Software License Agreement in Philippines: Template, Key Clauses and Local Law (2026)

What a software license agreement does A software license agreement sets the terms on which a software owner (the licensor) lets another party (the licensee) use its software. The licensor keeps ownership; the licensee gets a defined right to use, which can be narrow or broad, exclusive or non-exclusive, for a fixed term or perpetual. Unlike a SaaS subscription, a licence usually involves the licensee installing or holding a copy, so the agreement must be precise about what the licensee may and may not do with that copy. In the Philippines the agreement rests on two foundations: copyright law, which gives the licensor something to license, and the general law of contract under the Civil Code (Republic Act No. 386). This page explains how to build a clear software licence for a Philippine licensor or licensee. It is general information, not legal advice. ## The legal basis: copyright in software In the Philippines, computer programs are protected as literary works under the Intellectual Property Code (Republic Act No. 8293), administered by the Intellectual Property Office of the Philippines (IPOPHL). Copyright protection arises automatically on creation; registration is not required for protection, though a deposit and registration system exists to help prove ownership. Because the owner holds the exclusive rights to reproduce, distribute and adapt the software, any use by another party needs a licence. The licence is the legal permission; the agreement defines and limits it. Two consequences follow. First, a licence should be granted expressly and precisely, because anything not granted stays with the owner. Second, where software is developed for a customer, ownership of the new code depends on the contract and the commissioning or employment position, so the agreement should say clearly who owns what. ## Is a software license agreement binding in the Philippines? Yes. Under the Civil Code a contract needs consent, a certain object and a cause (Article 1318), with freedom of contract under Article 1306. Licences accepted electronically, including click-wrap and shrink-wrap style terms, are valid, supported by the Electronic Commerce Act (Republic Act No. 8792), provided acceptance is a clear act and the terms are available before the licensee commits. ## Key clauses in a Philippine software license agreement ### The licence grant This is the core clause. Define precisely: what software (version and modules), the scope (install, use, copy for backup), the model (per user, per device, per site, enterprise), whether it is exclusive or non-exclusive, the territory, and the term (fixed, renewable or perpetual). State whether sublicensing or assignment is allowed, which is usually not without consent. ### Restrictions Set what the licensee may not do: no copying beyond the licence, no reverse engineering (subject to rights the law preserves), no removing proprietary notices, no use beyond the licensed scope, and no transfer to third parties. ### Intellectual property ownership Confirm the licensor owns all rights in the software and that the licence does not transfer ownership. If the licensee receives custom development or configuration, state who owns that new work. If the software includes open-source components, disclose them and note that their own licence terms apply. ### Fees, payment and tax Set the licence fee, whether one-off or recurring, and payment terms. On tax, licence fees can attract 12 percent value added tax, and for software supplied as a digital service the VAT on Digital Services Act (Republic Act No. 12023), effective 18 October 2024 with implementing rules in Revenue Regulations No. 3-2025, may apply, including to non-resident providers. State whether fees are inclusive or exclusive of VAT, and address withholding tax where relevant. A perpetual on-premise licence may be treated differently from a subscription-style digital service. ### Maintenance, support and updates Say whether support, bug fixes and updates are included, charged separately, or excluded, with response expectations and whether new versions are covered. ### Warranties and disclaimers Give a limited warranty that the software will perform materially in line with its documentation for a defined period, and that the licensor has the right to license it. Disclaim broad implied terms where allowed, and avoid promising the software is error-free. ### Limitation of liability and indemnity Cap the licensor's liability, usually by reference to fees paid, with carve-outs for items that should not be capped, such as an intellectual property infringement indemnity. The licensor commonly indemnifies the licensee if the software infringes a third party's rights, with a right to repair, replace or refund. ### Term, termination and effect of termination Set the term and renewal. On termination, the licensee must stop using the software and, for non-perpetual licences, destroy or return copies and certify it has done so. For perpetual licences, say what survives. ### Governing law and disputes Choose Philippine law where appropriate, and decide between the courts and arbitration under the Alternative Dispute Resolution Act of 2004 (Republic Act No. 9285). ## A simple software license agreement structure 1. Parties and definitions

2. Licence grant: scope, model, exclusivity, territory and term
3. Restrictions on use
4. Intellectual property ownership and open-source components
5. Fees, payment and tax (VAT)
6. Maintenance, support and updates
7. Warranties and disclaimers
8. Limitation of liability and infringement indemnity
9. Confidentiality
10. Term, termination and effect of termination
11. Governing law (Philippines) and dispute resolution
12. General: assignment, notices, entire agreement ## Common mistakes in Philippine software licences - A vague licence grant that leaves scope, user model and term unclear, inviting over-use disputes.

• Silence on ownership of customisations or custom code, so both sides claim it.
• Ignoring open-source components and their own licence obligations.
• No infringement indemnity, leaving the licensee exposed.
• Treating the tax position as settled when a perpetual on-premise licence and a digital subscription can be taxed differently. ## Keeping software licences under control An organisation that licenses software, as licensor or licensee, quickly accumulates many agreements: different scopes, renewal dates and support terms, with the occasional perpetual licence buried among subscriptions. The hard part is not drafting one licence. It is drafting consistently, spotting the clause that granted more than intended, remembering renewals and support windows, and knowing which version is in force. That work is the same whether you hold five licences or fifty, and it is far easier when drafting, per-clause risk review, version history and renewal tracking live in one place rather than across folders and inboxes. A single AI contract workspace such as Adira is built around that idea. Adira is India-first today, with other jurisdictions including the Philippines on its roadmap, so for Philippine-specific copyright and tax positions you would still confirm the detail with counsel. The point to take is the direction: licences you can rely on are the ones that stay in one place, consistent, with their scope and dates in view.