When it comes to software the intellectual property owner is the author/s of the code. But what if the author is a contractor or an employee of a company?
It’s important to consider who will develop your company’s IP, and make sure there are agreements in place to be clear about who will own it.
Ownership where you have contractors
If you use contractors to develop your products and services, you will generally gain some form of implied licence to commercialise and use what is developed.
However, you will not own any intellectual property rights in the developed material unless you enter into a written agreement with the contractor that specifically assigns copyright in the software to you.
For an assignment of copyright to be legally effective, it must be set out in an agreement or deed and signed by the original owner. What if the contractor uses subcontractors or freelancers to help develop your products and services? You must also ensure that those subcontractors or freelancers agree in writing to assign any ownership to you.
This is best done before engaging the contractor to avoid having to locate and convince individual developers to sign contracts after the materials have been developed.
Another risk of using contractors to develop your products and services is that the materials they develop may infringe third party IP rights.
This might occur, for example, where the software uses proprietary or open source libraries and the licence for that material does not allow it to be used in that manner. Properly drafted agreements covering software development services will set out warranties and indemnities to protect you if a third-party claims that developed material is infringing.
When two or more parties have jointly contributed to the creation of a substantial part of software code, the default position is that the developers are joint authors and jointly own copyright in the code.
In a joint ownership arrangement none of the joint owners can reproduce the copyright material without the licence or permission of all the others. This means that where a partner is brought to jointly develop code, you might be prevented from further developing, enhancing or commercialising the software once that relationship has ended.
Any time software is developed, you should consider having a properly drafted agreement which outlines key IP ownership and licensing issues. Best practice would see an agreement including:
- where there is pre-existing code, the parties acknowledge that each partner owns copyright in pre-existing material introduced by the other partner
- what the other party is licensed to do with this pre-existing material
- whether copyright in the newly developed material is to be owned by one party, jointly or by each partner to the extent of their respective contributions
- what either party is licensed to do with the newly licensed material and whether either party can update, enhance or modify the code in future without the permission of the other party
- whether either party can use the know-how or learnings they gained from the relationship in other outside projects
- what happens when a third party's IP is infringed by the software and which party bears the loss if an infringement claim is made
- What the limitations on liability are.