License Scope Considerations for Data Providers


By Lauren Mack Data is more accessible and more able to provide insight than ever in today’s business environment. Providing a service that captures and efficiently organizes and analyzes valuable data is highly coveted by business executives looking to understand consumer trends, maximize revenues, and operate more efficiently. Equally important to the data provider, however, is the restrictions it places on how its clients may use and share the data in order to retain its competitive edge.

Who Can Access the Data?

When providing access to data and proprietary algorithms is your product, restricting who may have that access is a critical component of any data license agreement. A strict license will limit access only to employees with an authorized user account, while a lenient license will permit sharing with any person who does not compete with the data provider. Businesses who license data should carefully consider what permitted uses will appeal to their customers, as well as what uses would cause them to lose their competitive advantage or revenues based on their monetization strategy.

Data licensors that provide data to their client to pass along to the client’s customers will need to consider not only what restrictions are placed on the license to their client, but also the restrictions on sublicensing to the end customer. Often the license agreement will place certain requirements on what the end customer license agreement must include, or a more cautious licensor may require that their client use a license agreement drafted by the licensor’s counsel. Some such providers may opt to grant the license directly to the end customer, treating their clients as a reseller that simply passes along the license terms as an attachment to their customer agreement. This gives the data provider more control over the license terms, however it can also mean more administrative burden for the licensor to review end customer requests to revise the license language.

How Can the Data be Used?

Just as important as who can access the data is how the data may be used by those with access. Many licensors will protect their data by requiring that it be kept confidential and only used for the licensee’s “internal business purposes”. Others may freely allow disclosure and use of the data, subject to the licensee complying with any applicable laws.

Licensors should also consider whether and how their clients can modify or combine the licensed data with other data. If modification and aggregation are permitted, then who owns the end product and how it may be used should be considered. Likewise, if the client extracts new data from the licensed data – such end result being “derived data” – then a well-drafted license agreement will address ownership and use of the derived data.

Where Can the Data be Accessed?

Data providers also need to consider where they will allow the data to be accessed. The data being accessible in certain states or countries, at certain client locations, or even on a certain number of computers may factor into the provider’s pricing model. Different laws or norms in different territories may also influence whether the data provider is comfortable with the possibility of their data falling under less advantageous legal framework or into the hands of that government. Of course, the data provider must also require compliance with any export control laws of the country where it is located.


Having an attorney who is experienced with data protection and licensing draft your client agreement(s) is critical for data licensors who want to make sure that their data is properly protected and remains a valuable asset.