White label vs. OEM contracts – what tech start-ups need to look out for

White label and OEM models enable start-ups to distribute their software via partners without their own name appearing. With white labeling, a partner sells a finished product under its own brand, while the actual manufacturer remains in the background. In contrast, OEM products are often more tailored to the respective partner: The manufacturer develops the product specifically for a particular reseller, whereas white-labeled products are more generic and unbranded. What both models have in common is that they can create a win-win situation – the manufacturer opens up new markets and the partner expands its portfolio without having to spend time on development. At the same time, there are legal challenges that need to be resolved contractually so that quality, brand image and liability remain in balance.

Clearly regulate license and usage rights

As software is protected by copyright, the manufacturer must grant the white label/OEM partner the necessary rights of use. In practice, the partner usually receives a license to distribute the product under its own brand and to enable end customers to use it. It is important to precisely define the scope of the license: Is it for a limited or unlimited period of time? Does it only apply to certain countries or sectors? Can the partner grant sublicenses to end customers or does the end customer become a direct licensee of the manufacturer? The latter is often avoided in order to disguise the manufacturer’s role – instead, the agreement allows the partner to permit 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 the case of exclusivity, an exclusive right of use). If modifications to the software are to be permitted (e.g. integrations or own modules), this must also be licensed, as otherwise the manufacturer remains the sole owner of the rights to extensions. In addition, a clause addressing open source components is recommended if the software contains such components, as the conditions of the open source licenses apply here and must be complied with. Violations can have serious consequences, such as license revocation. Practical tip: All rights granted 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”) in order to avoid misunderstandings.

Branding: Can the partner change the brand, UI and documentation?

The core of a white label deal is that the reseller is allowed to provide the software with its own brand identity. The contract should therefore regulate in detail which changes are permitted. In most cases, the logo, color scheme and design of the user interface may be adapted to the partner’s brand. Documentation and manuals can also often be relabeled so that end customers see a consistent brand image. However, the manufacturer sets limits here in order to maintain the functional integrity of the product – far-reaching changes to the source code or security-relevant components are generally excluded. It should also be noted whether a reference to the original manufacturer must remain somewhere. Some manufacturers insist on a discreet “Powered by [manufacturer]” reference in the legal notice or at a technical point in 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. It is also important to have a rule on marketing statements: the partner should not present the product as if it had developed it itself (unless this is desired), but at the same time should not disclose any confidential information about the origin. Clear branding guidelines in the contract prevent conflicts and protect the brand identity of both parties.

Confidentiality of the manufacturer role and marketing rights

White label is based on the fact that only the partner’s brand is visible to the outside world. Confidentiality clauses are therefore key: the partner typically undertakes to treat the fact that an external company is the manufacturer of the software as confidential. The partner may only name the manufacturer publicly if this is legally required or contractually permitted. This prevents end customers or competitors from finding out who is actually behind the product. Conversely, the manufacturer is often also obliged to treat the cooperation discreetly – it may not simply name the partner as a reference or address its customers directly. Marketing and advertising rights can be specifically 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 does occur? Clear agreements on whether and how the collaboration may be communicated are recommended here. It is often agreed that the manufacturer should not appear to third parties at all in order to maintain the illusion of the partner’s own solution. Another aspect is the customer relationship: the end customers typically “belong” to the white label partner. The partner maintains the customer contacts and the manufacturer is not allowed to poach them. Such non-solicitation clauses protect the partner from the manufacturer approaching end customers directly at some point, bypassing the sales channels. Overall, a strict confidentiality and NDA agreement is essential in order not to jeopardize the white label concept.

Quality standards and support obligations

To ensure that the partner’s brand image is not damaged, the manufacturer must guarantee certain quality standards. Detailed product specifications and key performance indicators should be defined in the white label/OEM contract. These include functions, availability of the SaaS services (e.g. 99.5% uptime on a monthly average), response times in the event of faults and security standards. A separate service level agreement (SLA) is often attached for this purpose, in which measurable performance parameters are defined (e.g. maximum downtime, support response times, etc.). Ambiguities at this point lead to disputes later on about what is considered “poor performance”. Specific thresholds and measures should therefore be agreed in the event of non-compliance (e.g. penalties or extension of the contract term as compensation).

Support: Startups should also contractually regulate who provides which support. It is common for the white label partner to provide 1st level support for end customers (e.g. answering customer queries, solving simple problems) so that it is perceived as a “provider”. The manufacturer is available in the background for 2nd/3rd level support, for example for technical problems that the partner cannot solve themselves. Important: The manufacturer should provide the partner with sufficient training and documentation so that the partner can provide qualified customer support. In practice, training, knowledge base access and certification are often agreed in order to ensure a consistently high level of service. Both sides have an interest in ensuring that end users are satisfied – the partner because of its brand reputation, the manufacturer because poor product feedback also damages the partnership. Quality controls can therefore also be agreed: for example, regular feedback rounds, audits or benchmark tests to ensure that the solution works perfectly under the white label.

Distribution of liability between manufacturer and partner

A clear liability regulation is one of the most critical points in the white label/OEM contract. In the event of problems, the end customer will initially turn to the visible provider – i.e. the white label partner. The latter, in turn, will want to take recourse against the manufacturer. The contract should therefore specify who is liable for which damages or defects and how far any limitations of liability extend. In B2B contracts, liability and warranty can be defined more freely than in consumer business, but the limits of the law on general terms and conditions also apply here: a complete exclusion for intent or gross negligence is 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: liability must remain unlimited in certain cases, e.g. in the event of injury to life, limb or health, in the event of intentional misconduct – or often also in the event of infringement of third-party property rights (for example, if the manufacturer supplies the partner with software that infringes third-party copyrights or patents). In such cases, the manufacturer will generally indemnify the partner (indemnification). Conversely, the manufacturer can demand that the partner indemnifies it against claims arising from the partner’s sphere (e.g. false advertising statements made by the partner to end customers).

Warranty: 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.). Complex chains come into consideration here: If the partner passes on the software unchanged to end customers, the end customer could attempt to take direct action against the manufacturer in the event of a serious defect – especially if the manufacturer is known to the end customer (which is precisely what the white label seeks to avoid). Contractual clauses should therefore stipulate that the partner handles all end customer warranty cases independently, but that 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 originally originates from the manufacturer’s sphere.

Product liability: One aspect that is often underestimated is strict product liability. According to Section 4 (1) ProdHaftG, the “manufacturer” of a product is also the person who affixes his name or trademark to the product and thus acts as if he were the manufacturer. This means that if the white label partner places its logo on the software/packaging and the product causes damage (e.g. personal injury or property damage caused by the software – rare in the case of pure software, but conceivable, e.g. due to defective IoT software), the partner is liable as a quasi-manufacturer alongside the actual manufacturer. Attempts to avoid this liability by mentioning the real manufacturer somewhere in small print were thwarted by the ECJ in 2022. Brand owners are now practically always liable if their name adorns the product – even if they have named the actual manufacturer. For start-ups, this means Protect against liability risks appropriately! For example, it should be checked whether appropriate product liability insurance is in place. In the contract, the partner can also demand that the manufacturer indemnifies it in the event of product liability claims (where permissible). Overall, the distribution of risk is a question of negotiating power: larger white label partners (e.g. corporations) will often demand extensive indemnification from the startup, while conversely the manufacturer will want to limit its liability. A balanced middle ground that protects both from ruin is crucial here.

Further development, updates and feature releases

Especially in the SaaS sector, the constant further development of the software is an important point. Manufacturers and partners should therefore contractually stipulate how updates, upgrades and new features are to be handled. Typical questions are: Is the partner entitled to all future further developments? Will he receive updates automatically and free of charge? Can the manufacturer make important changes, even if the partner may not want them? In practice, it is often agreed that the manufacturer will maintain and improve the software during the term of the contract, but without guaranteeing certain new functions. The partner will have to accept security and maintenance updates to ensure operational reliability. Major version upgrades (which change the design or certain workflows, for example) should be announced by the manufacturer at an early stage. A good contract differentiates here: Mandatory updates (such as security patches) versus optional feature updates. It is possible, for example, to stipulate that new versions will be provided if the partner can reasonably be expected to do so, but that there is no entitlement to completely new generations of the software. An example of this: “The provider shall provide the customer with the version currently offered by the manufacturer if the change is reasonable for the customer. There is no entitlement to a version beyond this.”.

Test and rollback agreements are also important: 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. It can also be regulated how long the manufacturer supports older versions and whether the partner is allowed to skip updates – the latter usually only at their own risk and not indefinitely. For start-ups that offer white label software, the question also arises: what if the partner has special feature requests? A change request clause can help here. The partner can request additional functions, which the manufacturer develops in return for payment. The contract should stipulate who owns the rights to such adaptations – usually 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 of time to new functions that he initiates (so that he has a competitive advantage). All these points ensure that both parties are satisfied with the product development. Current legal development: If end customers are consumers, the law in force since 2022 (Sections 327f, 475b BGB) stipulates an update obligation for digital products. This means that the provider must provide updates, in particular security updates, for the agreed duration (for open-ended contracts: for a reasonable period). A white label partner should pass this obligation on to the manufacturer – in other words, ensure in the contract that the manufacturer provides all necessary updates so that the partner can fulfill its legal obligations towards consumers.

Non-compete and exclusivity clauses

Many white label/OEM deals touch on issues of exclusivity and competition. For example, a startup might assure its white label partner that it will work exclusively with it in a particular industry or region (not allowing any other partners there). In return, the manufacturer may require that the partner does not simultaneously distribute a competing product from another manufacturer. 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 a non-compete that runs indefinitely is problematic. According to the European Vertical Block Exemption Regulation (BER), non-competing exclusive supply or exclusive distribution clauses are usually only permitted for up to 5 years. Longer or indefinite commitments are considered a restriction of competition that requires special justification. In practice, clauses are often used that provide for an extension only with mutual consent, which corresponds to the requirement of “new consent every 5 years”. A post-contractual non-competition clause (i.e. that the partner does not immediately go to market with their own solution after the end of the contract) should also be limited in time (e.g. 1-2 years, depending on what is reasonable). Excessive restrictions could otherwise be invalid (Section 138 BGB or Section 1 GWB in the event of noticeable impairment of competition).

Exclusivity can also affect the other side: Perhaps the partner wants to ensure that it is the only reseller of the product in Germany so that it has no competition from other partners. Such agreements are permissible, but must also be examined under antitrust law (market shares!). For a startup, exclusivity can harbor opportunities and risks – on the one hand, you secure the partner’s full attention, on the other hand, you tie yourself to a sales channel. Exclusivity should therefore always be linked to minimum purchase quantities or sales targets: the partner only receives territorial protection if it achieves certain sales figures. If they fail to meet these targets, the manufacturer can withdraw the exclusive right. Overall, competition and exclusivity clauses are a sensitive area. Practical tip: Always limit such clauses to a reasonable duration and scope and, in case of 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 sui generis in legal terms – mixed contracts with elements of license law, service law and distribution law. There is no specific law that covers all of these aspects. This makes comprehensive contractual regulation all the more important. If one of the contracting parties is located in Germany, German law should be chosen (unless there are reasons to choose a different law). In cross-border constellations, agreements on the place of jurisdiction and possibly arbitration clauses are also useful to ensure clarity in the event of a dispute.

Important: 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, but Section 307 BGB (prohibition of surprising or grossly disadvantageous clauses) also applies here. This means, for example, that a clause that excludes all warranties may be invalid in case of doubt because it “undermines essential contractual obligations”. Limitations of liability must also remain within the legally permissible framework – gross negligence and intent can never be waived. Startups should therefore ensure that they formulate balanced contractual terms that stand up to judicial review. If the white label contract collides with the 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 agreeing all important points individually in a contractual document if possible.

In addition, mandatory protective regulations must be observed. If the product is also aimed at consumers, for example, the rules on the sale of consumer goods or the provision of digital products (Sections 327a ff. BGB) apply, which stipulate certain rights for end customers (as already mentioned: update obligations, warranty periods of 2 years, etc.). In such cases, the white label partner will be liable to consumers – although it can pass on these obligations internally to the manufacturer, it cannot exclude them vis-à-vis the consumer. Data protection law also plays a role: the contract should clarify who is responsible for the end customer data within the meaning of the GDPR and that a data processing agreement (Art. 28 GDPR) is concluded if the manufacturer processes personal data on behalf of the partner (e.g. hosts user data). Finally, export control and compliance issues (e.g. for encryption software, US sanctions, etc.) are relevant, depending on the product.

Conclusion: Contracts as a basis for success for white label partnerships

White label and OEM contracts offer start-ups enormous opportunities to scale their own product via established partners. However, an inadequately drafted contract can quickly become a pitfall – whether due to unclear license rights, gaps in liability or contradictory expectations regarding support and further development. Careful contract drafting is therefore essential. For entrepreneurs without prior legal knowledge, the wealth of points to be regulated may seem overwhelming. But it’s worth the effort: a well-drafted contract creates trust between the manufacturer and partner, protects your own business model and can prevent expensive disputes or liability cases. Start-ups that want to market their product via third parties should seek legal advice at an early stage in order to draw up tailor-made white label or OEM contracts. This will ensure that your cooperation is based on a solid foundation and that you can concentrate on the essentials – growing your business. After all, clear contracts are the best insurance for a successful partnership.

Author: Marian Härtel

Marian Härtel ist Rechtsanwalt und Fachanwalt für IT-Recht mit einer über 25-jährigen Erfahrung als Unternehmer und Berater in den Bereichen Games, E-Sport, Blockchain, SaaS und Künstliche Intelligenz. Seine Beratungsschwerpunkte umfassen neben dem IT-Recht insbesondere das Urheberrecht, Medienrecht sowie Wettbewerbsrecht. Er betreut schwerpunktmäßig Start-ups, Agenturen und Influencer, die er in strategischen Fragen, komplexen Vertragsangelegenheiten sowie bei Investitionsprojekten begleitet. Dabei zeichnet sich seine Beratung durch einen interdisziplinären Ansatz aus, der juristische Expertise und langjährige unternehmerische Erfahrung miteinander verbindet. Ziel seiner Tätigkeit ist stets, Mandanten praxisorientierte Lösungen anzubieten und rechtlich fundierte Unterstützung bei der Umsetzung innovativer Geschäftsmodelle zu gewährleisten.