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.

Gentleman’s Agreement: How to Avoid Getting Screwed

By | Business Lawyer, Dallas Business Lawyer, Dallas Business Lawyer, eCommerce Agreements, Featured Articles, Software Agreements, Technology Contracts | No Comments

gentleman's agreementWhether by handshake or an email that says “It’s a deal,” business owners often get into legal trouble because of a gentleman’s agreement (a.k.a. gentlemen’s agreement).

What is a Gentleman’s Agreement?

A gentleman’s agreement is an agreement which is not an agreement, made between two people neither of whom are gentlemen, whereby each expects the other to be strictly bound without himself being bound at all.” – Sir Harry Vaisey

Despite Judge Vaisey’s cynical description of such an agreement, most informal deals are entered into in good faith between small business owners who want to get things done without the time and cost of retaining a qualified business lawyer to paper the deal as a legally binding contract.

Donald Trump and the Art of the Handshake Deal

If you’ve read “The Art of the Deal” by Donald Trump or “Trump-Style Negotiation” by The Trump Organization’s senior legal counsel, George H. Ross, you’ll know that Trump will often shake hands on a verbal gentlemen’s agreement with another party.

However, Trump will then turn the deal over to Ross or another business lawyer to draft the contract that reflected the terms agreed to between the parties.

Words Have Different Meanings

So what’s wrong with just getting things done without a written contract in place?

Spoken words often have a different meaning to the listener than to the speaker. For example, if you’re buying a shipment of smart phones and tell the supplier that you need them a.s.a.p., you might mean delivery next week. However, the seller could interpret “as soon as possible” to be three months from now when he gets his next shipment from China.

Memories Fade

As pointed out by successful entrepreneur and author Harvey Mackay, “[p]ale ink is better than the most retentive memory.”

Unless the verbal agreement is performed within the space of a few hours, memories of what was agreed to will fade. That leads to misunderstandings and frequently lawsuits alleging breach of contract, bad faith, fraud, etc.

Honesty and the Verbal Agreement

Some contend that if both parties are honest, then there’s really no need for a written agreement because they’ll each endeavor to do what’s right.

Yet how can you tell? When it comes to deciding whether to enter into an oral B2B contract, there’s no acid test for honesty.

Better to get it in writing so there are remedies in place if the other party turns out to be a crook and a liar.

Preventing Misunderstanding of Your Gentlemen’s Agreement

Benjamin Franklin was right when he said that an ounce of prevention was worth a pound of cure. This is particularly true when preventing an expensive lawsuit or a bad business deal by taking a little time to get an oral agreement converted to a writing signed by the parties.

According to Dallas Internet Lawyer Mike Young, you can protect yourself by having a qualified attorney prepare a written contract that accurately reflects the gentleman’s agreement both parties verbally agreed to with regard to price, quantity, time, location of performance, and dispute resolution.

Nondisclosure Agreement: Oculus Rift and Virtual Reality

By | eCommerce and Technology, Intellectual Property, Patents, Software Agreements, Technology Contracts, Trade Secrets | No Comments
oculus rift

Did Oculus Rift founder Palmer Luckey violate a nondisclosure agreement?

A federal judge in California is letting a civil lawsuit proceed against Oculus founder Palmer Luckey for alleged breach of a nondisclosure agreement (NDA).

Total Recall Technologies (a Hawaiian partnership) claims that Luckey agreed to build 3D virtual reality glasses for the company pursuant to a written “non-disclosure, exclusivity, and payments agreement.”

According to Total Recall, Palmer Luckey’s work was to be performed based upon the company’s pending patent for a “[s]ystem and method for creating a navigable, three-dimensional virtual reality environment having ultra-wide field of view.”

However, the company alleges that Luckey breached this confidentiality agreement and launched a Kickstarter crowdfunding campaign to build “a highly immersive, wide field of view, stereoscopic headmounted display at an affordable price – a device that Luckey named the Oculus Rift.”

Whether there was an enforceable nondisclosure agreement between Total Recall and Luckey that was breached remains to be seen if there’s no settlement reached before trial.

Millions of dollars are at stake. Total Recall is seeking compensatory, exemplary, and punitive damages in addition to other remedies.

There are two important lessons you can learn from this breach of nondisclosure agreement lawsuit.

  1. Whether you’re paying a hardware developer or a software developer, a professionally written contract (employment contract or independent contractor agreement) that contains confidentiality provisions is important to protect your intellectual property rights.
  2. Any contract (including a confidentiality agreement) is only as good as the parties who sign it. If both parties are honest and acting in good faith, it’s unlikely you’ll end up in an expensive courtroom fight over whether misconduct occurred during performance of the agreement.

See Total Recall Technologies v. Palmer Luckey et al. (N.D. Cal. Docket No. 15-cv-02281)

Software Developer Nondisclosure Agreement: 5 Issues to Cover

By | Software, Software Agreements, Software Lawyer, Technology Contracts | No Comments

software developer nondisclosure agreement

If you’re developing an app, you can benefit from having a signed software developer nondisclosure agreement (NDA) when dealing with clients and competitors.

For example, in a recent lawsuit, a software developer claimed that its rival engaged in misconduct, including breach of a nondisclosure agreement. The jury agreed and awarded almost $44 million.

However, don’t try to put together the contract without the help of an experienced software lawyer if you want the agreement to be enforceable.

Important Issues to Discuss with Your Software Lawyer

When talking with your software lawyer, here are five issues to consider for your agreement (there will be others too):

  1. Choice of Law. What law will govern the NDA if there’s a dispute?
  2. Jurisdiction. Which courts will have jurisdiction to handle a lawsuit if there’s a breach of the agreement?
  3. Parties. Which parties should sign the contract? For example, if there are subcontractors involved in software development, should they be required to sign nondisclosure agreements too?
  4. Liquidated Damages. Will you include a liquidated damages provision with a sum substantial enough to deter breaches?
  5. Attorneys’ Fees. If there’s a dispute, is each party responsible for his own legal fees or do you want a loser pays provision?

Of course, any NDA is only as good as the person signing it. If you’re dealing with someone dishonest (and why are you?), you should expect there will be a breach of any agreements you reach. In other words, due diligence is key before entrusting anyone with information that needs to be protected by a confidentiality or nondisclosure agreement.

Where can you get a software developer nondisclosure agreement?

If you’re looking for a customized software developer nondisclosure agreement to protect you and your business, you may want to have a phone consultation with Dallas Software Lawyer Mike Young.

However, it may make sense for you to invest in our Software Development Legal Protection Package instead to obtain additional levels of protection for your intellectual property.

Software Development Agreement: 10 Issues to Cover

By | Copyrights, Software, Software Agreements, Software Lawyer | No Comments

software development agreementIf you’re a software developer, you’ll want to protect yourself by having a customized software development agreement that’s designed specifically for your business.

Why?

If you “borrow” someone else’s contract to use with your clients, chances are you’re (a) not fully protecting yourself and (b) you’re committing copyright infringement because you don’t any of the intellectual property rights to use the agreement (e.g. a license from the software lawyer who created it).

So, what should you include in your software development agreement?

The terms and conditions in your contract will vary because your business is unique. However, here are 10 of the most common issues you’ll want to address in your agreement.

1. Scope of Work. Your contract will cover both what you’re agreeing to develop for your client and specifically exclude work that you will not be doing without additional compensation.

2. Work Change Orders. Because it’s likely that the work involved will be modified during the course of the project, you’ll want to have your agreement include a mechanism for change orders by you and the client. These change orders should describe the additional work, cover compensation for the work, and any alterations to the project’s milestones and deadlines because of the changes.

get software development legal protection3. Subcontracting. If you’re outsourcing any of the coding to third parties (e.g. programmers overseas in India or the Philippines), your software development agreement should make it clear that you have the right to do so as well as cover any restrictions on such subcontracting (e.g. confidentiality agreements).

4. Delivery and Testing. Your contract should address what constitutes delivery and the milestones for each deliverable. With a possible exception for cowboy coding, your development process will heavily influence these provisions (e.g. whether or not a prototype will be provided). As part of these provisions, you should address the client’s rights to test the deliverables, what constitutes acceptance or rejection of a deliverable, and any of your obligations to fix a deliverable that doesn’t satisfy specifications.

5. Payment. How and when will you get paid during the development process? Will the client be required to pay a portion of your fee up front? What milestones trigger subsequent payments? As a developer, it’s in your financial interest to front load the payments as much as feasible so that you don’t have to pursue the client for collection after the project is completed. On the flip side, the client will want to back end the payments in order to ensure your performance of the work.

6. Intellectual Property Ownership. Who owns the software you develop for the client? You or the client? Are you granting a client a license to use the software? If so, what’s the scope of the license? If open source libraries are used as part of the development, that should be addressed to in the agreement so that there are no misunderstandings as to who owns what.

7. Warranties and Disclaimers. What type of warranties will you give the client for the software? For how long? What’s the mechanism for the client making a warranty claim? What warranties are you specifically disclaiming (e.g. fitness for a particular purpose)?

8. Competition. Will you be able to sell the software to your client’s competitors? Can you compete against the client using the software you’ve developed? If so, under what restrictions? Will there be a waiting period or a geographic limitation?

9. Confidentiality. How will confidential information be handled? What constitutes “confidential information?” When the project ends, what responsibilities (if any) do you have for this data?

10. Software Maintenance and Support. Will you have any support or maintenance obligations for the software? Is there any obligation to upgrade the software (e.g. to be compatible with a new OS)?

Of course, these are just some of the major issues you’ll want to address in your software development agreement in order to protect yourself (and avoid unnecessary lawsuits in the process). An experienced software lawyer will customize the contract to meet your specific needs.