies enter into an increasing number of legal agreements pertaining to the development of sites on the World Wide Web ("Web sites") and computer software used for various purposes. The purpose of this document is to:
- Describe the process through which such procurements are made by the Commonwealth.
- Suggest the standards that agency counsel should ensure are incorporated in such agreements.
- Refer agency counsel to resources available in connection with such agreements.
Except for section V.B., Commonwealth Terms and Conditions, this document does not address issues pertaining to licenses for "off-the-shelf", i.e. already developed, software.
II. Development Agreements and Their Importance to the Commonwealth
As the Commonwealth engages in an increasing number of activities involving information technology, both within its own computer systems and over the Internet, the terms of Web site and software development agreements assume increasing importance. The quality of the information technology used by the Commonwealth has a profound impact on the quality of the services it delivers. The well-being and survival of some of the Commonwealth¹s most vulnerable citizens are dependent on the swift and accurate exchanges of information among Commonwealth agencies and between the Commonwealth and other entities. The Commonwealth may, if such agreements are not worded correctly, give away valuable intellectual property paid for by the Commonwealth¹s taxpayers; agree to contractual terms inconsistent with its obligations under the state laws pertaining to the disclosure and withholding of data; and expose the Commonwealth to unnecessary legal risks. The purpose of the standards set forth in this document is to prevent these harms, protect the Commonwealth¹s information technology investments, and ensure, to the extent possible, that information technology developed for the Commonwealth serves its intended purpose.
III. How Web Site Development Differs From Pure Software Development
Most attorneys understand the rudiments of software development. In its crudest sense, this process consists of programming (the writing of a set of directions to be followed by a computer) and the subsequent testing and retesting of the resulting computer code.Web site development includes, in addition to basic software programming, some of the following additional features:
- Embedding images in the text . Web Site development involves embedding pictures or other images in text files so that they too can be posted on the Web.
- Interactive elements . Web site developers write software that permits users of such sites to engage in transactions with the agency hosting the Web Site.
- "Look and feel" and a "clickstream ". Web site developers create a site that has a particular "look and feel", which is just what the label implies. For example, while the IRS¹ web site looks official and bureaucratic, the L.L. Bean Web site is welcoming and consumer friendly. Each site¹s "clickstream" is the series of pages that appear at a web site as you make certain choices. For instance, if you visit the web site of retailer A, the site may have a click stream that has you arrive at a home page and then choosing either to look at a catalogue or place an order. Retailer B¹s clickstream may, at the home page, give you the choice only of looking at the catalogue, with the choice of placing an order coming after you have visited the catalogue.
- Ability to create "cookie" files . A cookie is a file that a Web site can place on the site user¹s computer. A cookie file contains unique information that a Web site can use to track such things as the user¹s password, lists of Web pages they have visited, and the date when the user last looked at a specific Web page, or to identify the user¹s session at a particular Web site. A cookie file allows the Web site to recognize users as they click through pages on the site. (Note that ITD currently permits the use only of "session"cookies, which expire at the termination of the user¹s session at the site, or shortly thereafter.)
The differences between Web Site development and software development are not great from the standpoint of state procurement, but must be taken into account as agency counsel review the products and services that their agency will purchase or license through the development process.
IV. The Essential First Step: A Requirements Document
The most important element in a successful information technology project begins long before a project is put out to bid or a contract awarded. In order to conduct a successful software or website development procurement, an agency must first analyze the business process (transaction or other activity) that it wants to accomplish through the use of information technology, breaking it down step by step and charting the flow of events that comprise the whole. What are the steps in the process as it is currently conducted by the agency, either on paper or through the information technology that will be replaced by the new system? Thereafter, the agency must re-examine the process from start to finish. Is each step of the process, or the sequence of steps, required by law or regulation? If not, is there a way to accomplish the transaction or activity with fewer, better or differently organized steps? An agency¹s CIO will need the assistance of the agency¹s business managers and its legal staff to tackle such questions. Once the business process has been re-imagined, the agency can develop a document that articulates the requirements --a "requirements document"-- for the information technology system that it seeks to develop. The requirements document should be a rough blueprint for the agency-generated documents discussed below, including the Request for Responses or Request for Quotes and the Statement of Work. The more thought and planning that the agency invests in analyzing its business processes and developing a requirements document, the better the outcome of its software or website development project will be.
Agencies that do not have the resources in-house to engage in such a business process analysis can seek assistance from ITD, which will provide the services of a project manager experienced in business process analysis. Alternatively, agencies may want to hire an outside consultant to perform this work. The outside consultant hired to analyze and/or redesign the agency¹s business process need not be used as the contractor ultimately designing the software or web site.
V. State Procurement Processes
- Procurement Basics
Agency counsel reviewing Web site or software development agreements must first become familiar with the Commonwealth¹s procurement requirements for commodity and service purchases.Executive Departments are subject to M.G.L. c. 7, §22, M.G.L. c. 30, §51 and § 52, 801 CMR 21.00, and the Commonwealth of Massachusetts Procurement Policies and Procedures Handbook (available on-line at http://www.comm-pass.com .) Additional contracting and state finance law requirements are outlined in Comptroller Policy Memo #304 and attachments.
- B.Commonwealth Terms and Condition
An agency contract for a Web site or software development project whose total value exceeds the department¹s incidental purchase limit (up to $5,000) must be spelled out using standard documentation including the Commonwealth¹s Terms and Conditions (hereinafter the "T¹s and C¹s") and the Commonwealth¹s Standard Contract Form and Instructions (hereinafter "Standard Contract Form") (available on-line at: http://www.comm-pass.com )
The T¹s and C¹s document is executed and filed only once by a contractor, and applies to any contract executed by the contractor with any agency of the Commonwealth. Unlike the T¹s and C¹s, a Standard Contract Form is executed with a contractor for each agency contract or contract.
The T¹s and C¹s and Standard Contract Form take precedence over the specific terms of all other written agreements, attachments or other documents utilized for the purchase of goods and services entered by the Commonwealth.Any additional documents signed by a state agency in connection with a Web site or software development procurement whose total value exceeds the department¹s incidental purchase limit (between $1,000 and $5,000) will be superceded by the terms of these two documents.
The Office of the Attorney General advises, and the Office of the State Comptroller requires, that agencies, in general, not execute vendor contracts, terms and conditions, forms, invoices or other documents containing contractual terms. Frequently, contractors have standard form development contracts of their own addressing topics similar to those addressed in the T¹s and C¹s and the Standard Contract Form, but in ways that differ radically from the former two documents. Agencies should not sign such documents and should, instead, draft and sign statements of work integrated in the contractor¹s pre-existing contract with the Commonwealth under ITS07, as described in section VI of this document.
One exception to the rule that agencies cannot sign contractor agreements occurs when an agency has no choice but to sign, through a "click-through" agreement for software use or a "click-wrap" or "shrink-wrap" license for off-the-shelf software purchased through a third party reseller like ASAP. In such cases, the software publisher has not and generally, due to their market power, will not, sign the T¹s and C¹s. If the dollar value of an individual license for the software is substantial (in excess of $50,000), the agency must review the agreement, and negotiate directly with the software publisher amendments conforming the license, to the greatest extent possible, with the T¹s and C¹s and/or the Standard Contract Form.
- Statewide Information Technology Services Contract: ITS07
The Commonwealth has issued a special Request for Response or RFR for information technology providers, known as "ITS07". Contractors who have been selected for a contract with the state under ITS07 are said to be on "statewide contract"or "on ITS07", and agencies can use these statewide contractors for Web site and software development. A copy of ITS07 is posted on the Comm-PASS web site. To locate the ITS07 page, which includes the RFR Main Document and all amendments to it, summarized in the latest numbered amendment, as well as a list of all contractors currently on ITS07, you must:
- Go to http://www.comm-pass.com;
- Scroll down to and click on "Search" and click it;
- Scroll down to near the bottom of the page.
In the"Bid Reference No." box, enter "ITS07"; and
- Click on "IT Services RFR".
1. Categories of IT contractors on ITS07.
ITS07 constitutes a list of contracted suppliers/providers of goods and services from numerous different types of information technology contractors, including:
- Contract personnel. These contractors are placement agencies or brokers of information technology professionals who offer the services of individuals with expertise in web site and/or software development. An agency would use the services of contractors offering contract personnel if, for instance, its own information technology staff was developing software in-house and it needed to obtain the services of a Visual Basic software programmer who would work side by side with agency staff on the project for six months.
- Solution providers . Solution providers have expertise in application development, project management, network integration, configuration control, and software solutions (i.e., developing sets of software that can be made to work together to solve a business need). An agency that didn¹t want to manage a software or Web site development project itself but knew what it wanted to achieve would ask such a contractor to build a system. For example, an agency that did a lot of enforcement litigation might contact such a contractor and request that they build a case management tracking system.
- Software publishers . Software publishers "own" software and license it to others. Agencies should note that most purchases of already written software are made by the Commonwealth not through publishers under ITS07 but through third party resellers under a separate contract with the Commonwealth. On occasion, however, direct purchase of software from a publisher under ITS07 is financially advantageous to the Commonwealth.
- Technical Specialists . Technical Specialists are businesses with up to $2,000,000 in gross annual revenue that identify to the Commonwealth, at the time that they bid on ITS07, up to two areas of specialty in the area of information technology. Their skills are the same as those of firms bidding under the "solution providers" section of ITS07; the only difference is the size of their business. This category was created by OSD for two purposes: to foster the growth of small businesses and to provide a base of small businesses available for procurement. Often, agencies receive better service on small Web site and software development contracts if they use a smaller company.
You should carefully review ITS07, in particular the special provisions of the RFR that pertain to different types of contractors, prior to reviewing or drafting a Web site or software development agreement.
2. What Does A Contractor¹s Presence On ITS07 Mean?
In order to bid on ITS07, vendors must provide a great deal of general information about themselves, including matters such as their areas of expertise, financial stability, customer base, and affirmative action plan. In addition, vendors who apply for classification as Technical Specialists or Contract Personnel must specify the hourly rate ranges at which their technical specialists will work.
Agencies wishing to obtain more information about a particular contractor on ITS07 should read the articles regarding the selection of software contractors posted by OSD. http://mass.gov/osd/.
Another article, OSD Update 02-45, can be reached by clicking on to ftp://ftp.comm-pass.com/Data/0055960086.pdf. The articles explain how to interpret the scoring system used by OSD with respect to contractors that are chosen under ITS07. Scores for each contractor are posted at http://www.mass.gov/osd.
At this site, scroll down to the list of awarded/renewed contracts for each section of ITS07.Using OSD¹s explanatory material, agencies can use the scoring system to obtain further information about individual contractors. Unfortunately, the scores are two years old as of the date of this document and, given the rate of change in the technology field, should be used with caution.
3. How Do I Contact an ITS07 Contractor?A contractor¹s presence on ITS07 means that agencies can directly contact the contractors on the contract and negotiate with them to develop a web site or software. Although there is no formal requirement that agencies obtain quotes from multiple contractors on ITS07, agencies are always required to use sound business judgment in connection with procurement decisions and, in most cases, obtaining multiple quotes is the only way to do so, even when making a selection among contractors on ITS07.
If the amount of the development project involved is significant, agencies are advised to solicit price proposals or quotes from several different ITS07 contractors, unless they have a clear, documented business justification for eschewing this process. Agencies can contact individual contractors by emailing a group of contractors in the appropriate category and asking them to give a price for their services. For a large project, it is recommended that agencies post an RFQ on Comm-PASS addressed to ITS07 contractors and containing a detailed description of the proposed project.
While agencies are required to use ITS07 for software or Web site development projects for which the contractors on that contract are appropriate, for extremely complex projects where no ITS07 contractor appears to offer the right mix of products and services, agencies may issue a new RFR for the project. In determining which of these three methods of communication to use, agencies must weigh the cost of the selection method against the dollar amount that the Commonwealth could potentially save by using the most rigorous selection procedure.
4. What Can I Negotiate with the ITS07 Contractor ?
All ITS07 contractors have executed T¹s and C¹s and Standard Contract Forms with the Commonwealth, which incorporate by reference the terms of the original ITS07 RFR, the Contractor¹s response thereto, and any additional terms and conditions negotiated by the Operational Services Division (OSD). Therefore, agencies are not required to sign any additional contracts with ITS07 vendors, except in the case of contracts with solutions providers or technical specialists, whose specific, and usually complex, project goals must be set forth in a statement of work as described in section VI of this document.
Agencies which seek to negotiate terms with any ITS07 contractors should review the terms of the ITS07 contract, 801 CMR 21.00, and the Commonwealth Procurement and Procedures Handbook to determine what can and cannot be negotiated for their project.
Agencies that negotiate directly with contractors must hold Technical Specialists and Contract Personnel contractors to, at a maximum, the hourly rates or prices offered by the contractor in its response to ITS07. (Agencies are often successful in negotiating contractors¹ rates downward, particularly during "down" markets). ITS07 does not require Solution Providers to provide hourly rates, which are intended to be negotiated by the agency and the contractor. Regardless of how they contact ITS07 contractors, agencies engaging the services of an ITS07 contractor for a development project must sign a written scope of work document addressing the issues set forth in section VI of this document.
Agencies should also consider negotiating a fixed rate for the development project, rather than a time and materials contract. Fixed rate projects put a greater burden on the contractor to complete the project on time and on budget.
5. Requests for Quotes under ITS07?
ITS07 is drafted in very general terms, and typically, the bidder¹s response to ITS07 contains pro forma agreements to the requirements of that RFR. For that reason, for specific projects, agencies may issue a request for quotes, or "RFQ", to contractors who are on state contract under ITS07. RFQ¹s provide contractors with detailed information about the scope of a specific project for which the agency seeks such contractors¹ goods or services, and provides the contractor with an opportunity to give a detailed description of how they could meet the agency¹s needs. If issued, the RFQ, followed by the contractors¹ response thereto, become part of the Commonwealth¹s contract with the contractor and, after the T¹s and C¹s and the Standard Contract Form, ITS07 and the contractor¹s response thereto, take precedence over other documents signed by the parties.
There are links to several completed RFQs online on the OSD Software and Services web page. To access them, click on the green button at the top of the page labeled "IT Services Contracts". Other RFQ¹s for IT projects may be available at the Comm-Pass web site, located at www.Comm-PASS.com look for RFQ¹s in both "Open Solicitations" and "Closed Solicitations." Page 31 of ITS07 itself provides some limited guidance regarding the drafting of RFQs within the ITS07 contract.
Prior to drafting an RFQ, an agency should consider whether a fixed-cost or time and materials method of payment is more appropriate given the nature of the development contract. In general, fixed-cost contracts are preferable because they put the burden of underestimation of needed resources and poor management on the Contractor, rather than the Commonwealth, and provide a strong incentive to Contractors to finish projects on time and within budget.
6. Scope of Work under ITS07
Once the agency has reviewed the responses to the RFQ and chosen a contractor, the contractor and the agency negotiate and sign a "Statement of Work" or, as it is referred to in this document, "Scope of Work" agreement which sets forth in detail the parties¹ mutual obligations with respect to the development project. General standards for drafting a scope of work are set forth in OSD Update 02-45. To access this update, click on ftp://ftp.comm-pass.com/Data/0055960086.pdf.
The Scope of Work is normally subordinate to all other documents described above in the order of precedence of documents. Thus, one section of the Scope of Work must list all of the documents that will eventually comprise the agreement between the Contractor and the Commonwealth (i.e., the T¹s and C¹s and Standard Form Contract; RFR ITS07; the Contractor¹s response thereto; and the Scope of Work), in their order of priority, and restate the priority of the documents. Alternatively, agencies may decide to give the Scope of Work higher precedence than the contractor¹s response to ITS07, and can indicate this priority by so stating in the Scope of Work.(However, agencies are not authorized to enter agreements altering the primacy of the T¹s and C¹s, the Standard Form Contract and the RFR in the order of priority; these three documents must always take precedence over the contractor¹s response to ITS07 and the Scope of Work.)
However, in negotiating the scope of work, agencies cannot agree to accept fewer or lower quality products or services than those specified in the contractor¹s response to the RFR or RFQ. Although it is common for contractors to write the initial draft of the scope of work, agencies undertaking this role themselves will enhance their control over the process.
VI.The Scope of Work For Contracts Entered With Solution Providers and Technical Specialists 
In that most contractors hired by agencies to develop Web sites or software will already be on ITS07 and will therefore be bound by the T¹s and C¹s, one might ask why agencies need to draft or sign any additional documents other than an RFQ issued under ITS07. Unfortunately, because the obligations created for the contractor by ITS07 and, to a lesser extent, the agency¹s RFQ issued under ITS07, are generic, agencies must work with the contractor to draft a specific, detailed scope of work addressing not only what the developer will do at each stage of the project but also clarifying the many issues raised in a general sense in the T¹s and C¹s but not sufficiently fleshed out for a Web site or software development agreement. This section sets forth standards and recommendations for addressing such issues. Agency counsel should always review the scope of work before it is executed, and ensure that, in addition to the matters discussed in this section, any other inconsistencies between the scope of work and the T¹s and C¹s are eliminated.
A. Contractor¹s Obligations
Required Elements. The success of a Web site or software development project is based in part upon the parties¹ ability to jointly draft a clear description of their mutual responsibilities. In drafting or reviewing the scope of work for a Web site or software development contract, agencies should include, at a minimum, in addition to the remainder of the items discussed below in this section, the following:
- A detailed description of the goods and services that the contractor will deliver, and when he will deliver them. In the case of software development, the goods and services will include the development and delivery of all software and Web site components, including those listed in section VI.B.1. of this document.
- A clear description of the development process, including who will provide needed resources and where the development will take place.
- A description of the quality assurance and testing processes to be used by the contractor. For Web sites accessible to the general public, testing should include, among other things, usability testing for members of the public who will be visiting the agency¹s web site.
- An objective set of acceptance criteria and a detailed acceptance procedure, including the testing that will be performed by or with the agency.
- A description of what will happen if the contract terminates mid-way through the project, addressing the issue of who will own the work-in-progress.
- A commitment from the contractor as to the identity of its employees and subcontractors who will work on the project, their physical location, and the Commonwealth¹s right to approve substitute staff.
- A list of all of the documents comprising the contract with the Commonwealth, and their precedence, which specifically references and is consistent with Section 1.8 of the ITS07 RFR and the order of precedence set forth in the T¹s and C¹s.
- For fixed cost contracts, a breakdown of the amount to be paid at each project milestone (usually the completion of a deliverable) if the project is to be paid for on a fixed cost basis. Agencies should consider a hold-back amount (i.e. paying only 90% of each invoice or leaving a larger balance for the final payment). Agencies are authorized to hold back up to 15% of the contract price, and can negotiate details regarding when, if appropriate, the held back amount will be paid. For time and materials contracts, hourly rates and reimbursements for labor and materials provided by the contractor.
- The contractor¹s responsibility for providing documentation, training, and source code, maintenance and support.
- The Commonwealth¹s responsibilities during the development process, including provision of staff time, development resources such as software or hardware, ability to access network files and email, and testing resources, if applicable.
- The identity of the Commonwealth¹s and contractor¹s respective project managers, and their contact information.
- A process to be followed when one party or the other seeks a change in the scope of or specifications for the original agreement or has a conflict. This process should include a method of identifying and approving changes and making necessary changes, if any, in the project or payment schedule.
- Changes that the parties expect to make to already developed software, including design, coding, testing, and documentation responsibilities; version control, and costs.
- The contractor¹s practices and procedures for project planning, tracking, reporting and management, including the types, frequency and contents of reports that will be provided by the developer to the agency.
- The physical location of software during development, and the contractor¹s procedures for controlling access and updates.
- The manner in which the contractor will ensure the privacy and security of the Commonwealth¹s data during the development process.
- Identification of any "off the shelf" software, if any, that the agency will have to purchase because the contractor has built it into the application or Web site that he intends to design.
- A commitment on the part of the contractor to design a Website or software consistent with ITD ¹s policies and standards for the Commonwealth¹s information technology. Copies of those policies and standards can be found on-line at:
Optional Elements. In addition, as an option, agencies may want to consider the following:
Software escrow . Using a software escrow agreement for any code that will be licensed to the agency by the contractor. (For a discussion regarding when developers can be expected to license such code to the Commonwealth, see section IV.B.1. of this document). Under such agreements, the developer and agency agree to have a third party hold the source code for the software at issue in escrow, in case the contractor goes out of business or for some other reason is unable or unwilling to provide the source code at some point in time following the completion of the development contract. Such agreements should require, among other things, that the code be physically kept within the Commonwealth, identify the custodian and provide his or her contact information, state the conditions under which the agency would be entitled to access the code, require the contractor add updates to the escrowed code and require that relevant documentation be included among the escrowed material.
Use of a performance bond to minimize the Commonwealth¹s potential fiscal damage if the contractor fails to perform. Such a bond must be purchased by the contractor at its own expense, and specifically name the Commonwealth as its beneficiary, and its size must be commensurate with the Commonwealth¹s potential financial damage should the contractor fail to perform.
B. Legal Issues That Should Be Addressed In The Scope Of Work
- Ownership of Intellectual Property
Intellectual property includes many types of property interests that an owner or owners may have in a Web site or software. Although trade secrets, trademark, service mark, patent, trade dress, and trade usage may also be involved, the interests most often implicated in the Commonwealth¹s Web Site and software development are those arising out of copyright law.An adequate description of the scope of copyright law is beyond this document. Counsel contemplating reviewing a Web site or software development agreement should familiarize themselves with this area of law. At the very least, they should understand that:
Copyright protection subsists in original works of authorship fixed in any tangible medium of expression from which they can be perceived, reproduced or otherwise communicated;
Software,web site look and feel, Web site clickstreams and the content of Web pages (both text and images) are copyrightable;
The copyright owner has the exclusive right to reproduce the copyrighted work in copies, prepare derivative works (i.e. works based on one or more preexisting works) and distribute copies by sale, rental or lease. The copyright owner can license all or some of these rights to a third party, and still retain ownership of the copyright.
Many categories of intellectual property, and attendant legal interests, are associated with Web site and software development.The specific property may include computer programs (in object and source code form), scripts, data, documentation, the audio, visual and audiovisual content related to the layout and graphic presentation of a Web site, text, photographs, video, pictures, animation, sound recordings, training materials, images, techniques, methods, algorithms, program images, text visible on the Internet, HTML code and images, illustrations, graphics, pages, storyboards, writings, drawings, sketches, models, samples, data, other technical or business information, and other works of authorship fixed in a tangible medium.
The standard for the Commonwealth¹s ownership of the intellectual property created in connection with web site or software development work for which the Commonwealth has contracted is set forth in the first, unnumbered paragraph of the T¹s and C¹s. It states: The Commonwealth is entitled to ownership and possession of all deliverables purchased or developed with State funds". What does this language mean in connection with Web and software related agreements?
Depending on the terms to which it agrees in the scope of work, the Commonwealth will either own or obtain a license to software and elements of the Web site developed by the contractor or commercially available from some other source. When the Commonwealth obtains a license to use software developed by a software publisher, ownership of intellectual property rights is not among the"deliverable[s] purchased or developed"; the Commonwealth only obtains permission to use the software in a particular way for a particular period of time . By comparison, when the Commonwealth pays a Web site or software developer to write new source code or html code, the "deliverable" purchased or developed, if it is being written for the first time by the contractor, is the code itself, and the Commonwealth becomes the code owner. When the Commonwealth pays a developer to write code and the developer merely modifies code that it has already developed for another customer, or includes in the application or system developed software that it has licensed from a third party, the Commonwealth, unless it enters a specific written agreement with the Contractor to the contrary, again obtains no rights to such property and must receive a license from the developer or third party to use such code.
When the Commonwealth enters a web or software development agreement with a contractor, the scope of work should address the issue of ownership of intellectual property rights. Such agreements should either contain the ownership language set forth in Exhibit A hereto, which is consistent with the "ownership" language of the T¹s and C¹s, or language more favorable to the Commonwealth.
The standard language: defines the property rights at issue; identifies the nature and source of the intellectual property involved in the contract; defines the intellectual property to which the Commonwealth will not take ownership, and for which it must obtain a license from the contractor or a third party; creates a license running from the contractor to the Commonwealth for the use of the contractor¹s intellectual property; identifies intellectual property to which the Commonwealth will claim ownership rights; and addresses other issues related to the parties¹ respective ownership interests.It does not address the question of whether or not the Commonwealth will own works developed by the contractor under the contract that derive from material authored by the Contractor prior to it engagement by the Commonwealth. Agencies that wish to own, rather than license, such works, can modify the standard language to reflect that fact.
Many contractors will attempt to negotiate language under which the Commonwealth gives up its ownership rights in return for a long-term license or reduced-cost or free maintenance and upgrades. Under no circumstances should agencies give up all of the Commonwealth¹s ownership interest in intellectual property developed at the Commonwealth¹s expense. There are many reasons why such arrangements are disadvantageous to the Commonwealth, including: the fact that the contractor may attempt to resell or license to other state agencies property for which the Commonwealth has already paid; that private parties should not be allowed to profit from the sale or licensing of Commonwealth property; and that the Commonwealth may want to share with another state for free software that it has developed. Nor should agencies ever license such property to a contractor in exchange for a stream of licensing revenues. However, in some cases, the Commonwealth may benefit from a license granted by the agency to the contractor permitting them, in turn, to license the software to a third party (other than another Commonwealth entity) in exchange for free or greatly-reduced maintenance costs and free upgrades. All such agreements must be approved by the Commonwealth¹s Chief Information Officer and by the Office of the State Comptroller as "revenue maximization".
- Termination or Suspension of Contract
Paragraph 4 of the T¹s and C¹s defines events, which will cause a contractor¹s contract with the Commonwealth to terminate.Note that most contractor "form" contracts have a termination provision inconsistent with paragraph 4. Therefore, agencies should not sign contractor contract forms.However, if an agency must sign a contractor contract, you must first amend this contract so that it is consistent with the T¹s and C¹s. This can be done by deleting the contractor¹s termination provision and replacing it with a reference stating that termination will be governed by paragraph 4 of the T¹s and C¹s.
The T¹s and C¹s do not identify a specific time for sending out a notice of termination.Therefore, the agency and contractor may negotiate a reasonable period of time for providing such notices. Agencies should ensure that a contractor¹s notice of termination will be provided sufficiently in advance of the termination itself to enable the agency to re-procure the services at issue, or to obtain needed service coverage. Also, agencies must ensure that contractors cannot terminate their contract simply because payment is late. All payments made by the Commonwealth are subject to appropriation and may be delayed during the budget process.
Paragraph 6 of the T¹s and C¹s requires contractor compliance with the Fair Information Practices Act, M.G.L. c. 66A, and also requires that contractors "protect the physical security of and restrict any access to personal or other Department data in the Contractor¹s possession, or used by the contractor in the performance of a contract, which shall include, but is not limited to, the Department¹s public records, documents, files, software, equipment or systems".
Many contractor standard form agreements create reciprocal confidentiality obligations for the purchaser and contractor, defining a set of "confidential information"and requiring that both the contractor and the purchaser take the same steps to protect such data from disclosure to third parties. In addition, a contractor may state in its license that data generated by the testing of the software it is developing is to be kept confidential by the Commonwealth. Because all Executive Department agencies are subject to the Public Records Law and the Fair Information Practices Act, the Commonwealth cannot sign such agreements. Its obligations can never mirror those of an outside contractor, and the outside contractor¹s confidentiality obligations can never be limited to those set forth in a contract.
Once it receives data of any kind from the contractor, unless this data falls under an exemption to the public records law, the Commonwealth is obliged to disclose it to third parties that request such data. This fact must be reflected in the language of any confidentiality provision. The blow to the contractor¹s desire for confidentiality can be softened somewhat by including in the confidentiality provision a statement to the effect that the Commonwealth will provide prompt notice to the contractor if access to the contractor¹s data is required under the Public Records law or through other legal mandates, in order to enable the contractor to take legal action to prevent such disclosure. An example of such a statement is set forth in Exhibit B to this document.
In addition, source code provided by contractors to the Commonwealth in the course of development, to which they claim a proprietary interest, is not protected from disclosure to the public. The Secretary of the Commonwealth has held that copyrighted works held by the Commonwealth are public records subject to disclosure under the Public Records Law. Agencies can minimize the impact of the Public Records law on contractors¹ desire to keep their code confidential by suggesting that the Commonwealth be provided with access only to the minimal amount of code necessary for it to participate in the development process, and by agreeing to notify the contractor promptly if they receive a public records request, so that the contractor can seek a protective order against disclosure.
Finally, confidentiality provisions in contractors¹ standard form agreements often require the Commonwealth to have its employees sign a confidentiality agreement. Department heads, or their authorized signatories, should sign such agreements, rather than individual employees.All state employees are already required pursuant to the Commonwealth¹s Ethics Law to keep Commonwealth data confidential. More importantly, agencies cannot identify all employees who might have access to the information the contractor seeks to protect. Agencies should modify standard contractor confidentiality requirements so that only contractors are required to enter written confidentiality agreements. Agencies may offer, as a concession to contractors, an agreement that the Commonwealth will be responsible for any disclosures of such information, other than in response to legal process.
- Records Retention
Two aspects of records retention requirements must be considered in drafting software and Web site development agreements. First, a contractor¹s standard agreement may require licensees to give back all copies of the software, documentation and related documents if and when termination occurs. Under the Records Conservation Law, M.G.L. c. 66, § 8, state agencies are not authorized to give away all copies of public records, some of which must be kept for short or long-term storage. Thus, agencies must modify such termination provisions by indicating that the agency will have the right to keep a copy for archival purposes, consistent with the Records Conservation Law. An example of the modifications that agencies should make to such termination provisions is set forth in Exhibit B, a provision from an End User License that incorporates the Commonwealth¹s Records Conservation obligations.
Second, the system developed by the contractor must be consistent with the agency¹s obligations under the Records Retention Law, Mass. Gen. Law. ch. 30, sec. 42.
Web site and software contractor form agreements may attempt to limit the Commonwealth¹s ability to assign its rights under the agreement. Because state agencies are subject to governmental reorganization efforts, a state agency negotiating such a contract should ensure that the assignment provision of the contractor¹s contract is modified to indicate that the agency has the right to assign its rights under the contract to a successor agency. An example of the modifications that agencies should make to such assignment provisions is set forth in Exhibit C to this document, an assignment provision from an End User License that incorporates the Commonwealth¹s assignment rights.
- Indemnification,Attorneys¹ Fees, and Limitations of Liability
Who will defend? Paragraph 11 of the T¹s and C¹s requires the contractor to indemnify the Commonwealth if it is sued for copyright infringement in connection with goods or services delivered by the contractor. Contractors may offer the Commonwealth form agreements that contain an indemnification provision establishing the contractor¹s limited obligation to indemnify the license holder against claims of infringement with respect to the intellectual property transmitted under the license. In other words, the contractor guarantees the Commonwealth that, if it is sued by a third party for infringement of patent or copyright law, the contractor will step in and pay for the legal defense and all damages. Such agreements typically require the Commonwealth to permit the contractor to defend against any infringement claims. Agencies must insert a provision to the effect that, even if the contractor will provide counsel to defend the Commonwealth against such a claim, the Office of the Attorney General has the right to participate in and lead the defense.
Agencies may not enter into contracts under which the Commonwealth promises to indemnify a contractor.The Commonwealth does not indemnify or pay attorneys¹ fees. Contractor agreements may also require the Commonwealth to indemnify the contractor under certain circumstances. Agencies are constitutionally prohibited from contractually agreeing to indemnify a contractor. Agencies must eliminate in any document signed by them any reference to indemnification of the contractor by the Commonwealth; the Commonwealth does not indemnify contractors in such circumstances. Similarly, the Commonwealth does not agree to contractual obligations to pay attorneys¹ fees for third parties. 
Acceptable concessions with respect to contractor liability. Contractors¹ form agreements may include provisions severely limiting their liability with respect to the product licensed or sold to the Commonwealth in connection with a development agreement. These provisions are clearly inconsistent with paragraph 11 of the T¹s and C¹s. However, given the pervasiveness of these limitation clauses in the software industry, OSD has approved the Indemnification language below. It incorporates the maximum amount of concessions that agencies can make with respect to the contractor liability for indemnification that is created under Section 11 of the T¹s and C¹s. Agencies are free to negotiate language that imposes a greater, but not a lesser, indemnification burden on contractors.
Pursuant to Section 11. Indemnification ofthe Commonwealth Terms and Conditions, the term "other damages" shall include, but shall not be limited to, the reasonable costs the Commonwealth incurs to repair, return, replace or seek cover (purchase of comparable substitute commodities and services) under a Contract. "Other damages" shall not include damages to the Commonwealth as a result of third party claims, provided, however, that the foregoing in no way limits the Commonwealth¹s right of recovery for personal injury or property damages or patent and copyright infringement under Section 11, nor the Commonwealth¹s ability to join the Contractor as a third party defendant. Further, the term "other damages" shall not include, and in no event shall the Contractor be liable for, damages for the Commonwealth¹s use of Contractor-provided products or services, loss of Commonwealth records, or data (or other intangible property), loss of use of equipment, lost revenue, lost savings or lost profits of the Commonwealth.In no event shall "other damages" exceed the greater of $100,000, or two times the value of the product or service (as defined in the Contract Scope of Work) that is the subject of the claim. Section 11. sets forth the entire liability under a Contract. Nothing in this section shall limit the Commonwealth¹s ability to negotiate higher limitations of liability in a particular Contract, provided that any such limitation must specifically reference Section 11. of the Commonwealth Terms and Conditions.
- Choice of Law
Paragraph 14 of the T¹s and C¹s requires that contracts entered into by the Commonwealth be governed by Massachusetts law. Agencies must ensure that choice of law provisions indicate that Massachusetts law will govern.
- Automatic data transmission.
Some web-based software collects data automatically and transmits it to the contractor. Agencies must ensure that no software developed for the Commonwealth transmits information to the contractor unless such transmission benefits the Commonwealth and the transmission of information is consistent with the Fair Information Practices Act, M.G.L. c. 66A, and other privacy laws.
All statutory warranties are generally excluded by the explicit terms of contractor agreements, and lesser warranties put in their place. At a minimum, agencies should negotiate for:
A warranty of title with respect to any code provided by the contractor
A warranty that the product developed under the contract at least meets the specifications set forth in the scope of work
A warranty period of 120 to 180 days
An example of the minimal warranty agencies should seek is provided in Exhibit E to this document.
- Licensee remedies
Agreements may address the remedies, in addition to damages and attorneys¹ fees, that the contractor must provide if the Commonwealth is subject to an infringement claim with respect to any copyrightable material delivered by the contractor. Remedies helpful to the Commonwealth include the contractor¹s procurement of the Commonwealth¹s right to use the material, its modification of the material so that it is no longer infringing, and its replacement of the original material with other, non-infringing material. If a contractor¹s form requires that the licensee accept as a remedy the termination of its use rights in the allegedly infringing product and partial refund of its licensing fee, agencies should negotiate for a modification to the agreement to the effect that these remedies will be used only if all other remedies, of the type specified above, fail.
- Integration clause.
Section 1.8 of ITS07 specifies, among other things, that, for purposes of interpreting all of the documents that comprise an information technology contract with the Commonwealth, the order of precedence of documents in an information technology procurement is (1) the T¹s and C¹s and the Standard Contract; (2) the RFR (here, ITS07); (3) the contractor¹s response to the RFR; and (4) the statement of work or scope of work. Contractor agreements may include their own integration clauses. Such clauses must be stricken and replaced by the "order of priority" language set forth in paragraph 15 of the T¹s and C¹s, and by reference to any documents "under" those listed in paragraph 15, such as a statement of work.
- Requests to License Back Commonwealth-owned Intellectual Property to the contractor
Some contractors seek a license from the Commonwealth to use intellectual property developed under a state contract and thus "owned" by the Commonwealth. Agencies contemplating such a license should contact the parties identified in Section V. of this document for assistance in drafting such a license.
VII. Reporting and Resources
Agency counsel with questions about the foregoing standards should contact: Marge McEvitt, OSD Procurement Manager - IT Software & Services, (617)-720-3121, Marge.MacEvitt@osd.state.ma.us;
Linda Hamel, ITD General Counsel, (617) 626-4404, firstname.lastname@example.org;
Jenny Hedderman, Office of the State Comptroller Deputy General Counsel, (617)-973-2656, email@example.com;or
Bill McAvoy, OSD General Counsel, (617) 720-3327, firstname.lastname@example.org.
Agencies must send an electronic copy of the text of all agreements negotiated by them and pertaining to web and software development or licensing to ITD¹s General Counsel for the purpose of providing ITD with information about the challenges facing agencies negotiating such agreements and for creating a bank of such agreements that other agencies can use in drafting their own agreements.
For complex development projects, agencies can contact ITD and request a referral to the Intellectual Property counsel on contract with the state.
More details about web and software related agreements are available from MCLE and other vendors of legal practice manuals.
Exhibit A. Standard Intellectual Property Language
1. Definition of Property
The intellectual property required by Contractor to develop, test, and install the [name product to be developed](hereinafter the "Property") may consist of computer programs (in object and source code form), scripts, data, documentation, the audio, visual and audiovisual content related to the layout and graphic presentation of the [name product to be developed], text, photographs, video, pictures, animation, sound recordings, training materials, images, techniques, methods, algorithms, program images, text visible on the Internet, HTML code and images, illustrations, graphics, pages, storyboards, writings, drawings, sketches, models, samples, data, other technical or business information, and other works of authorship fixed in any tangible medium.
2. Source of Property
The development of the [name product to be developed] will involve intellectual property derived from three different sources: (1) third party software contractors such as . . .[this provision may not apply to all contracts]; (2) developed by a Contractor specifically for clients other than the Commonwealth, or developed by Contractor for internal purposes prior to the Effective Date of this Statement of Work and not delivered to any other client of Contractor¹s; and (3) developed by a Contractor specifically for the purposes of fulfilling its obligations to Agency under the terms of this Statement of Work and all other documents listed in section 5A of this Statement of Work entitled "Order of Precedence of Documents".Ownership of the first category of intellectual property is addressed in separate agreements between the Agency and the contractors and resellers of such software. This section of the Statement of Work addresses exclusively ownership rights in the second and third categories of intellectual property.
3. Title and Intellectual Property Rights
A. Contractor Property and License
Contractor will retain all right, title and interest in and to all Property developed by it, i) for clients other than the Commonwealth, and ii) for internal purposes and not yet delivered to any client prior to the Effective Date, including all copyright, patent, trade secret, trademark and other intellectual property rights created by the Contractor in connection with such work (hereinafter the "Contractor Property"). The Commonwealth acknowledges that its possession, installation or use of Contractor¹s Property will not transfer to it any title to such property.
The Commonwealth acknowledges that the Contractor Property contains or constitutes commercially valuable and proprietary trade secrets of the Contractor, the development of which involved the expenditure of substantial time and money and the use of skilled development experts. The Commonwealth acknowledges that the Contractor Property is being disclosed to the Commonwealth to be used only as expressly permitted under the terms of the license described in this section of the Statement of Work. The Commonwealth will take no affirmative steps to disclose such information to third parties, and, if required to do so under the Commonwealth¹s Public Records Law, M.G.L. c. 66, § 10, or by legal process, will promptly notify the Contractor of the imminent disclosure so that the Contractor can take steps to defend itself against such disclosure.
Except as expressly authorized herein, the Commonwealth will not copy, modify, distribute or transfer by any means, display, sublicense, rent, reverse engineer, decompile or disassemble the Contractor Property.
Contractor grants to the Commonwealth a fully-paid, royalty-free, non-exclusive, non-transferable, worldwide, irrevocable, perpetual, assignable license to make, have made, use, reproduce, distribute, modify, publicly display, publicly perform, digitally perform, transmit and create derivative works based upon the Contractor Property,in any media now known or hereafter known, but only to the extent reasonably necessary for the Commonwealth¹s exploitation of the [name product to be developed]. During the term of this Statement of Work and immediately upon any expiration or termination hereof for any reason, Contractor will provide to the Commonwealth the most current copies of any Contractor Property to which the Commonwealth has rights pursuant to the foregoing, including any related documentation.
Notwithstanding anything contained herein to the contrary, and notwithstanding the Commonwealth¹s use of the Contractor Property under the license created herein, Contractor shall have all the rights and incidents of ownership with respect to the Contractor Property, including the right to use such property for any purpose whatsoever and to grant licenses in the same to third parties.
B. Commonwealth Property
In conformance with the Commonwealth¹s Standard Terms and Conditions, on the date on which the Commonwealth reimburses Contractor for a deliverable accepted by the Commonwealth under the terms of this Statement of Work, all of the Contractor¹s right, title and interest in all Property developed by the Contractor under the terms of this Statement of Work solely for purposes of creating the deliverables described in section ____of this Statement of Work shall pass to and vest in the Commonwealth, including all copyright, patent, trade secret, trademark and other intellectual property rights created by Contractor in connection with such work and any causes of action relating to or based upon such work (hereinafter the "Commonwealth Property"). Contractor hereby assigns to the Commonwealth, as of the date on which the Commonwealth reimburses Contractor for such deliverables, all intellectual property rights that it may now or hereafter possess in the Commonwealth Property related to such deliverable and all derivative works thereof.The Contractor also agrees to execute all documents and take all actions that may be necessary to confirm such rights, including providing any code used exclusively to develop such deliverables for the Commonwealth and the documentation for such code. The Contractor acknowledges that there are currently and that there may be future rights that the Commonwealth may otherwise become entitled to with respect to Commonwealth property that does not yet exist, as well as new uses, media, means and forms of exploitation, current or future technology yet to be developed, and that the Contractor specifically intends the foregoing ownership or rights by the Commonwealth to include all such now known or unknown uses, media and forms of exploitation.
[This paragraph only required for web site development contracts] The Commonwealth will bear sole responsibility for registering the [name product to be developed] domain name or URL, applying for any trademark registration relating to the [name product to be developed] domain name or URL and applying for any copyright registration related to its copyright ownership with respect to any Commonwealth Property.
The Contractor agrees to take such actions as may be reasonably requested by the Commonwealth to evidence the transfer of ownership of or license to intellectual property rights described in this section.
The Contractor represents and warrants to the Commonwealth that it has obtained all rights, grants, assignments, conveyances, licenses, permissions and authorizations necessary or incidental to any materials owned by third parties supplied or specified by it for incorporation in the [name product to be developed].
Exhibit B: Language Modifying Confidentiality and Return of Records Provisions
Contractor Confidential Information. You acknowledge that during the term of the Agreement, Contractor may share Confidential Information with you. Contractor¹s Confidential Information shall be marked or otherwise identified as such in writing.You agree to keep Contractor Confidential Information confidential and not disclose it to any third party subject to Commonwealth¹s Public Records Law, M.G.L. c. 66, § 10. Confidential Information shall not include any information that: (i) you can demonstrate by written documents was known to you prior to disclosure by Contractor; (ii) is or becomes publicly known without breach of your obligations hereunder; (iii) is disclosed to you by a third party without obligation of confidentiality; and (iv) is independently developed by you without reference to Contractor Confidential Information.Customer shall have no rights to copy any Contractor Confidential Information except for purposes of (a) training, solely for your employees who have a need to know or (b) responses to public records requests, following notice to Contractor and the expiration of 10 days from the date on which such public record request is received by you, unless ordered to refrain from such disclosure by court order. Customer further agrees to destroy or return to Contractor all such Confidential Information at the end of the term of the Agreement, except such copies as may be required to save pursuant to the Commonwealth¹s Records Conservation Law, M.G.L. c. 66, § 8, or needed to save for training purposes. Should you receive a public records request demanding access to Contractor Confidential Information, you will promptly notify Contractor nine (9) business days prior to disclosing such information for the purpose of providing Contractor with the opportunity to defend itself against such disclosure.
Exhibit C: Preservation of Commonwealth¹s Assignment Rights
Assignment. Licensee may not assign any of its rights or delegate any of its obligations under this Agreement without the prior express written consent of the Contractor. Any attempted assignment or delegation without such consent shall be void. Notwithstanding the foregoing, Licensee will have the right to assign this Agreement, upon written notice to the Contractor, in connection with a transfer of the responsibility for managing the Commonwealth of Massachusetts¹ E-government portal to an entity that is affiliated with the Commonwealth of Massachusetts, other than Licensee. Subject to the foregoing, the rights and liabilities of the parties hereto will bind and inure to the benefit of their successors and permitted assigns.
Exhibit D: Frequently Asked Questions
Question: When is my department required to purchase Information Technology ("IT") equipment, services and software from a Statewide Contract?
Answer: Almost all Executive Branch agencies are subject to the procurement laws and regulations and must make purchases from an existing Statewide Contract unless no Statewide Contract meets their specific needs.Non-Executive Branch agencies and certain Executive Department agencies exempt from the procurement requirements of 801 CMR 21.00 should use Statewide Contracts whenever possible because, in most cases, the Statewide Contracts offer better value than individual Departments can obtain on their own. (See Comptroller Policy Memo #304 for more information on procurement requirements for Executive Departments, Non-Executive Branch entities and Executive Departments exempt from the procurement requirements of 801 CMR 21.00.)
A locator list of Statewide Contracts, with links to contractor listings and usage information, is included elsewhere in this document. Statewide Contracts were developed not only for the administrative convenience of government agencies, but to obtain the best value for these agencies. For example, the Software Reseller Contract provides value by keeping track of software purchases for the entire Commonwealth, and provides software at a cost plus price of +1/4% for Microsoft and at most 5% for most other products. In the hardware arena, all IT equipment contractors for Computers and Video Conferencing equipment are qualified resellers of the brands of equipment that they provide, and provide warranty service, maintenance service and system integration. Such contractors provide very good pricing in the form of a fixed price or percent discount from the equipment¹s catalogue price. These are a few examples of the best value provided by the statewide IT contracts.
Question: My agency has decided to make a purchase from a statewide contract pertaining to IT services. How do I find out about the details of such contracts?
Answer: Review the RFR and OSD Update (contract announcement) published on www.Comm-PASS.com for the contract. You can find the OSD Updates and all related procurement documents by going to www.Comm-PASS.com then click on Current Statewide Contracts in the upper left.
Question: If a project requires hardware, software and services which could be obtained by purchasing hardware from one Statewide Contract, software from a different Statewide Contract, and services from yet another Statewide Contract, is my Department required to use Statewide Contracts in this case or may the Department conduct its own RFR instead? What is recommended in this case?
Answer: This is a judgment call based upon the complexity of the project and the expertise and availability of the Department¹s staff to manage the project. When it is advantageous to obtain hardware, software and all necessary services from a single contractor, in many cases this can only be accomplished by issuing a new RFR for a complete project.
Departments which have sufficient expertise among their MIS staff to determine what products and services are needed to complete the project are encouraged to submit their requirements to current Statewide Contractors to obtain the required components and services. This often provides better value. Departments whose staff lack sufficient experience or expertise to choose those products and services should consider contracting with an IT consultant for project management or systems integration while using the current Statewide Contracts.For assistance in using the statewide contracts or doing a procurement for a new project, departments are encouraged to consult with the IT Procurement Team Leaders (PTLs) at OSD:
IT Hardware PTL Gloria Harris (617) 720-3106 Gloria.email@example.com;
Software and Services PTL Marge MacEvitt (617) 720-3121 firstname.lastname@example.org;
IT and Office Procurement Director Dick Mordaunt (617) 720-3302 email@example.com.
Exhibit E: Minimal Warranties
Limited Software Warranty. Contractor warrants that, for a period of one hundred and twenty (120) days after the Effective Date, (i) the media on which each copy of the Software is furnished will be free of defects in materials and (ii) the Software shall substantially conform to and operate in accordance with the Documentation.
(1)A new T¹s and Cs document would only be required if the legal structure of the contractor changed. See "Guidelines on Material Changes in a Contractor¹s Identity", available on-line at http://www.mass.gov/osd/phand/change.doc.
(2)See Office of the State Comptroller¹s Fiscal Year 2000 closing/Fiscal year 200 Opening Instructions, available online at www.mass.gov/osc The exception to this rule for Web site and software development contracts discussed in this paragraph does not appear in the Opening Instructions.
(3)A different type of scope of work is required when agencies enter contracts with software publishers or contract personnel firms.
(4)"Buying software" is usually a misnomer applied in circumstances where an individual or entity obtains only a license to, rather than ownership rights in, software. Generally, when the state "buys" a license to software, the "deliverable" purchased with state funds is not ownership of the software, even if the vendor is the owner. The state will usually own and possess the medium (CD, diskette, or tape) on which a copy of the software is recorded, but the value of the medium is trivial. The real value in the product is the intangible, limited right to use the software.
(5)The T¹s and C¹s state that indemnification is subject to applicable law, and to appropriation. This language poses formidable barriers to indemnification, but permits it where those barriers are overcome. The point here is not that the Commonwealth will not indemnify contractors under any circumstances, but that a commitment that the Commonwealth will indemnify a contractor absolutely should not be made in documents signed by agencies in connection with ITS07 contracts.