The most common clauses included in Oracle’s ULA (II)

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If you are following our ULA article series, you know already that the limitations of a ULA are governed by the clauses within the agreement. Some ULA clauses are product and usage related, whilst others refer to your organization or the term of the ULA. In our previous article, we zoomed in on the product and support related clauses. This time, we will focus on the organization and term related clauses.

Customer definition

The Customer definition in your ULA ordering document mentions the specific legal entity or legal entities that are entitled to make use of the Oracle programs for which an Unlimited Deployment Right has been granted. In many situations this would be your ultimate parent legal entity and all its associated majority owned subsidiaries, which are listed in an exhibit of your ordering document.

Why does Oracle list all the legal entities in its agreement? Oracle wants to avoid that in case your organization acquires another legal entity or merges with another legal entity, these entities would automatically receive the right to make use of the Oracle programs in an unlimited capacity. You should therefore keep in mind that any legal entity which is not listed in your ULA ordering document is by definition NOT allowed to make use of the Oracle programs included in your ULA.

Before entering into a ULA, you should therefore think about situations in which your organization:

  1. merges with or acquires another company and such acquired or merged entity requires the use of the Oracle programs
  2. is acquired by another legal entity, in which case the company that acquires you may require access to your Oracle programs
  3. divests a legal entity which is making use of the Oracle programs and requires to keep making use during the period of time needed to completely disentangle from your IT infrastructure
  4. creates one or more new legal entities due to an organic expansion of your organization
  5. reorganizes the legal entities within your organization

During the commercial negotiations of a new ULA, different options for contractual language can be included to avoid situations where you would need to pay additional license and/or support maintenance fees.

Territory

The Territory section of your ULA ordering document defines the specific countries (territory) in which the Oracle ULA programs can be used. Typically, this clause will specify that the licenses are for “worldwide use” subject to US export laws. For Oracle’s revenue recognition and tax purposes, the ordering document however also includes an estimated usage, for example: 100% use for the Netherlands. This estimated usage is included in the territory clause to determine in what country Oracle will need to pay taxes for this transaction and how much of the revenue related to this transaction will be allocated to the Oracle organization in a specific country. Hence the reason why your local Sales rep will typically include in your ordering document a 100% usage of the programs for the country of the Oracle subsidiary he/she is working for.

Acquisition or Merger

The acquisition or merger clause is part of every ULA ordering document and specifies as a standard that you are no longer entitled to deploy the Oracle programs in an unlimited capacity in case of a merger or acquisition of your company. In such case, you are required to follow the accelerated certification process and, in case no new commercial agreement is reached, your then current deployment of the Oracle programs is counted and converted into perpetual licenses. During the commercial negotiations of a new ULA it is therefore important to validate if and to what extent your organization may be subject to an acquisition or a merger in the next period of time and to agree on a different procedure in case such situation occurs.

Unlimited Deployment Right

This clause specifies the duration (term) of the unlimited deployment rights granted by Oracle. This will typically be a period of 1 to 5 years and varies per individual end user. If you entered into a Perpetual ULA, then this “perpetual” term is listed in this section of the ULA ordering document. A longer unlimited deployment term represents a higher net license and net support fee. At the end of the Unlimited Deployment Right term, you are required to follow a certification process.

When negotiating a new ULA, it pays off to spend some time reviewing the standard clauses proposed by Oracle and considering if these cover your specific needs. It is important to not only look at your current situation, but also think about your organization’s plans for the coming years. This enables you to negotiate clauses that suit your current and future needs.

For a visual overview of Oracle’s ULA ins and outs, as well as a real-life example of how we helped a National Tax Agency to maximize the value of its ULA prior to its expiration date and prepare for the upcoming ULA certification, download our infographic and customer case.

We are happy to use our ULA knowledge and experience to determine which clauses can be customized to create an agreement that works for your organization. In case you want to know more about our ULA services and how we can help you to get the most out of your ULA, don’t hesitate to reach out to us.