White Label & OEM Contracts | IT-Medienrecht

Protect your tech startup: Learn how White Label & OEM contracts work. Discover legal considerations for distribution, licensing & branding. Avoid…

White Label and OEM Contracts: Legal Aspects for Software Startups

White label and OEM models empower startups to distribute their software through partners without their own brand being visible. With white labeling, a partner sells a finished product under its own brand, while the original manufacturer remains in the background. In contrast, OEM products are often more tailored to the specific partner: the manufacturer develops the product specifically for a particular reseller. White-labeled products, conversely, are typically more generic and unbranded.

Both models aim to create a win-win situation. The manufacturer gains access to new markets, and the partner expands its portfolio without the burden of extensive development. However, these arrangements also present legal challenges. These issues must be meticulously resolved contractually to ensure a balance in quality, brand image, and liability.

Clearly Regulating License and Usage Rights

Since software is protected by copyright, the manufacturer must grant the white label or OEM partner the necessary rights of use. Typically, the partner receives a license to distribute the product under its own brand and to enable end customers to use it.

Defining the scope of the license precisely is crucial. Key questions include:

The latter is often avoided to obscure the manufacturer's role. Instead, the agreement typically permits the partner to allow its customers to use the product as part of its own offering. The manufacturer usually retains the intellectual property rights to the product; the partner is only granted a simple right of use (or, in cases of exclusivity, an exclusive right of use). For a deeper understanding of software ownership, you might want to read about who actually owns the code.

If any modifications to the software are to be permitted (e.g., integrations or custom modules), these must also be explicitly licensed. Otherwise, the manufacturer remains the sole owner of the rights to any extensions. Furthermore, a clause addressing open source components is recommended if the software contains such elements. The conditions of open source licenses apply here and must be rigorously complied with; violations can lead to severe consequences, such as license revocation. More information on this topic can be found in our article on open source in software development.

Practical tip: All granted rights should be described precisely in the contract (e.g., "The manufacturer grants the partner the right to distribute the software to end customers under its own name and to allow them to use it for the duration of the contract") to prevent misunderstandings and disputes.

Branding and Customization Options

The core principle of a white label arrangement is that the reseller can brand the software with its own identity. Therefore, the contract must detail which changes are permitted. Typically, the logo, color scheme, and design of the user interface may be adapted to the partner's brand guidelines. Documentation and manuals can also often be relabeled to ensure a consistent brand image for end customers.

"Powered by" References and Disclosure

Manufacturers often set limits to maintain the functional integrity of the product; extensive changes to the source code or security-relevant components are generally excluded. It is also important to specify whether a reference to the original manufacturer must remain visible. Some manufacturers insist on a discreet "Powered by" reference in the legal notice or at a technical point within the software. Other agreements stipulate that the original developer is not named at all.

According to an industry survey, over 40% of white label contracts require at least a small mention of the original manufacturer, despite otherwise full rebranding. Clear branding guidelines in the contract prevent conflicts and protect the brand identity of both parties.

Furthermore, rules on marketing statements are crucial. The partner should not present the product as if they developed it themselves (unless explicitly desired). At the same time, they should not disclose confidential information about the product's origin.

Confidentiality and Marketing Rights

White label agreements fundamentally rely on the idea that only the partner's brand is externally visible. Therefore, confidentiality clauses are paramount. The partner typically undertakes to treat the fact that an external company is the software manufacturer as confidential. Public disclosure of the manufacturer's identity is usually only permitted if legally required or contractually agreed upon. This prevents end customers or competitors from discovering the true origin of the product.

Customer Relationship and Non-Solicitation

Conversely, the manufacturer is often also obligated to treat the collaboration discreetly. They may not simply name the partner as a reference or directly approach the partner's customers. Marketing and advertising rights must be explicitly allocated in the contract. For example, can the manufacturer refer to the white label partnership in press releases ("Our product now also available at X")? Can the partner use its own logo alongside the manufacturer's logo if co-branding occurs? Clear agreements on whether and how the collaboration may be communicated are highly recommended. Often, it is agreed that the manufacturer should not appear to third parties at all, to maintain the illusion of the partner's own solution. For strategies on protecting sensitive information, consider exploring confidentiality strategies for startups.

Another important aspect is the customer relationship: end customers typically "belong" to the white label partner. The partner maintains customer contacts, and the manufacturer is generally prohibited from poaching them. Such non-solicitation clauses protect the partner from the manufacturer directly approaching end customers, bypassing established sales channels. Overall, a strict confidentiality and NDA agreement is essential to uphold the integrity of the white label concept.

Quality Standards and Support Obligations

To protect the partner's brand image, the manufacturer must guarantee specific quality standards. Detailed product specifications and key performance indicators should be defined in the white label/OEM contract. These include:

A separate Service Level Agreement (SLA) is often attached for this purpose, defining measurable performance parameters such as maximum downtime or support response times. Ambiguities at this point can lead to disputes later about what constitutes "poor performance." Therefore, specific thresholds and measures, like penalties or contract extensions as compensation, should be agreed upon for non-compliance. Cybersecurity is also a growing concern, and information on cybersecurity tightening in 2025 might be relevant here.

Support Models and Training

Support responsibilities must also be contractually regulated. It is common for the white label partner to provide 1st level support for end customers (e.g., answering queries, solving simple problems) to be perceived as the direct provider. The manufacturer typically remains in the background, providing 2nd/3rd level support for technical issues that the partner cannot resolve independently.

It is important that the manufacturer provides the partner with sufficient training and documentation. This enables the partner to offer qualified customer support. In practice, agreements often include provisions for training sessions, access to knowledge bases, and certification to ensure a consistently high level of service. Both parties benefit from satisfied end-users: the partner due to brand reputation, and the manufacturer because poor product feedback also damages the partnership. Therefore, quality controls can also be agreed upon, such as regular feedback rounds, audits, or benchmark tests, to ensure the solution functions perfectly under the white label.

Liability Distribution in White Label Agreements

A clear liability regulation is one of the most critical aspects of any white label or OEM contract. In case of problems, the end customer will initially turn to the visible provider—the white label partner. This partner, in turn, will want to seek recourse from the manufacturer. The contract should specify who is liable for which damages or defects and the extent of any limitations of liability.

General Liability Provisions

In B2B contracts, liability and warranty provisions can be more freely defined than in consumer business. However, the limits of the law on general terms and conditions still apply. A complete exclusion for intent or gross negligence is generally ineffective. It is customary to set upper liability limits (e.g., limited to the value of the annual remuneration) and to exclude consequential damages such as loss of profit.

At the same time, exceptions are defined where liability must remain unlimited. These often include:

In such cases, the manufacturer will generally indemnify the partner. Conversely, the manufacturer can demand that the partner indemnifies them against claims arising from the partner's sphere (e.g., false advertising statements made by the partner to end customers).

Warranty Claims

Since the partner is liable to the end customer for defects, the internal relationship should stipulate how long the manufacturer is liable for defects and what warranty rights the partner has (rectification, replacement delivery, etc.). If the partner passes on the software unchanged to end customers, the end customer might attempt to take direct action against the manufacturer in the event of a serious defect, especially if the manufacturer is known to them (which white labeling aims to avoid). Contractual clauses should therefore stipulate that the partner handles all end customer warranty cases independently. However, the manufacturer is obliged to provide the partner with the necessary measures or updates in the background. It can also be agreed that the manufacturer will reimburse the partner for any costs for replacement services if the defect originated from the manufacturer’s sphere. For more details on defects, refer to our article on the new concept of defects in software development.

Product Liability Considerations

One often underestimated aspect is strict product liability. According to Section 4 (1) ProdHaftG in Germany, the "manufacturer" of a product also includes anyone who affixes their name or trademark to the product and thus acts as if they were the manufacturer. This means that if the white label partner places its logo on the software or packaging and the product causes damage (e.g., personal injury or property damage due to defective IoT software, though rare for pure software), the partner is liable as a quasi-manufacturer alongside the actual manufacturer. The ECJ ruled in 2022 that attempts to avoid this liability by discreetly mentioning the real manufacturer are largely ineffective. Brand owners are now practically always liable if their name adorns the product, even if they have named the actual manufacturer.

For startups, this means: Protect against liability risks appropriately! It should be verified whether adequate product liability insurance is in place. In the contract, the partner can also demand that the manufacturer indemnifies them in the event of product liability claims (where permissible). Overall, risk distribution is a matter of negotiating power. Larger white label partners often demand extensive indemnification from the startup, while the manufacturer will want to limit its liability. A balanced middle ground that protects both parties from ruin is crucial. More on this topic can be found in our article on the New EU Product Liability Directive 2023.

Software Development, Updates, and Features

Especially in the SaaS sector, the constant further development of the software is a critical point. Manufacturers and partners should contractually stipulate how updates, upgrades, and new features will be handled.

Managing Updates and Upgrades

Typical questions include: Is the partner entitled to all future developments? Will they receive updates automatically and free of charge? Can the manufacturer implement significant changes even if the partner might not want them? In practice, it is often agreed that the manufacturer will maintain and improve the software during the contract term, without guaranteeing specific new functions. The partner will generally accept security and maintenance updates to ensure operational reliability.

Major version upgrades (e.g., changes to design or workflows) should be announced by the manufacturer well in advance. A robust contract differentiates between mandatory updates (like security patches) and optional feature updates. For instance, it can be stipulated that new versions will be provided "if the partner can reasonably be expected to adopt the change," but without an entitlement to entirely new generations of the software.

Feature Requests and Legal Update Obligations

Test and rollback agreements are also vital. The partner should be able to test new updates in a test environment before they are rolled out to all end users. If an update causes serious problems, a rollback plan is needed to revert to the last stable version. The contract should also regulate how long the manufacturer supports older versions and whether the partner is allowed to skip updates (usually only at their own risk and not indefinitely).

For startups offering white label software, the question of handling special feature requests arises. A change request clause can be helpful here. The partner can request additional functions, which the manufacturer develops in exchange for payment. The contract should specify who owns the rights to such adaptations—typically the manufacturer, with the partner receiving a right of use. It is also conceivable to grant the partner an exclusive right of use for a certain period for new functions they initiate, providing a competitive advantage.

Current legal development: If end customers are consumers, German law (Sections 327f, 475b BGB), effective since 2022, stipulates an update obligation for digital products. This means the provider must supply updates, especially security updates, for the agreed duration (or for a reasonable period in open-ended contracts). A white label partner should pass this obligation on to the manufacturer, ensuring the contract requires the manufacturer to provide all necessary updates so the partner can fulfill its legal obligations towards consumers.

Non-Compete and Exclusivity Clauses

Many white label and OEM agreements involve issues of exclusivity and competition. For example, a startup might assure its white label partner that it will work exclusively with them in a particular industry or region, not onboarding any other partners there. In return, the manufacturer may require that the partner does not simultaneously distribute a competing product from another manufacturer.

Antitrust Law Implications

Such non-compete obligations must be carefully formulated and limited in time. Strict limits apply under German and EU antitrust law. A general exclusive distribution right or an indefinite non-compete clause is problematic. According to the European Vertical Block Exemption Regulation (BER), non-competing exclusive supply or exclusive distribution clauses are usually permitted for a maximum of 5 years. Longer or indefinite commitments are considered a restriction of competition that requires special justification. In practice, clauses often provide for extension only with mutual consent, aligning with the "new consent every 5 years" requirement.

A post-contractual non-competition clause (i.e., preventing the partner from immediately launching their own solution after contract termination) should also be time-limited (e.g., 1-2 years, depending on reasonableness). Excessive restrictions could otherwise be invalid under Section 138 BGB or Section 1 GWB if they noticeably impair competition.

Conditional Exclusivity

Exclusivity can also affect the other side. Perhaps the partner wants to be the only reseller of the product in Germany to avoid competition from other partners. Such agreements are permissible but must also be scrutinized under antitrust law, especially concerning market shares. For a startup, exclusivity can present both opportunities and risks. On one hand, it secures the partner's full attention; on the other hand, it ties the startup to a single sales channel.

Therefore, exclusivity should always be linked to minimum purchase quantities or sales targets. The partner receives territorial protection only if they achieve certain sales figures. If these targets are not met, the manufacturer can withdraw the exclusive right. Overall, competition and exclusivity clauses are sensitive areas.

Practical tip: Always limit such clauses to a reasonable duration and scope and, when in doubt, seek expert advice to avoid legal infringements.

Integration into German Contract and General Terms and Conditions Law

White label and OEM contracts are usually legally categorized as sui generis—mixed contracts with elements of license law, service law, and distribution law. There is no single specific law covering all these aspects. This makes comprehensive contractual regulation all the more important.

Legal Classification and Choice of Law

If one of the contracting parties is located in Germany, German law should be chosen, unless there are compelling reasons for a different choice of law. In cross-border constellations, agreements on the place of jurisdiction and possibly arbitration clauses are useful to ensure clarity in the event of a dispute.

General Terms and Conditions (GTC) Control

It is important to note that as soon as a contractual partner uses general terms and conditions (prefabricated contractual clauses), these are subject to the general terms and conditions control of §§ 305 ff. BGB. In pure B2B business, the standard of review is somewhat looser than in consumer protection. However, Section 307 BGB (prohibition of surprising or grossly disadvantageous clauses) still applies. This means, for example, that a clause completely excluding all warranties may be invalid if it "undermines essential contractual obligations." Limitations of liability must also remain within legally permissible frameworks; gross negligence and intent can never be waived.

Startups should therefore ensure they formulate balanced contractual terms that withstand judicial review. If the white label contract conflicts with a larger partner's extensive general terms and conditions, particular caution is required. "Battle-of-forms" situations (contradictory T&Cs on both sides) should be avoided by, if possible, agreeing on all important points individually in a contractual document. For more guidance on contract drafting, particularly for SaaS companies, you can check out our tips from an IT law expert.

Mandatory Regulations and Data Protection

In addition, mandatory protective regulations must be observed. If the product is also aimed at consumers, rules on the sale of consumer goods or the provision of digital products (Sections 327a ff. BGB) apply. These stipulate certain rights for end customers, such as update obligations and warranty periods of 2 years. In such cases, the white label partner will be liable to consumers. Although these obligations can be passed on internally to the manufacturer, they cannot be excluded vis-à-vis the consumer.

Data protection law also plays a significant role. The contract should clarify who is responsible for end customer data within the meaning of the GDPR. A data processing agreement (Art. 28 GDPR) must be concluded if the manufacturer processes personal data on behalf of the partner (e.g., by hosting user data). Finally, export control and compliance issues (e.g., for encryption software, US sanctions) are relevant, depending on the product. Further information on this can be found in our article on GDPR compliance for the self-employed.

Conclusion

White label and OEM contracts offer startups immense opportunities to scale their products through established partners. However, an inadequately drafted contract can quickly become a pitfall, whether due to unclear license rights, gaps in liability, or conflicting expectations regarding support and further development. Careful contract drafting is therefore essential.

For entrepreneurs without prior legal knowledge, the multitude of points to regulate may seem overwhelming. Yet, the effort is worthwhile: a well-drafted contract builds trust between manufacturer and partner, protects your business model, and can prevent costly disputes or liability cases. Startups seeking to market their product via third parties should seek legal advice early on to develop tailor-made white label or OEM contracts. This ensures your cooperation rests on a solid foundation, allowing you to focus on what matters most: growing your business. Ultimately, clear contracts are the best insurance for a successful partnership.