This toolkit is a guide to Practical Law New Zealand's resources relating to the legal, practical and commercial issues raised by the use of software, including links to relevant resources.

Software refers to computer programs or instructions, including in the form of:

Software is intangible by nature and can be protected as intellectual property.

The data, documents and other content required to operate and use a computer program may also be referred to as forming part of software. Software is distinguished from hardware, which refers to the physical components of a computer system, including monitors, keyboards and drives. For a general introduction to the different issues when acquiring other forms of information technology (IT) solution, see Practice note: overview, IT procurement.

Software is frequently delivered by internet download. For a general introduction to how the internet works, see Practice note, Introduction to the internet.

The most commonly used method of acquiring software is for the supplier to grant a licence to the customer. Software licensing is used where the software is a standardised solution, or packaged product, rather than bespoke software.

For further information, see:

Open-source software is a different model for software development and access. Broadly speaking, open-source software is developed and supplied on the basis that the software, along with any changes or enhancements subsequently made to that software (by any user), must be made available free of charge to the public. Open-source software is typically licensed under standard form open-source licence terms, many of which are published by not-for-profit or other similar organisations.

Open-source software can be incorporated into commercial software products. It is important to identify where this is the case as the open-source components of the software may have to be carved out from some of the standard terms.

For further information, see Practice note, Open-source software and Checklist, Open-source software licences: key terms and conditions.

Software is now commonly procured "as a service". This means that software is not installed on or downloaded to the customer's servers or computers. Instead, it is provided from the software vendor's servers and accessed by the customer over the internet. The customer's data is referred to as being stored in the "cloud". As SaaS business models are based on different commercial considerations, the contractual obligations set out in a cloud-based agreement are usually different to those arising in a traditional software licensing context.

For further information, see:

A software development project involves the customer commissioning a supplier to write new code, usually to solve a particular problem for the customer. As the software is bespoke, software development projects can be complex and run over a long period of time. It is important to establish who will own the copyright in the developed software at the end of the project. This can raise potentially tricky commercial and strategic questions for both customer and supplier.

Different project methodologies can be adopted (such as agile). The method chosen will have a bearing on the way that legal issues are addressed in the contract.

It is a good idea that any software commissioned for use in a business environment goes through a period of acceptance testing. Acceptance testing aims to establish that the software does what was agreed in the contract. For further information on these topics, see:

The procurement of software often requires services to be provided to the customer. The service might be the software itself (see Software as a service (SaaS) (or cloud-based software)) or might be ancillary to the provision of the software, such as design services, maintenance or support.

Where services are supplied to a customer, the supplier might commit to particular service levels in a service level agreement (SLA). For an example of a standard SLA for use in commercial transactions, see Standard document, Service level agreement. This document is based on the services being the maintenance and support of specified software, but it can also be adapted for other services.

For further information on the issues to consider in relation to service levels and service credits, see Practice note, Service levels and service credit schemes in outsourcing.

Another common form of service provided in software transactions is a software source code escrow arrangement. These are intended to protect customers from the supplier's inability to support the software, usually where the supplier defaults or faces an insolvency event. In a software escrow arrangement, there are three parties: the customer; supplier; and escrow agent. The escrow agent is usually a company specialising in software escrow services.

For further information, see Practice note, Software escrow agreements and Standard clause, Software source code escrow.

The use of software, if not properly managed, can introduce vulnerabilities into an organisation's IT systems and networks, such as the risk of unauthorised access to data, or damaging malicious software (malware) or ransomware (a type of malware that threatens to publish data or block access to it unless a ransom is paid).

Where the data used within software is personal information, companies will need to consider their obligations under the Privacy Act 2020 (PA 2020) and the Information Privacy Principles (IPPs) contained within the PA 2020. (The PA 2020 came into force on 1 December 2020, repealing and replacing the Privacy Act 1993.)

As business becomes increasingly focused on efficiencies, and as the technologies that underpin modern commerce get better, there is increased focus on the ability of electronic contracts to provide smoother and more efficient legal workflows.

Electronic contracts, inclusive of blockchain-based smart contracts, raise new and different legal considerations than their predecessor counterparts. The development and use of these forms of contract often requires consultation with IT and software service providers.

For further information about these forms of contract and the issues that may be raised in their use, see Practice notes, Electronic contracts and transactions and Blockchain and smart contracts.