[Federal Register Volume 59, Number 72 (Thursday, April 14, 1994)]
[Unknown Section]
[Page 0]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 94-8834]


  Federal Register / Vol. 59, No. 72 / Thursday, April 14, 1994 /
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[[Page Unknown]]

[Federal Register: April 14, 1994]


                                                    VOL. 59, NO. 72

                                           Thursday, April 14, 1994

DEPARTMENT OF AGRICULTURE

Rural Electrification Administration

7 CFR Parts 1753 and 1755

 

REA Telecommunications Software License Agreement

AGENCY: Rural Electrification Administration, USDA.

ACTION: Final rule.

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SUMMARY: The Rural Electrification Administration (REA) hereby amends 
its regulations on telecommunications to add a uniform 
Telecommunications Software License Agreement that will be an Addendum 
to any REA financed central office equipment contract where the 
Borrower is required to execute a Software License Agreement. This 
action provides a single Telecommunications Software License Agreement 
instead of the present situation where each supplier uses its own form. 
This action reduces the review and approval time of equipment contracts 
and provides fair and equal treatment for all providers of central 
office equipment.

EFFECTIVE DATE: May 16, 1994.

FOR FURTHER INFORMATION CONTACT: John J. Schell, Chief, Central Office 
Equipment Branch, Telecommunications Standards Division, Rural 
Electrification Administration, room 2836, South Building, USDA, 
Washington, DC 20250-1500, telephone number (202) 720-0671.

SUPPLEMENTARY INFORMATION:

Executive Order 12866

    This final rule has been determined to be not-significant for 
purposes of Executive Order 12866 and therefore has not been reviewed 
by OMB.

Executive Order 12372

    This final rule is excluded from the scope of Executive Order 
12372, Intergovernmental Consultation. A notice of final rule entitled 
Department Programs and Activities Excluded from Executive Order 12372 
(50 FR 47034) exempts REA and RTB loans and loan guarantees, and RTB 
bank loans, to governmental and nongovernmental entities from coverage 
under this Order.

Executive Order 12778

    This final rule has been reviewed under Executive Order 12778, 
Civil Justice Reform. This final rule:
    (1) Will not preempt any state or local laws, regulations, or 
policies;
    (2) Will not have any retroactive effect; or
    (3) Will not require administrative proceedings before parties may 
file suit challenging the provisions of this rule.

Regulatory Flexibility Act Certification

    The Administrator of REA has determined that this final rule will 
not have a significant impact on a substantial number of small entities 
as defined by the Regulatory Flexibility Act (5 U.S.C. 601 et seq.). 
This final rule provides for a uniform software license agreement which 
will reduce review and approval time and ensure fair and equal 
treatment for all providers of central office equipment.

Information Collection and Recordkeeping Requirements

    The reporting and recordkeeping requirements contained in this 
final rule have been submitted to OMB for approval. Comments concerning 
these requirements should be directed to the Department of Agriculture, 
Clearance Office, Officer of Information Resources Management, room 
404-W, Washington, DC 20250, and to the Office of Information and 
Regulatory Affairs of OMB, Attention: Desk Officer for USDA, room 3201, 
NEOB, Washington, DC 20503.

National Environmental Policy Act Certification

    The Administrator of REA has determined that this final rule will 
not significantly affect the quality of the human environment as 
defined by the National Environmental Policy Act of 1969 (42 U.S.C. 
4321 et seq.). Therefore, this action does not require an environmental 
impact statement or assessment.

Catalog of Federal Domestic Assistance

    The program described by this final rule is listed in the Catalog 
of Federal Domestic Assistance Programs under No. 10.851, Rural 
Telephone Loans and Loan Guarantees, and 10.852, Rural Telephone Bank 
Loans. This catalog is available on a subscription basis from the 
Superintendent of Documents, the United States Government Printing 
Office, Washington, DC 20402.

Background

    7 CFR part 1753, Telecommunications System Construction Policies 
and Procedures, contains guidelines for the preparation of Software 
License Agreements subject to approval by REA. Efforts to conclude 
satisfactory license agreements with individual equipment suppliers 
have been time consuming and in certain cases REA has been unable to 
reach an agreement that is acceptable to REA and the equipment 
suppliers. This agreement will permit all REA financed purchases of 
central office equipment and the suppliers to utilize a common uniform 
Software License Agreement. The agreement will be an Addendum to all 
REA financed central office equipment contracts and eliminates the 
present practice of using individual license agreements negotiated with 
separate equipment suppliers.
    REA amends 7 CFR part 1753, by revising subpart A, Sec. 1753.7, 
paragraph (f)(4), and subpart E, Sec. 1753.38, paragraph (a)(2)(i)(J), 
to indicate that the software license agreement prepared by REA will be 
an addendum to the central office equipment contract, and to amend 
Sec. 1753.38, paragraph (c), by revising the software license 
agreement. Additionally, it removes Sec. 1753.38, paragraph 
(a)(2)(iii), which instructs the borrower to review the proposed 
software licensing agreement and obtain REA approval, if required. This 
final rule eliminates the need for instructions since the software 
agreement has been prepared by REA and approved by the Administrator 
prior to presentation to suppliers. It is also amended by adding a form 
to Sec. 1755.93.

Comments

    Public comments were received from Alcatel Network Systems, Inc., 
AT&T Network Systems, Commonwealth Telephone Company, Hastad 
Engineering Co., Mitel Public Switching, Northern Telecom Inc., Redcom 
Laboratories, Inc., and Seimens Stromberg-Carlson. The comments, 
recommendations and responses are summarized as follows:

General Comments

    One commenter felt REA should have one universal software license 
for all software controlled devices.
    Response: The use of a universal software license has been 
considered by REA but is not viable at this time because of the large 
difference in types of equipment and the requirements of various REA 
contracts.
    One commenter states that their switch uses firmware, which is 
hardware based and sold with the product, rather than software, 
therefore, they are not required to have a software agreement.
    Response: REA does not require an executed software license 
agreement. If the vendor requires an executed software/firmware license 
agreement, then the only one acceptable to REA is the REA prepared 
Software License Agreement (Addendum 2).
    One commenter feels that it is in the best interest of the Licensor 
and the REA Borrowers to use its existing standard form Software 
License, or failing that, to use the currently approved REA Negotiated 
License instead of the REA prepared Software License Agreement.
    Response: REA believes one form of Software License to be used in 
all Software leasing situations involving the Forms 525 and 545 
Contracts is in the best interests of the suppliers, the borrowers, and 
REA because a single uniform Software License presents a fair and 
equitable distribution of risk to all parties involved and assures 
borrowers that all manufacturers must meet the same requirements.
    Two commenters felt that the term ``Licensed Software'' be used 
consistently throughout the Agreement.
    Response: The Agreement has been revised to reflect the above 
comment.
Section (1)
    One commenter suggested that the definition of Licensed Software 
and the associated documentation be more specific.
    Response: The definition of Licensed Software and associated 
documentation has been revised to resolve this problem.
    One commenter suggested that the definition of Licensee and 
Licensor be expanded to include sublicensors of the Licensor so that 
resellers or distributors could sign the Agreement.
    Response: REA believes that there should be one party responsible 
for meeting the Licensee's obligations and one party responsible for 
meeting the Licensor's obligations so that the ultimately responsible 
entities can be easily ascertained. The language in this definition has 
not been changed.
Section (2)
    Two commenters suggested that the last sentence of Section (2) be 
changed to more clearly define the use of the Licensed Software.
    Response: REA has revised this sentence to clarify the intention 
that the Licensed Software can only be used with the System provided 
under the Contract.
    One commenter suggested that section (2)(i) be changed to require 
the Licensee to notify the Licensor of any change in location of the 
equipment and Licensed Software so that the Licensor could track its 
software and assist in providing software support (e.g., change 
notices, etc).
    Response: REA agrees. Section (2)(i) has been revised to 
incorporate the suggested change.
    One commenter wanted additional language added to section (2)(ii) 
emphasizing territorial limits and the comparable technical application 
by transferee of the original License.
    Response: REA has added language to sections (2)(ii) and (2)(iii) 
to further define the responsibilities of the transferee and the 
original License holder.
    One commenter wanted language added to section (2)(ii) to restrict 
the transfer of the Licensed Software unless the transfer was 
authorized in writing by the Licensor.
    It was also requested that the Licensor be allowed a 60 day period 
to raise any objections to the transfer.
    In addition, it was suggested that if a Company's relationship to 
the Licensee changes such that it is no longer a subsidiary of the 
Licensee then a transfer of the License Agreement is required or the 
Licensor has the right to terminate the Agreement and revoke the right 
to use the Licensed Software.
    Response: REA feels that the Licensee should have the right to 
transfer the Licensed Software to any party who acquires legal title to 
the System.
    REA has added language to section (2)(ii) to specify that the 
Licensor should receive 30 days notice of any transfer.
    The obligations of the Licensee and of the transferee who acquires 
legal title to the System are covered under section (2)(ii). In 
addition, REA has added language to section (2)(iii) to emphasize the 
responsibilities of the Licensee, therefore, REA does not feel that 
additional changes are advisable.
    Two commenters felt that the word ``reasonable'' should be changed 
to ``necessary'' in the first sentence of section (2)(iii).
    One commenter felt that the word ``rightful'' should be added to 
the last sentence before the word ``acts''.
    One commenter requested that the following sentence be added to 
section (2)(iii): ``The Licensee shall not make the Licensed Software 
available to any person except its employees on a need to know basis''.
    Response: REA feels the word ``necessary'' places too great a 
burden on the Licensee and that ``reasonable'' provides Licensor with 
adequate protection. This requested change has not been implemented.
    The Licensee would not know if information or data that is 
available to the general public was rightfully released or not. This 
requested change has not been implemented.
    REA has added language to restrict Software availability to a need 
to know basis, however, the words ``its employees'' have not been 
added. This would restrict the Licensee from obtaining assistance from 
other sources in the event section (2)(xi) required enforcement.
    (i) In section (2)(iv), one commenter wanted additional language 
added to require the Licensee to follow the commenter's printed 
procedures for copying the Licensed Software. It was suggested that the 
phrase ``pursuant to the Licensor's then current procedures and 
practices'' be added to section (2)(iv).
    (ii) One commenter wanted the words ``In such reproduction,'' to 
begin the second sentence and the word ``such'' inserted between the 
words ``all'' and ``copies'' in the second sentence to further define 
the limitation of reproduction of the Licensed Software.
    (iii) One commenter remarked that there was no need to copy the 
code since it was contained on non-volatile ROM on the switch.
    Response: (i) REA feels the suggested language regarding current 
procedures and practices is too vague and could impose unknown 
restrictions on the Licensee. This language has not been added to the 
Software License.
    (ii) The suggested language on limitation of reproduction has been 
added.
    (iii) REA feels that it is appropriate to be able to copy any 
Licensed Software/Firmware that is furnished with the System covered 
under the Contract for the reasons described in section (2)(iv) of the 
Software License Agreement.
    One commenter remarked that in section (2)(v), activation of 
nonactivated program instruction steps is a process by which a non-
enabled software feature may be enabled and that, in such cases, 
additional Right-To-Use fees may apply.
    Response: REA agrees and has added language to that effect.
    One commenter suggested that a new section (2)(vi) be added 
restricting decompiling or reverse assembly.
    Response: Although REA has not added a new section, the suggested 
language has been added to section (2)(iii).
    Four commenters replied on section (2)(vii)(A). Their comments are 
summarized below:
    (i) Three would void the warranty if the Licensee made any changes.
    (ii) Three wanted section (2)(vii)(A) removed.
    (iii) One suggested extensively revising the language.
    (iv) One suggested refusing to allow Licensee to make any changes 
to the Licensed Software to restore service.
    Response: (i) REA feels the Borrower must be able to attempt to 
preserve or restore service to their subscribers without incurring a 
penalty if the Licensor is unable to preserve or restore service in a 
timely manner.
    (ii), (iii) Section (2)(vii)(A) has not been removed but the 
language has been extensively revised to clarify REA's intention and 
protect the Licensor.
    (iv) As stated previously, REA feels the Borrower must be able to 
attempt to preserve or restore service to their subscribers. However, 
this section has been revised to indicate that any changes made by 
Licensee can only be made if the Licensor is unable to preserve or 
restore service in a timely manner.
    One commenter wanted to know who determines that the Licensor is 
unwilling or unable to furnish support for the Licensed Software under 
section (2)(vii)(C).
    Response: The exception set forth in section (2)(vii)(c) applies 
only if section (2)(xi) is enforced. Section (2)(vii)(c) has been 
revised to indicate the above.
    One commenter feels that all rights to any changes made under 
section (2)(vii) should remain the property of the Licensor.
    Response: As indicated previously, section (2)(vii)(A) has been 
revised for clarification and any changes made under section 
(2)(vii)(C) are only allowed if section (2)(xi) is enforced. REA 
believes any changes should become the property of the Licensee because 
the changes are made only in the instance where the Licensor is 
unwilling or unable to support the Licensed Software.
    Comments were received on section (2)(ix) as follows:
    (i) Five commenters stated that some software problems cannot be 
corrected in thirty days and suggested that additional time be allowed 
in these cases.
    (ii) Two commenters suggested a one (1) year warranty period.
    (iii) One commenter felt that the Software warranty should begin at 
the Completion of Installation.
    (iv) It was also felt that the Software should function according 
to the Specification and not to the technical material provided to 
explain the System and that the Licensor's sole obligation should be to 
repair the Software and correct any physical damage caused by the 
Software failure.
    (v) One commenter wanted the phrase ``free from errors and 
incompleteness'' added to the first sentence of section (2)(ix) to 
reflect the requirement in 7 CFR 1753.38(c)(1)(v) and a definition of 
those terms added to the Agreement.
    (vi) It was also suggested that a one (1) year warranty period be 
added for special equipment.
    Response: (i) Section (2)(ix) already allows for an extension of 
time if the software problem cannot be corrected in thirty (30) days. 
This language has been further clarified.
    (ii) REA requires a five (5) year warranty period because software 
is information based and defects in seldom used programs would not be 
detected until the program is used. REA believes that over a 5 year 
period even seldom used programs would be used and any defects 
corrected.
    (iii) In order for the Licensee to realize a full five (5) year 
warranty the warranty period must start with the delivery of possession 
and control from the Licensor. If it began at the Completion of 
Installation, the warranty period would be diminishing while the 
equipment was still under control of the Licensor.
    (iv) Performance of the software must be in accordance with both 
the Specification and Licensor documentation. The documentation is 
furnished to assist the Licensee in the operation, administration, and 
maintenance of the System. REA has made no change in the obligations of 
the Licensor as stated in the Contract.
    (v) REA does not feel the term ``free from errors and 
incompleteness'' fully describes the intent of this section (2)(ix). 
This language has not been added to section (2)(ix).
    (vi) This License was specifically designed for use with REA Forms 
525 Central Office Equipment Contract (Including Installation) and 545 
Central Office Equipment Contract (Not Including Installation) and does 
not apply to special equipment contracts, therefore, there is no need 
for a one (1) year warranty clause for special equipment.
    Comments were received on section (2)(x) as follows:
    (i) Two commenters wanted the ability to modify the Licensed 
Software or replace it with equivalent software at Licensor's option.
    (ii) One commenter suggested that section (2)(x) disclaim any 
special, indirect or consequential damages in connection with the use 
or performance of the Licensed Software.
    (iii) One commenter wanted the infringement clause to apply only to 
United States patents, copyrights and trademarks and the right to 
remove the enjoined Licensed Software and refund some of the Right-to-
Use Fee if modification or replacement is not feasible.
    (iv) One commenter wanted the Licensee to indemnify the Licensor in 
like manner for any claim, suit or proceeding brought against the 
Licensor for infringement caused by the Licensee. The commenter also 
wanted to remove the phrase ``This shall be in addition to any other 
rights or claims which the Licensee may have'' and suggested that 
section (2)(x) disclaim any liability for any settlement made without 
Licensee's consent.
    Response: (i) The option of modifying or replacing the Licensed 
Software is in the current language.
    (ii) REA's intent is to limit liability for special, indirect and 
consequential damages to provide the Licensor with reasonable 
protection against losses related to product failure; protect the 
government's loan security; and serve as a standard that bidders and 
owners alike can expect to see on all central office equipment 
contracts so competitive bidding can be facilitated. This language has 
not been changed.
    (iii) REA feels that the Licensor should know what software can be 
legally licensed by the Licensor, and the Licensee should expect that 
the Licensed Software furnished with the System is not going to be 
subject to infringement challenges. Simply allowing the Licensor to 
refund some of the Right-to-Use Fee and remove the enjoined Licensed 
Software gives the Licensor the right to ``buy back'' equipment or 
software when a copyright problem is encountered. To the Licensee, this 
means that essential features or capability could be lost and would 
remain unavailable for the entire useful life of the new switching 
equipment. The resulting reduction in value of the contract to the 
Licensee cannot be predicted, and certainly cannot be limited to the 
price of the infringing equipment or software less depreciation. These 
requirements have not been changed.
    (iv) Section (2)(x) specifically exempts the Licensor from 
liability if the infringing software is of the Licensee's design or 
selection. REA feels that the existing language sufficiently protects 
the Licensor from unwarranted claims caused by the Licensee. REA also 
feels the Licensee should not have to relinquish its rights as covered 
in the Contract because the Licensor is involved in an infringement 
dispute. This language has not been changed. Also, the Licensee cannot 
commit the Licensor to any settlement, therefore, the suggested 
additional language is not required.
    Comments were received on section (2)(xi) as follows:
    (i) Two commenters suggested that software support after the 
warranty period should have a specific time period.
    (ii) Two commenters suggested that they should not be required to 
support retired software when there is active equivalent or upgraded 
software available from the Licensor which it will support.
    (iii) One commenter suggested that the language should be amended 
to exclude information that the Licensor does not have the legal right 
to turn over; e.g., third party Software.
    (iv) One commenter suggested that the only support covered under 
this section (2)(xi) should be the support required by the Contract. 
The commenter also felt that the Licensee should be allowed to modify 
the Licensed Software for proper equipment operation but not for 
feature enhancements, and the Licensor should receive royalty-free 
rights to make, use and sell any modifications made by the Licensee 
under this section.
    (v) One commenter remarked that the only time the Licensee should 
be able to modify the Licensed Software is in the event that the 
Licensor withdraws from the business of selling and supporting the 
Licensed Software.
    Response: (i) REA agrees that support after the warranty period 
should have a specified time limit. This was addressed when REA 
published the Proposed Rule Form 525 Central Office Equipment Contract 
(Including Installation) in the Federal Register.
    (ii) REA feels that the Licensee should reasonably expect to 
receive support for the Licensed Software without having to upgrade the 
System.
    (iii) REA agrees in principle, however, this exclusion does not 
extend to any information or Software not specifically identified as 
``agreed excluded documentation'' in an attachment to the Contract, and 
under no circumstance can it include the overall operating Software of 
the System. Section (2)(xi) has been revised to reflect the above.
    (iv) REA agrees that the support referred to in section (2)(xi) is 
the support required by the Contract. The language has been changed to 
reflect this. However, REA does not agree that the Licensee should be 
restricted from making feature enhancements. The Licensee must be able 
to add enhancements to the System in order to offer current and future 
services to their subscribers. Due to the circumstances that would 
require enforcement of this section (2)(xi) any changes made under this 
section become the exclusive property of the Licensee.
    (v) REA feels the Licensee should have the right to modify the 
Licensed Software in the event that the Licensor refuses to furnish 
support as required by the Contract.
    One commenter felt that in section (2)(xii), the word Licensor 
should be Licensee. One commenter felt that this section should apply 
to both the Licensor and the Licensee.
    Response: Section (2)(xii) refers specifically to the Licensor. 
Section (2)(xiii) refers to the Licensee and details the remedies 
available to the Licensor.
    Five commenters remarked on section (2)(xiii). Their comments are 
summarized below:
    (i) One commenter felt that damages of ten times the Contract price 
for a breach of the Software License was excessive and should be 
changed to the initial cost of the Software.
    (ii) One commenter felt that damages of ten times the Contract 
price for a breach of the Software License was not a sufficient 
deterrent and sixty (60) days notice before termination may cause 
irreparable harm to the Licensor. It was suggested that section 
(2)(xiii) be eliminated in its entirety.
    (iii) One commenter suggested that the sixty (60) day notice period 
for REA should be changed to thirty (30) days.
    (iv) One commenter wanted section (2)(xiii) to apply to the 
Licensee and the Licensor and exclude from damages lost revenue or 
profits.
    (v) One commenter wanted REA to agree that certain events would 
cause REA to recommend termination. One commenter wanted the right to 
terminate the Software License without REA approval.
    (vi) One commenter suggested the word reasonable in the first 
sentence of section (2)(xiii) be changed to thirty (30) days.
    Response: (i) REA feels that damages limited to the initial cost of 
the Software is not a sufficient deterrent to provide a reasonable 
amount of security against a breach of the Software License. However, 
after further evaluation, and in response to the comments, REA feels 
that ten times the Contract price could financially devastate the 
typical REA Borrower and consequently jeopardize REA loan security. 
Damages payable by the Licensee for breach of this License have been 
changed to not exceed the total Contract price
    (ii) In order to protect the Borrower and REA loan security REA 
feels there must be a cap on damages against the Licensee for a breach 
of this License. REA also feels that there must be some restrictions on 
the termination of the Software License. This section (2)(xiii) 
remains.
    (iii) REA feels that thirty (30) days is not sufficient time to 
thoroughly evaluate and arrive at a fair and equitable decision 
regarding the circumstances that might cause termination of the 
Software License.
    (iv) As stated previously, section (2)(xii) refers specifically to 
the Licensor. Section (2)(xiii) refers to the Licensee and details the 
remedies available to the Licensor.
    (v) Any event that would cause the Licensor to recommend 
termination of the Software License must be individually and thoroughly 
evaluated by REA prior to any recommendation by REA. In order to 
protect the loan security of REA and the Licensee's ability to repay 
that loan, REA must be included in any decision to terminate the 
Software License.
    (vi) REA has evaluated the suggestion to change the word reasonable 
to thirty (30) days and agree that it would make the Software License 
more definitive. The language in section (2)(xiii) has been changed to 
reflect this.
    The remainder of section (2)(xiii) has not been changed.
    One commenter felt that section (2)(xv) was unnecessary because the 
Software License is an Addendum to the Contract and the Contract is 
subject to REA approval.
    Response: Separate provisions for REA approval of the Software 
License Agreement makes the Agreement more prominent and helps ensure 
that arbitrary changes are not made to the Agreement without REA's 
knowledge or approval.
    One commenter wanted four additional paragraphs added to section 
(2) of the Software License. One commenter wanted two additional 
paragraphs added to section (2) of the Software License. These six 
paragraphs are summarized here.
    (i) One paragraph specified that the obligations of the Licensee 
under this agreement shall survive after the termination of this 
Agreement.
    (ii) One paragraph specified that the Licensee shall not, without 
the prior written permission of the Licensor, use in advertising, 
publicity, or otherwise, any trade name, trademark, or any other 
identification owned by the Licensor.
    (iii) One paragraph specified that the Software License Agreement 
shall prevail notwithstanding any conflicting terms or legends which 
may appear on or in the Licensed Software.
    (iv) One paragraph specified that nothing contained herein shall be 
construed as conferring by implication or otherwise (1) any license or 
right to use any name, trade name, trademark or any other 
identification, or simulation thereof; (2) any obligation to furnish to 
any person, including Licensee, any assistance whatsoever, or any 
documentation other than Licensed Software and related documentation as 
specified in this Agreement; (3) a grant to sell, lease, or otherwise 
transfer or dispose of Licensed Software, except as specified.
    (v) One paragraph specified that the Licensee shall not decompile 
or reverse assemble the Licensed Software.
    (vi) One paragraph specified that the Licensee assumes sole 
responsibility for ensuring that the Billing Center can correctly read 
call records and risk of loss for any data, use, revenue or profit 
shall be the responsibility of Licensee.
    Response: (i) REA agrees and has added the suggested language to 
the Software License Agreement in section (2)(xiv).
    (ii) REA agrees that the Licensor and Licensee have a right to 
protect their trademarks, trade names and other forms of 
identification. Language has been added to the Software License to 
reflect this in section (2)(xv).
    (iii) REA believes that this is the intent of the Software License 
Agreement and has added the suggested language to the Software License 
in section (2)(xvi).
    (iv) REA believes that the language added to the Software License 
for paragraph (ii) covers part (1) of this paragraph. Part (2) of this 
paragraph has not been added as the Licensor must provide support and 
assistance as required by the Contract. REA has not added part (3) of 
this paragraph because section (2)(ii) of the Software License already 
states the requirements for sale of the System.
    (v) Although REA has not added a new section, the suggested 
language has been added to section (2)(iii).
    (vi) REA believes it is the responsibility of the Licensor to 
determine what format is required for the call records and react 
accordingly. This paragraph has not been added to the Software License.

List of Subjects

7 CFR Part 1753

    Communications equipment, Loan programs--communications, Reporting 
and recordkeeping requirements, Rural areas, Telephone.

7 CFR Part 1755

    Loan programs--communications, Reporting and recordkeeping 
requirements, Rural areas, Telephone.

    For the reasons set out in the preamble, Chapter XVII of title 7 of 
the Code of Federal Regulations is amended as follows:

PART 1753--TELECOMMUNICATIONS SYSTEM CONSTRUCTION POLICIES AND 
PROCEDURES

    1. The authority citation for part 1753 continues to read as 
follows:

    Authority: 7 U.S.C. 901 et seq., 1921 et seq.

    2. Section 1753.7 is amended by revising paragraph (f)(4) to read 
as follows:


Sec. 1753.7  Plans and specifications (P&S).

* * * * *
    (f) * * *
    (4) Telecommunications software license provision. If the borrower 
is required to enter into a software license agreement in order to use 
the equipment, the contract must contain the REA prepared Software 
License Agreement as an Addendum.
    3. Section 1753.38 is amended by revising paragraph (a)(2)(i)(J), 
by removing paragraph (a)(2)(iii), by redesignating paragraphs 
(a)(2)(iv) through (a)(2)(vii) as paragraphs (a)(2)(iii) through 
(a)(2)(vi), respectively, and by revising newly designated paragraph 
(a)(2)(v) and paragraph (c) to read as follows:


Sec. 1753.38  Procurement procedures.

    (a) * * *
    (2) * * *
    (i) * * *
    (J) A software license agreement (if required by the manufacturer) 
in the form indicated in =1753.38(c).
* * * * *
    (v) After evaluation of the technical proposals and REA approval of 
changes to the P&S, sealed bids shall be solicited from only those 
bidders whose technical proposals meet the P&S requirements. When fewer 
than three bidders are qualified to bid, REA approval must be obtained 
to proceed. Generally, REA will grant this approval only if all 
suppliers currently listed in the ``List of Materials Acceptable for 
Use on Telephone Systems of REA Borrowers'' were invited to submit 
technical proposals.
* * * * *
    (c) Software license agreement (Addendum 2). The Addendum in this 
paragraph to REA Form 525, Central Office Equipment Contract (Including 
Installation), and REA Form 545, Central Office Equipment Contract (Not 
Including Installation), must be used with any central office equipment 
contract that requires a software license agreement and for which REA 
financial assistance is to be provided.

Addendum 2--Software License Agreement

    (1) Definitions. For the purpose of this Software License 
Agreement--
    Contract means the REA Form 525 Central Office Equipment 
Contract (Including Installation) or REA Form 545 Central Office 
Equipment Contract (Not Including Installation),

dated ____________, between

----------------------------------------------------------------------
(the Licensee) and

----------------------------------------------------------------------
(the Licensor).

    Days means calendar days.
    Licensed Software means the computer programs, furnished for the 
operation of the System(s) provided under the Contract, whether 
contained on a tape, disc, semiconductor device, or other memory 
device or system memory consisting of logic instructions and 
instruction sequences in machine-readable object code, which 
manipulate data in the central processor, control and perform input/
output operations, perform error diagnostic and recovery routines, 
control call processing, and perform peripheral control, 
administrative and maintenance functions; as well as Licensor's 
standard customer documentation, excluding source code, used to 
describe, maintain and use the programs provided under the Contract.
    Licensee and Licensor, respectively, mean the parties signing 
the software license agreement as the licensee and licensor.
    Right-to-Use Fee is defined in section (2).
    Specifications means the REA Form 522, General Specification for 
Digital, Stored Program Controlled Central Office Equipment, which 
is part of the Contract.
    System means the stored program controlled central office and 
associated remote switching terminal or terminals which use the 
Licensed Software covered by this License.
    (2) Software License Provisions. The Licensor may charge a fee, 
herein referred to as a Right-to-Use Fee, for use of the Licensed 
Software. The Right-to-Use Fee shall be included in the Total Base 
Bid as defined in the Contract. In consideration of the Right-to-Use 
Fee, the Licensor hereby grants the Licensee the right to use all 
Licensed Software, solely in connection with the System provided 
under this Contract, so that the System performs in accordance with 
the Contract and the Specifications.
    (i) The Licensee's right to use the Licensed Software is non-
exclusive and limited to use or operation in the United States of 
America, including its Territories, the Federated States of 
Micronesia, the Marshall Islands, Palau and the Commonwealth of 
Puerto Rico, with the System for which the Licensed Software is 
provided by the Licensor. The Licensee may reuse the equipment and 
its accompanying Licensed Software at another location within the 
Licensee's System without obtaining additional approvals from 
Licensor, provided, however, that the Licensee notify the Licensor, 
within ten (10) days, of the change in location of the equipment and 
Licensed Software.
    (ii) The Licensee and any successor to the Licensee's title in 
the System may, without further consent of the Licensor, transfer 
the Licensed Software and all of the Licensee's rights and interests 
under this Software License to any transferee who acquires legal 
title to the System, provided that such transferee first agrees in 
writing to the Licensor to abide by all of the terms and conditions 
of this License including, without limitation, the territorial 
limitation stated in section (2)(i) and the restrictions on 
decompiling or reverse assembly stated in section (2)(iii). Licensee 
shall give Licensor written notice thirty (30) days prior to any 
transfer. The Licensor shall not place any additional conditions on 
the transferee's use of the System or the Licensed Software. If the 
provisions of this section (2)(ii) are satisfied, thereafter the 
Licensee shall bear no responsibility for transferee's failure to 
abide by the terms and conditions of this License.
    (iii) The Licensee shall take reasonable steps to protect the 
confidentiality of the Licensed Software and shall not decompile or 
reverse assemble all or any part of the Licensed Software to 
generate source code. The Licensee shall not make the Licensed 
Software available to any person except on a need to know basis. The 
obligations of the Licensee hereunder shall not extend to any 
information or data relating to the Licensed Software which is now 
available to the general public or becomes available by reason of 
the acts of the Licensor or third parties.
    (iv) The Licensee may reproduce or copy the Licensed Software 
and related materials solely for the purpose of archival backup, in-
house training and operating, maintaining, and administering the 
System provided under this Contract. In such reproduction, the 
Licensee shall include, upon all such copies of the Licensed 
Software, all proprietary notices, including the copyright notice 
within the Licensed Software program and related documentation in 
the form in which it is received from the Licensor.
    (v) The Licensee acknowledges that the Licensed Software program 
is the property of the Licensor, and shall not do, or cause to be 
done, anything to activate any of the subsisting nonactivated 
computer instruction steps therein unless authorized in writing by 
the Licensor. The Licensor shall have the exclusive right to 
activate, or authorize the activation of, the subsisting 
nonactivated program instruction steps in the Licensed Software. In 
this event Licensee shall pay any additional Right-To-Use Fee(s) 
agreed to by Licensee and Licensor.
    (vi) In the event the Licensor develops significant improvements 
to the Licensed Software, the Licensor may market the improvements 
as a separate offering requiring payment of an additional Right-to-
Use Fee.
    (vii) The Licensee shall not modify or otherwise change the 
Licensed Software other than at the direction of the Licensor. This 
provision shall not apply to:
    (A) Changes to the Licensed Software which are necessary to 
preserve or restore service. Licensee shall use all reasonable 
efforts to contact Licensor before making any such changes. If the 
Licensor is unable to make the necessary changes promptly to the 
Licensed Software to preserve or restore service, then the Licensee 
may make only such changes to the Licensed Software as are necessary 
to preserve or restore service. In such event, Licensee shall 
promptly notify Licensor of the changes made by Licensee.
    (B) Changes made by the Licensee to its own database; and
    (C) Changes made by the Licensee in connection with the exercise 
of its rights under section (2)(xi).
    (viii) Within thirty (30) days after written notice that a 
program or a release thereof has been discontinued and is no longer 
required for the operation of the System and the Licensor has 
furnished the Licensee with a new program that is fully satisfactory 
to the Licensee, the Licensee agrees to return the original and all 
copies of the discontinued program and specified related documents. 
If such return is impossible or impractical, the Licensee shall 
destroy said program and documents and provide the Licensor with a 
written notice of such destruction.
    (ix) The Licensor warrants to the Licensee that any Software 
licensed under this Software License shall function for a period of 
five (5) years from the warranty start date defined in the Contract 
in accordance with the Specifications and any written or printed 
technical material provided by the Licensor to explain the operation 
of the Licensed Software and aid in its use. The Licensor shall 
correct all deficiencies within thirty (30) days from the date of 
receipt by the Licensor of written notice of such deficiencies from 
the Licensee. An extension of this thirty (30) day period may be 
allowed only if agreed upon by the Licensee and REA. It shall be the 
Licensor's obligation to insert and thoroughly test, at no charge to 
the Licensee, any software amendment or alteration provided to 
satisfy the obligations of this section (2)(ix). If a deficiency is 
detected or a correction made within the final ninety (90) days of 
the warranty, the warranty shall be extended to a date ninety (90) 
days after the deficiency has been corrected.
    (x) The Licensor shall hold harmless and indemnify the Licensee 
from any and all claims, suits, and proceedings for the infringement 
of any patent, copyright, trademark, or violation of trade secrets 
covering any Licensed Software used with the System, except for 
items of the Licensee's design or selection. If the Licensee's use 
of the Licensed Software is enjoined, the Licensor shall promptly, 
at its own expense, place the Licensee in a position where it is 
able to use the System in accordance with the Specifications, 
whether by:
    (A) Modifying the Licensed Software or portion thereof so that 
it no longer infringes but remains functionally equivalent,
    (B) Replacing the Licensed Software with noninfringing 
equivalent software,
    (C) Obtaining for the Licensee a license or other right to use, 
or
    (D) Such other actions as may be required. This shall be in 
addition to any other rights or claims which the Licensee may have. 
The Licensor shall, at its own expense, (and the Licensee agrees to 
permit the Licensor to do so) defend any suits which may be 
instituted by any party against the Licensee for alleged 
infringement of patents, copyright, trademark, or violation of trade 
secrets relative to the Licensor's performance hereunder. Either 
party shall notify the other promptly of any such claims, and the 
Licensee shall give to the Licensor full authority and opportunity 
to settle such claims, and shall reasonably cooperate with the 
Licensor in obtaining information relative to such claims.
    (xi) In the event the Licensor becomes unwilling or unable to 
furnish support required by the Contract for the Licensed Software, 
the Licensor shall, upon written request of the Licensee, provide 
with the greatest possible dispatch all Licensed Software back-up 
documentation including proprietary information other than agreed 
excluded documentation. In this event, (1) the Licensee shall be 
permitted full use of all Licensed Software and documentation as 
long as the System is operational and (2) the Licensee may modify, 
or have modified, the Licensed Software for feature enhancement or 
proper equipment operation and becomes the owner of such 
modifications for all purposes, including patenting, copywriting, 
sale, or license thereof. Agreed excluded documentation is Licensed 
Software back-up documentation described in the first sentence of 
this section (2)(xi) which (A) is proprietary information of a third 
party, (B) was specifically described at the pre-bid technical 
session and individually identified in an attachment to the Bid, and 
(C) REA and the Licensee agree, before bids are opened, may be 
excluded from the requirements of this section (2)(xi). In the event 
the Licensor furnishes agreed excluded documentation and the 
Licensee exercises its rights under this section (2)(xi), the 
Licensor shall use its best efforts to provide such agreed excluded 
information to the Licensee, or obtain continuing support agreements 
from the parties retaining legal rights to the excluded 
documentation. Licensor agrees that certain Licensed Software cannot 
be excluded from the requirements of this section (2)(xi) including, 
but not limited to, software, the absence or improper operation of 
which would significantly impair the operation of the System, would 
significantly impair the ability of the Licensee to generate 
revenue, or would pose a risk to REA loan security.
    (xii) A breach of this License by the Licensor is a breach of 
the Contract. Therefore, the remedies specified in the Contract 
shall apply.
    (xiii) The Licensee shall have thirty (30) days after receipt of 
written notice from the Licensor to correct any breach of this 
License. Damages payable by the Licensee for its breach of this 
License shall not exceed the total Contract price. The Licensor 
shall not terminate this License unless:
    (A) The Licensor has given REA sixty (60) days notice before 
termination; and
    (B) REA agrees with the Licensor that termination is the only 
method available to prevent significant harm to the Licensor from 
additional Licensee defaults.
    (xiv) The obligations of Licensee and Licensor and any 
successors in title under this Agreement shall survive the 
termination of this Agreement and continue after any termination of 
rights granted hereunder.
    (xv) Licensee and Licensor agree that it will not, without the 
prior written permission of the other party, use in advertising, 
publicity, packaging, labeling, or otherwise, any trade name, 
trademark, trade device, service mark, symbol, or any other 
identification or any abbreviation, contraction, or simulation 
thereof owned by the other party or any of its affiliates or used by 
the other party or any of its affiliates to identify any of their 
products or services, unless otherwise agreed by the parties.
    (xvi) This Software License Agreement shall prevail 
notwithstanding any conflicting terms or legends which may appear on 
or in the Licensed Software.
    (xvii) If any Section or part thereof, in this Agreement shall 
be held to be invalid or unenforceable in any jurisdiction in which 
this Agreement is being performed, then the meaning of such section 
or part shall be construed so as to render it enforceable, to the 
extent feasible; and if no feasible interpretation would save such 
section or part, it shall be severed from this Agreement and the 
remainder shall remain in full force and effect. However, in the 
event such section or part is considered an essential element of 
this Agreement, the parties shall promptly negotiate a replacement 
therefor.
    (xviii) This Software License and any amendments thereto, or 
revisions thereof, are subject to REA approval.

Licensor

Company

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Title------------------------------------------------------------------

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Licensee

Company

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[End of clause]
* * * * *

PART 1755--TELECOMMUNICATIONS STANDARDS AND SPECIFICATIONS FOR 
MATERIALS, EQUIPMENT AND CONSTRUCTION

    4. The authority citation for part 1755 is revised to read as 
follows:

    Authority: 7 U.S.C. 901 et seq., 1921 et seq.

    5. Section 1755.93 is amended by adding a new entry at the end of 
the table and by revising footnote 1 at the end of table to read as 
follows:


1755.93  List of standard forms of telecommunications contracts.

* * * * * 

----------------------------------------------------------------------------------------------------------------
                                                                                                     Source of  
    REA form No.            Issue date                 Title                     Purpose              copies    
----------------------------------------------------------------------------------------------------------------
                                                                                                                
                                                  * * * * * * *                                                 
Addendum No. 2.......  May 16, 1994........  Addendum to REA Forms 525  Incorporates the Software  REA.\1\      
                                              and 545 Central Office     License Agreement into                 
                                              Equipment Contracts.       REA Forms 525 and 545.                 
----------------------------------------------------------------------------------------------------------------
\1\A limited number of copies of the publication will be furnished by REA upon request. As this document is     
  produced by the Federal Government and is, therefore, in the public domain, additional copies may be          
  duplicated locally by any user as desired. Requests for copies should be sent the Director, Administrative    
  Services Division, U.S. Department of Agriculture, Rural Electrification Administration, Washington, DC 20250.
  The telephone number of the REA Publication Office is (202) 720-8674.                                         

* * * * *
    Dated: April 16, 1994.
Bob J. Nash,
Under Secretary, Small Community and Rural Development.
[FR Doc. 94-8834 Filed 4-13-94; 8:45 am]
BILLING CODE 3410-15-P