How can I shield myself from being sued?
I wrote a software and I distribute it for free for personal and educational purposes. This software permits you to execute orders (buy and sell) through a broker.
The software has a custom license (it is not opensource under GPL)
and it states :
5) Limited warranty: XXX and documentation are "as is" without any warranty as to their performance, merchantability or fitness for any particular purpose. The licensee assumes the entire risk as to the quality and performance of the software. In no event shall XXX or anyone else who has been involved in the creation, development, production, or delivery of this software be liable for any direct, incidental or consequential damages, such as, but not limited to, loss of anticipated profits,benefits, use, or data resulting from the use of this software, or arising out of any breach of warranty.
The question is: do you think this license is enough or do you think I need to incorporate in order to protect myself from being sued?
There is something else I can do to protect myself to being sued?
Which is the best way to protect myself?
There is an important distinction between being sued and liability. To test for whether or not you can be sued is simple: "Are you breathing?" If yes, then I am afraid the answer is regardless of what you do between now and when you stop breathing you can be sued at some point.
The operative question is "do you have liability". Any bozo can sue and too often bozos do sue - you can't really stop that. What you can do is minimize your liability and a limited warranty is one way to do so. You might also consider a fixed cap on damages and make clear this is a material part of the exchange, shorten the time period and process by which a party may sue etc provided the disclosure is clear and conspicuous.
John was right on the benefits of adding a layer of corporate protection.
You may want to register the copyright rights you have in the software to prevent someone from replicating or creating a substantially similar software. That may be more in the nature of offensive legal protection rather than defensive but it can be defensive to the extent that an imitator tries to replicate your software and fails miserably. In other words, what if they try to replicate your software and their copy ends up causing a user of their copy significant losses and that suffering user sues you because they think it was your software that caused their loss? A copyright registration registers with the government exactly what is yours and creates liability for statutory damages on the part of the copyright infringer. The copyright that you would register is in the source code.
do not do anything illegal or that will lead to being sued, or is your intention to be protected from doing shady business dealings?
Frankly, you always be sued, and no language in your software agreement, or incorporation for that matter, is going to prevent that. Even if you successfully defend yourself in the suit, you will incur certain costs.
The real question is the one you posed at the end: what can you do to protect yourself and your assets from liability when you do get sued? Incorporating definitely helps, because then the liabilities of the company would not be yours personally. Liability insurance is another great way of insulating yourself from these risks. And the limitation of liability you have here is another piece, assuming that it is part of a broader agreement, which this one appears to be. Keep in mind, though, the protection that you get from the language in the agreement might vary from state to state (as governed by the UCC under state law), and even more so if you distribute outside the US.
The best protection, of course, comes from an "all of the above" approach, but that is not always cost effective. And while there are many resources on the web to help educate you about the issues here, be careful about relying on those exclusively. I would recommend at least getting a consult with an experienced attorney (which is often free) to help you figure out the difference between calculated risks and unnecessary exposure. Then use that to create a protection plan that makes sense for you.
You are off to a good start. The easiest thing is to look into what similar software apps are using for a license - not to plagiarize, but to see if they have covered something you may not have thought of - be careful though, it could be a slippery slope into a 5 page license! You may want to embellish you list of possible losses a bit, and include a wider clause of zero responsibility. Once you think you have it nailed, suck up the cost of getting a lawyer to look at it (be firm about your price up front - tell them you have $150 only or whatever) . You may even find lawyer services online for a lot less at a place like justanswer.com who will review it and give you pointers or make some edits.
To provide better protection for your product, I would have the end user execute a software license agreement. In addition, I don't know if you have a name for your software, but if so, I would get a trademark on the product name, as well as trademark the name of your firm for added protection.
The best way to protect yourself in the event of a suit is with insurance. Professional Liability insurance provides you with errors & omissions coverage. Even if you were not negligent, an insurance policy would provide you with a defense.
i would personally look at limited liability as well... there are lots of bits of software and apps that offer a 'vehicle to transact shares' etc ... look at their terms and conditions... I think what you have at the moment is rather light... and you could be at risk.
The money you will invest in a lawyer will be a lot less than a la suit... :)