Software Licence Agreement (Pakistan)

A Software Licence Agreement in Pakistan transfers or licenses the rights it concerns, defining their scope, any fees and the limits on their use.

The Copyright Ordinance 1962 (as amended) is the cornerstone statute for software licensing in Pakistan. Section 2(c) of the Copyright Ordinance 1962 defines a computer programme as a literary work, making software a category of intellectual property protected by copyright from the moment of creation — no registration is required for copyright to subsist, though registration with the Intellectual Property Organisation of Pakistan (IPO-Pakistan) under the Copyright Ordinance 1962 creates a formal record and provides evidentiary advantages in infringement proceedings. Under Section 15 of the Copyright Ordinance 1962, the copyright owner has the exclusive right to reproduce, distribute, adapt, and communicate the software to the public. Any use of the software without the copyright owner's licence constitutes infringement under Section 58 of the Copyright Ordinance 1962, which is a criminal offence punishable by imprisonment and fine, in addition to civil remedies for damages and injunction.

The Contract Act 1872 governs the formation, interpretation, and enforcement of the Software Licence Agreement as a contract. Section 10 of the Contract Act 1872 requires the agreement to have lawful consideration, mutual consent, and competent parties. The licence fee (one-time or recurring) constitutes the consideration from the licensee; the grant of a right to use the software constitutes the licensor's obligation. Section 73 of the Contract Act 1872 governs compensation for breach — if the licensee uses the software beyond the scope of the licence (such as installing on more computers than licensed, sharing with unauthorised users, or using it after termination), the licensor is entitled to damages including the licence fee that would have been payable for the actual extent of use.

The Electronic Transactions Ordinance 2002 (ETO) is particularly relevant to software licences because software is often delivered electronically and the licence agreement may itself be in electronic form. Under the ETO, electronic agreements, digital signatures, and electronic records have the same legal validity as paper agreements — a click-wrap or shrink-wrap licence accepted electronically by the licensee is legally binding under the ETO framework. The Pakistan Telecommunication Authority (PTA) and National Telecommunication Corporation (NTC) administer the national public key infrastructure (PKI) for digital signatures under the ETO.

Pakistan's software market includes both domestic software products developed by Pakistani companies registered with the Pakistan Software Export Board (PSEB) and imported software from international vendors. Imported software licences are regulated by the State Bank of Pakistan (SBP) for foreign exchange payment — licence fees paid to foreign vendors require SBP approval or reporting under the Foreign Exchange Regulation Act 1947 and must be routed through authorised dealers. Royalty payments to foreign copyright owners are subject to withholding tax under Section 152 of the Income Tax Ordinance 2001 at the rate of 15% unless reduced by a bilateral Double Taxation Treaty between Pakistan and the software vendor's country.

The Intellectual Property Organisation of Pakistan (IPO-Pakistan), established under the Intellectual Property Organisation of Pakistan Act 2012, administers copyright registration and provides dispute resolution services. The Federal Investigation Agency (FIA) Cybercrime Wing and the Intellectual Property Crime Unit (IPCU) of the FBR Customs Intelligence investigate software piracy and copyright infringement at the commercial scale. Software piracy — installing or using unlicensed copies of software — is a significant problem in Pakistan's market, and both criminal prosecution under the Copyright Ordinance 1962 and civil remedies in the High Court are available to licensor companies whose software is used without a valid licence.

A Software Licence Agreement in Pakistan is needed whenever a software owner wishes to allow another party to use their software on defined terms, while retaining ownership, or whenever a business or individual uses commercial software and requires formal documentation of the licence terms for compliance, audit, or operational purposes.

The agreement is needed when a Pakistani software company develops a product and licenses it to multiple business customers. The Software Licence Agreement defines the exact scope of each customer's rights — the number of users, the number of installed copies, the permitted business purposes, and the geographical territory. Without a written licence agreement, the licensor cannot enforce the restrictions on use, and licensees may dispute the scope of their rights.

A Software Licence Agreement is required when a business procures enterprise software — such as an ERP system, HR management platform, or accounting software — from a domestic or international vendor. The licence agreement governs the terms of use, the licensor's obligations for maintenance and updates, the licensee's right to use the software after the vendor is acquired or ceases business, and the data security obligations of the vendor under the Prevention of Electronic Crimes Act 2016 (PECA).

The agreement is needed when a software company grants a reseller or distribution partner in Pakistan the right to sublicense its software to end users. The reseller agreement must define the permitted territory, the sublicensing rights, revenue sharing, and the reseller's obligations to confirm end-user compliance with the master licence terms. Reseller arrangements in Pakistan must comply with the Competition Act 2010 administered by the Competition Commission of Pakistan (CCP) — exclusive distribution arrangements that restrict competition require careful structuring.

A Software Licence Agreement is required when a government ministry, public sector body, or autonomous organisation procures software under the Public Procurement Rules 2004 administered by the Public Procurement Regulatory Authority (PPRA). Government software procurements require a formal licence agreement establishing the government's rights to use the software in perpetuity, the licensor's obligations to provide support, and the terms for escrow under a Software Escrow Agreement where the software is mission-critical.

The agreement is needed when a Pakistani startup or technology company licenses open-source software and incorporates it into a commercial product. The licence agreement (or open-source licence terms such as GPL, MIT, or Apache) must be reviewed to confirm the commercial product does not breach the open-source licence conditions — for example, the GPL's copyleft requirements may require the commercial product's source code to be disclosed if GPL-licensed components are used. Legal advice from an IT lawyer enrolled at a provincial Bar Council is essential for commercial products built on open-source foundations.

A Software Licence Agreement is also needed when an individual or company in Pakistan uses licensed software after a business acquisition or restructuring. The change of control provisions in the licence agreement govern whether the licence automatically transfers to the new entity or whether the licensor's consent is required — failure to obtain consent when required constitutes licence breach and copyright infringement under the Copyright Ordinance 1962.

A valid Software Licence Agreement in Pakistan under the Copyright Ordinance 1962 and the Contract Act 1872 must include the following essential elements.

Parties and Software Identification: Full legal names, SECP registration numbers, and NTN numbers of the licensor and licensee. A precise description of the licensed software — its name, version number, and a brief functional description — together with the medium of delivery (electronic download, physical media, cloud-hosted Software-as-a-Service). For imported software, the country of origin of the licensor and the applicable bilateral Double Taxation Treaty (if any) affecting withholding tax on royalty payments under Section 152 of the Income Tax Ordinance 2001.

Grant of Licence: The specific rights granted to the licensee, expressed by reference to the exclusive rights of the copyright owner under Section 15 of the Copyright Ordinance 1962. The licence should specify: whether it is exclusive (only the licensee may use the software) or non-exclusive (the licensor may licence the same software to others); the geographical territory (Pakistan only, or worldwide); the duration (perpetual, or a defined term); the permitted number of users, installations, or concurrent sessions; and the permitted business purposes (internal use only, or the right to sublicense or distribute).

Restrictions on Use: Explicit prohibitions on the licensee's use of the software, including: reverse engineering, decompiling, or disassembling the software (except to the limited extent permitted by the Copyright Ordinance 1962 for interoperability purposes); copying the software except for backup purposes; sublicensing without the licensor's written consent; using the software for illegal purposes including under the Prevention of Electronic Crimes Act 2016 (PECA); and transferring the licence to a third party without consent.

Licence Fee and Payment Terms: The licence fee amount in Pakistani Rupees (PKR) or foreign currency, the payment schedule (one-time, annual subscription, or monthly SaaS fee), the payment method (bank transfer to a State Bank of Pakistan-regulated bank, electronic payment), and the consequences of late payment including interest and suspension of licence rights. For royalty payments to foreign licensors, the withholding tax obligation under Section 152 of the Income Tax Ordinance 2001 must be addressed.

Maintenance and Support: The licensor's obligations to provide software updates, security patches, and technical support during the licence period, including the level of support (telephone, email, on-site), response time commitments, and the definition of updates versus upgrades (which may be subject to additional fees). The agreement should specify whether maintenance is included in the licence fee or priced separately.

Warranty and Liability: The licensor's warranty that the software will perform substantially in accordance with its documentation for a specified period, that the licensor has the legal right to grant the licence, and that the software does not infringe any third-party intellectual property rights. The liability cap — typically limiting the licensor's liability to the amount of licence fees paid in the preceding 12 months — should be expressly stated, as Pakistani courts apply Section 73 of the Contract Act 1872 to assess damages, which can include consequential losses in the absence of a contractual cap.

Termination: The circumstances in which either party may terminate the agreement — typically the licensee's failure to pay, material breach, insolvency, or use of the software beyond the licence scope. Upon termination, the licensee must immediately cease using the software and delete all copies from its systems, confirming deletion in writing. The licensor's right to audit the licensee's systems for compliance before and after termination should be expressly provided.

Forms-legal.com provides this Software Licence Agreement (Pakistan) template as a practical reference document for software licensors and licensees. The template reflects the requirements of the Copyright Ordinance 1962, the Contract Act 1872, and the Prevention of Electronic Crimes Act 2016. Parties should obtain legal advice from a qualified IT lawyer enrolled at a provincial Bar Council before entering into significant software licence transactions.