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I live in the UK and use software from a US-based company. I currently pay a software licence fee of $150 every six months. This covers access to support and access to monthly software updates, new features, security and bug fixes.

They are now offering to let customers switch to a new pay monthly license, but there is a clause to the effect that if you should later deactivate your monthly license and take a break of less than two years, they will reactive your license upon request, but you agree to them charging you the backdated fees for all the months you missed.

If the deactivated license is not reactivated within two years, it will be considered cancelled and thus not be possible to reactive it; a brand new licence would be required.

Is it legal to backdate the monthly license fee for the missed payments, even though you have opted to forgo the normal active license benefits whilst your license is dormant?

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    I can offer that you buy a license of my cool 2010 product for x a month, however you need to pay x for all months since 2010 because that's when I programmed the software. That's not illegal - you can simply decide it's not worth the money and not buy the software. I can also offer the software for x monthly and y as a lump payment without any explanation how I derived y.
    – DonQuiKong
    Commented Sep 10, 2023 at 9:03
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    Why wouldn't it be? They're offering to sell you a product, and they're telling you what the terms of the sale would be. You are free to decline their offer.
    – PJB
    Commented Sep 10, 2023 at 16:58
  • @PJB Plenty of terms that sellers would want to put in sales contracts are illegal in plenty of countries.
    – JiK
    Commented Sep 12, 2023 at 11:46
  • @JiK -- sure, that's vacuously true.
    – PJB
    Commented Sep 12, 2023 at 12:57

2 Answers 2

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This is a very common scheme for software support contracts.

You're making an incorrect statement that you're forgoing benefits in the inactive period. The issue is you're receiving the version upgrades during the period the contract was inactive.

For example, you buy the full license in 2020, when version 2020 is current. You do not subscribe to the contract in 2021-2022. When you renew the contract in 2023, you get an upgrade to version 2023, without having to pay for the 2021 and 2022 upgrades like people with a continuous contract have.

Requiring the inactive years be back-paid eliminates this.

A further issue is very similar to insurance: adverse selection. People only buy support contracts when they anticipate a major issue, and let it lapse when they don't. This distorts the cost.

But in general, there's nothing illegal about this scheme.

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    But someone completely fresh how has never used the software before, can start using it in 2023, and get the "version 2023, without having to pay for the 2021 and 2022 upgrades like people with a continuous contract have."
    – vsz
    Commented Sep 10, 2023 at 16:18
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    @vsz That's irrelevant. Someone who has chosen not to have a subscription almost always has the option of purchasing a new additional license, but doing so tends to be priced such that it's notably more expensive than paying the accumulated subscription costs. It's up to the software vendor to set the price and terms for their ongoing subscription service and new license purchase at whatever prices and terms they choose. Those are usually set to make it seem beneficial for many/most purchasers to keep up a subscription, but it's generally a cost/benefit choice the customer gets to make.
    – Makyen
    Commented Sep 10, 2023 at 16:54
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    The thing that's changed in the industry is that a significant number of companies are only providing their software as a subscription service, effectively just renting the customers a license for the subscription period, rather than allowing people to purchase a perpetual license to use the software.
    – Makyen
    Commented Sep 10, 2023 at 16:58
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    The benefit of the subscription is that it's a discount on the full license, the more out of date your software is the more you benefit from the update. Right up to the point of the full license cost. I like to think in this scenario that should the backdated subscription cost more than the full license, the company should limit the cost to a new full license, although even then I'm not sure it would be illegal, just annoying
    – James
    Commented Sep 11, 2023 at 15:14
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    @Homercles during the inactive license period you are in a situation similar to those with an active license but not needing tech support, since you would immediately activate it if you needed tech support.
    – Ángel
    Commented Sep 11, 2023 at 23:35
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As a rule of thumb, any contract you read and sign is legal.

The major exception is the rule of consideration. That is, both sides should gain something from the contract.

However, that concerns the total contract, not just the renewal clause. Here the total contract clearly benefits both parties.

Private customers have a law protecting them from the most blatant abuses, corporate customers do not.

Also, consider the alternative. They could have just dropped all this "deactivated license" stuff and cancelled the contract from the first unpaid bill. Then you would have to pay the full price to start using the program again.

Instead, from the goodness of their hearts, they allow recent former customers to return at a lower price. Aren't they nice?

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