Software Licence Agreement (Hong Kong)

A Software Licence Agreement in Hong Kong sets out the scope, fees, and conditions on which the licensor permits the licensee to use the rights.

Hong Kong’s technology sector — centred on Cyberport in Pok Fu Lam and the Hong Kong Science and Technology Parks Corporation (HKSTP) in Sha Tin — generates significant volumes of software licensing transactions, both inbound (international software vendors licensing to Hong Kong enterprises) and outbound (Hong Kong developers licensing locally developed software to regional customers). The Hong Kong Monetary Authority (HKMA) and the Securities and Futures Commission (SFC) also impose technology risk management requirements on financial institutions that effectively mandate written agreements for all software used in regulated activities.

Unlike a SaaS agreement (where software is accessed over the internet as a service, and the user never receives a copy), a software licence agreement covers software that is installed locally on the licensee’s hardware or servers. Section 22 of Cap. 528 gives the copyright owner the exclusive right to copy the work; Section 28 gives the exclusive right to make an adaptation (including translating to another programming language). The licence agreement authorises the licensee to exercise these rights within the agreed scope — number of users, number of installations, territory, and permitted uses.

The Supply of Services (Implied Terms) Ordinance (Cap. 457) applies to maintenance and support services included in or associated with the software licence. Section 5 of Cap. 457 implies that services will be performed within a reasonable time; Section 8 implies reasonable care and skill. The Control of Exemption Clauses Ordinance (Cap. 71) subjects limitation of liability clauses in business-to-business software agreements to a reasonableness test under Section 3. Hong Kong does not impose GST or VAT — all licence fees are expressed in HKD and the stated amount is the total payable. Forms-legal.com provides a free Hong Kong Software Licence Agreement template covering perpetual and term licence structures, maintenance terms, and Cap. 528 compliance.

A Software Licence Agreement in Hong Kong is needed whenever a software owner authorises another party to install and use software on that party’s own systems — whether for a single user on one workstation or for thousands of users across an enterprise network.

Enterprise software vendors selling to Hong Kong corporations — banks, insurance companies, retail groups, logistics operators, and professional services firms — need a written licence agreement that specifies the permitted number of users or concurrent sessions, the territory (Hong Kong SAR, or broader Asia-Pacific), the duration (perpetual or annual subscription), and the maintenance and support terms. The HKMA’s Supervisory Policy Manual (SPM) module TM-G-1 requires authorized institutions to maintain documented technology agreements with software vendors.

Software developers at Cyberport and HKSTP licensing their products to enterprise customers in Hong Kong and the Greater Bay Area need a licence agreement that protects their copyright under Cap. 528 while giving customers the certainty they need to deploy the software in regulated environments.

OEM arrangements — where a software vendor licences their product to a hardware manufacturer or systems integrator for embedding in the integrator’s products or solutions — require a licence agreement addressing royalty structures, sub-licensing rights to end customers, and the OEM’s obligations regarding copyright notices and documentation.

Specialised industry software — financial trading systems used by SFC-licensed securities firms, medical device software used in private hospitals regulated by the Department of Health under the Private Healthcare Facilities Ordinance (Cap. 633), and engineering analysis software used by consultants on Buildings Department-approved projects — needs a licence that addresses industry-specific compliance requirements, liability for software-related professional advice, and the consequences of software defects in regulated contexts.

Source code escrow arrangements — where the source code is deposited with a neutral escrow agent (such as the National Computing Centre or a Hong Kong solicitor firm) and released to the licensee only if the licensor becomes insolvent or ceases to maintain the software — are often requested by enterprise customers in Hong Kong as a condition of entering into a significant perpetual licence commitment.

A Hong Kong Software Licence Agreement should include the following essential elements to protect both the licensor’s copyright and the licensee’s right to use the software as agreed.

Licence Grant: The type of licence (perpetual or fixed term), the scope (exclusive or non-exclusive — most commercial licences are non-exclusive), the permitted number of named users or concurrent users or installations, the territory (typically Hong Kong SAR, with Greater Bay Area or Asia-Pacific if applicable), and any restrictions on use (for example, internal business use only, no resale, no sub-licensing). The licence grant should be drafted consistently with the copyright owner’s exclusive rights under Sections 22, 23, 26, and 28 of the Copyright Ordinance (Cap. 528).

Licence Restrictions: Express prohibitions on reverse engineering, decompilation (except as permitted by Section 61 of Cap. 528 for interoperability purposes only), disassembly, creating derivative works, sublicensing, and transfer of the licence without the licensor’s prior written consent. These restrictions protect the licensor’s copyright and the integrity of the software.

Fees and Payment: The licence fee in HKD (no GST or VAT applies in Hong Kong), the payment schedule, and the process for annual maintenance fee renewals for perpetual licences. The agreement should address what happens if maintenance fees are not paid — typically the licence continues but updates and support cease.

Intellectual Property Ownership: Confirmation that the licensor retains all copyright, trade marks, and other intellectual property in the software under Cap. 528, and that the licensee receives a licence only — no assignment of IP rights. Where the licensee develops modifications or integrations, the agreement should address ownership of those derivative works.

Source Code and Escrow: Whether source code is provided to the licensee; if not, whether a source code escrow arrangement is offered; and the conditions under which escrowed source code is released to the licensee.

Maintenance and Support: The scope of maintenance (bug fixes, security patches, version updates), the service level targets for defect resolution, the support channels and hours, and the annual maintenance fee (typically 15–22% of the initial licence fee for perpetual licences).

Warranties and Liability: The licensor’s warranties regarding software functionality, non-infringement of third-party intellectual property rights, and fitness for the described purpose. Limitation of liability clauses must satisfy the reasonableness test under the Control of Exemption Clauses Ordinance (Cap. 71).

Termination: Grounds for termination (material breach, insolvency), notice requirements, and the licensee’s obligation on termination to delete all copies of the software and certify deletion in writing.

Governing Law: Laws of the Hong Kong Special Administrative Region. Disputes may be referred to the Hong Kong International Arbitration Centre (HKIAC) or the courts of Hong Kong.

Forms-legal.com provides a free Hong Kong Software Licence Agreement template incorporating Cap. 528 copyright requirements and SFC/HKMA compliance provisions.