Software Development Agreement – Who Really Owns The Intellectual Property?

By | Copyrights, Intellectual Property, Licensing, Licensing Agreements, Open Source, Software, Software Agreements, Software Lawyer | No Comments

software development agreementWhether you’re a developer or a client, one of the most important things to cover in your software development agreement is who owns what intellectual property (IP) rights.

Surprisingly, most developers and their clients either don’t know or having conflicting views on the subject.

Imagine you’re a client that’s just obtained an advantage in the marketplace with new software. Then you discover your developer now works for one of your biggest competitors on a similar software project.

Or, let’s say you’re a software developer. At the end of a project, the client is happy with your work but makes an off-the-cuff remark about owning the new software lock, stock, and barrel. You wonder if the client understands that’s not the case.

According to Dallas Software Lawyer Mike Young, there are two competing interests at play. “The client wants ownership while preventing the developer from re-selling the software to others,” he said. “On the other hand, the developer wants to keep ownership because some code can be recycled and used on projects for other clients instead of having to reinvent the wheel from scratch.”

So, how do you balance these competing interests in a software development agreement?

get software development legal protectionOne method is to use a combination of licensing with non-competition provisions.

How does this work?

The developer retains IP ownership, licenses the software to the client, and agrees to restrict the purposes for which the code can be recycled. Often, this means the developer is agreeing that for a period of time, the developer will not use the software to compete with the client or recycle the code and sell it to one of the client’s competitors.

What if the developer doesn’t own some of the code used in the software?

The general rule of thumb is you can’t convey what you don’t have.

When it comes to software development, there’s often is some code the developer does not own. For example, a developer’s license has been purchased from a third party, the developer is using open source licensed code (e.g. GNU General Public and Creative Commons licenses), or some of the code has been taken freely from the public domain.

In other words, there may be multiple tiers of intellectual property rights associated with a single piece of software. And if those are not clearly identified in the software development agreement, it’s a recipe for confusion, hard feelings, and litigation.

What if the developer is the company’s employee?

Even if employees are doing software development for an employer, it’s risky to assume the software is the employer’s intellectual property as a work made for hire for two primary reasons.

First, certain criteria must be satisfied before the software is considered a work made for hire.

Second, the employee(s) developing the software may have licensed some of the code, used open source code, or taken code from the public domain.

Employers can reduce these risks by taking preventative steps before development begins. These actions can include written employment agreements that cover works made for hire, implementing employment guidelines to ensure the work-for-hire criteria is satisfied, and establishing a clearly defined project scope of work to identify the coding resources for the project and related intellectual property rights.

IP Ownership Is Negotiable

Whether you’re an independent contractor, client, or an employee involved with a software development project, it’s important to understand the intellectual property rights are frequently negotiable, i.e. there’s no one-size-fits-all standard to apply across all projects.

Before negotiating, work with your software lawyer to identify what you must have, what would be nice to have, and what you can live without. This makes it easier to cut a deal where each party gets what they want from the project.

How to Terminate a Contract Early

By | Business Contracts, Business Lawyer, Consulting Agreements, eCommerce Agreements, Employment Agreements, Independent Contractor Agreements, Licensing Agreements, Technology Contracts, Texas Business Lawyer | No Comments

terminate a contract earlyAlthough parties often benefit by having an annual or multi-year contract that either renews automatically or gives one party the option to renew, there are many cases where an ongoing relationship is not financially beneficial.

Whether it’s poor performance, market changes, or some other adverse event, you may want to terminate a contract early.

Contract Terms and Conditions

According to Texas Business Lawyer Mike Young, the first thing to do is review the terms and conditions of your agreement, including any amendments, to determine if there is a clear path to premature termination. “Many contracts provide for early termination by giving advance written notice, particularly when one party is in material breach and fails to timely fix the problem after being notified of the violation,” he said.

Some agreements provide for termination without cause and with little or no notice if the party who ends the contract pays an early termination fee to the other party.

Negotiated Termination

If one party to an agreement is unhappy, the other party frequently is dissatisfied too. If it appears the differences are too great, and the contract is silent on early termination, you may wish to reach out and make an offer to end the deal early anyway. Frequently both sides will agree to this and go their separate ways without a termination fee being paid by either.

Just as it was important to get your contract down on paper in the first place, it’s equally important to ensure that your agreement to terminate early is in writing signed by the parties.

Why? Because memories fade faster than ink.

If there’s a subsequent disagreement about how the relationship ended, you want to be able to rely upon written terms to show exactly what was agreed to and what was not.

Decide Not to Renew

If a contract contains renewal provisions, such clauses frequently permit either party to provide notice of intent not to renew at the end of the current term. Although this is not technically early termination, it does prevent the contractual relationship from continuing longer than the minimum time required.

Be sure to follow instructions to the letter as to the method and deadlines for giving proper notice.

Terminate a Contract Early by Efficient Economic Breach

If it is essential to terminate your agreement early, you’re able to compensate the other party for such termination, and you’ll financially benefit after paying such compensation, it may make sense to walk away from the contract even if the other party wants to continue the relationship.

Be sure to discuss this option with an experienced business lawyer before taking any action because there are a variety of legal factors that must be taken into account when evaluating the true cost of a willful breach of contract.

Non-Disparagement

Regardless of the method you choose to terminate a contract early, it’s important not to publicly disparage each other as the relationship ends.

In addition to creating ill will and tarnishing your company’s reputation, disparaging the other party can lead to additional claims for damages in a civil lawsuit and increase the likelihood you’ll end up in court rather than walking away from the original deal amicably.

Protect Your Brand With The Right Licensing Agreement

By | Licensing, Licensing Agreements, Technology Contracts | No Comments

brand licensing agreementThere’s a well-known fashion designer who’s currently suing for breach of a licensing agreement because she alleges, among other things, that the licensee is hurting her brand by selling inferior merchandise.

Whether or not that’s true, the key takeaway from this lawsuit is that when it comes to protecting your brand as a licensor, your licensing agreement must contain specific terms and conditions that makes it difficult for the licensee to harm your service marks and trademarks through misconduct.

Important Brand Licensing Agreement Clauses

Some of the key provisions you may want to include in the contract are:

  • Limit the scope of the license (e.g. term, geographic, revocable, nonexclusive, etc.);
  • Choice of law and forum for resolving disputes (preferably your home territory, not the licensee’s);
  • The ability to obtain injunctive and other equitable relief to protect your brand;
  • Significant liquidated damages per violation;
  • Alternative dispute resolution (mediation and arbitration) for most issues unrelated to protecting your intellectual property (IP);
  • Award of attorneys’ fees and court costs to the prevailing party in a dispute (loser pays); and
  • Confidentiality and non-disparagement clauses.

According to Texas Internet Lawyer Mike Young, unequal bargaining power may become an issue when interpreting a license agreement because courts (particularly juries) are inclined to favor the underdog if one party is significantly larger than the other.

If you have all of the leverage (e.g. the licensee is a micropreneur), it’s important that your company’s attorney draft language that mitigates this disparity in bargaining power while protecting your interests so that there’s a perception of fairness when it comes to enforcement.

Plain Language

Using simple plain English will prevent many common disagreements as to your respective rights and obligations under a licensing agreement. When each party clearly knows what he is supposed to do, the odds increase that your deal will be profitable while protecting your brand too.

A good way to get what you want when licensing your brand is to have an experienced business transactional lawyer draft the contract based on your unique needs and use that draft as the starting point for all negotiations with prospective licensees.

Licensing Your Software On Your Own Terms Through A Click-Wrap Software License Agreement

By | Internet Lawyer, Licensing Agreements, Software, Software Agreements, Software Lawyer | No Comments

click-wrap software license agreementWhat is a click-wrap software license agreement?

A click-wrap software license agreement is one of the more common software licensing agreements that has developed and evolved in recent decades as mass produced software has entered the marketplace. Click-wrap agreements require people who buy software licenses to read and acknowledge that have read the complete software license agreement provided by the software author before they are allowed to install the software on their computers. Typically this acknowledgment is completed by checking a box or clicking an acknowledgment button on the computer screen.

How should your click-wrap software license agreement be structured?

In recent decades the mass production of software has created some logistical challenges for software companies as they try to license their work to millions of consumers. These challenges ended up leading to the creation of licensing agreements that are broadly written and in one way or another included with the software at the time of purchase, giving the software companies the ability to largely dictate the terms of the agreements and consumers very little recourse to reject or back out of terms of the agreements.

Unlike some other licenses, click-wrap software license agreements are designed to guarantee that clients acknowledge that they have read and agreed to the terms of the software agreement before they are allowed to install the software. These agreements are advantageous to companies because they take any ambiguity or doubt out of the picture, legally if a consumer installs the software they are both bound by the terms of the license and acknowledge they agree to the terms it contains.

Like other license types, clients typically do not see the license agreement until after they have gone ahead and purchased the software in question. Because of this most click-wrap agreements will typically still contain language allowing a client who has bought the software but disagrees with a term or condition to return the program within a reasonable amount of time for a full refund rather than install and make use of it.

Therefore, if these broad guidelines are complied with software companies are still free to craft a broad license agreement that will apply to all of the purchases of their software titles, saving the company the hassle and inconvenience of negotiating licensing contracts with each and every person or business who wishes to purchase their software.

Do you need help crafting your own click-wrap software license agreement?

Do you need a click-wrap software license agreement for your software? Software Lawyer Mike Young helps companies by preparing and revising click-wrap software license agreements. To get started, set up a telephone consultation with him today.