Software Development: Who Really Owns A New App?

By | Software, Software Lawyer | No Comments

Software Development: Who Really Owns A New App?Whether you’re a developer or you’ve contracted with one to create a new application, there’s often a big misunderstanding as to who owns the intellectual property at the end of a software development project.

If you paid to have the app developed, naturally you expect to own it. On the other hand, if you’re the developer, chances are you recycled some code on the current project and plan to use it in the future on other projects.

Open Source Code?

And then there’s the open source issue.

Was any of the code added per a GNU General Public license, Creative Commons license, or other open source license?

As you can see, there’s plenty of room for disagreement about who owns what intellectual property.

Related Article – Software Development Agreement : Who Really Owns The Intellectual Property?

Written Software Development Agreement

Of course, the solution to this problem is to having the project done per a comprehensive app development contract that covers ownership, licensing (including type of license), and any open source issues.

Related Article – Software Development Agreement: 10 Issues To Cover

Your written contract can provide not only for intellectual property issues but also prevent other problems from arising during all phases of development and testing.

Where Should You Get An App Development Contract?

By having your agreement professionally prepared by an experienced software lawyer, you’re likely to get what you want rather than leaving it to chance.

For example, our firm prepares a Software Development Legal Protection Package that’s designed to favor our client’s legal rights while offering a fair deal to the other side. Often the agreement is reused by our client on future app development projects with minimal changes.

Regardless of what you decide to do, whether you’re a developer or paying one, don’t just wing it when it comes to software intellectual property ownership, licensing, and related legal rights. That’s not only bad for business relationships but also an invitation to a lawsuit to sort things out after the fact.

Startup Funding – Where To Get Money For Starting A New Business

By | Internet Lawyer | No Comments

startup funding get money new businessNewbie entrepreneurs with their first “million dollar idea” for starting a new business are often cash-strapped. This frequently makes third party startup funding a misplaced top priority.

Pretotyping Not Payola

As a practical matter, the first issue should be validating whether or not your idea is worth pursuing.

For the aspiring entrepreneur with a limited budget, your first investment should be buying and reading “Pretotype It: Make sure you are building The Right It before you build It right” by Alberto Savoia.

Even if you’re convinced everyone needs what you plan to build, save your time, money, and energy by testing that theory through applying the tactics described in Savoia’s book at little or no cost.

According to Texas Business Lawyer Mike Young, if there’s no market ready, willing, and able to pay for what you have in mind, it’s time to regroup before trying to fundraise for a startup no one wants.

After you’ve proven there’s a sufficiently profitable market by pretotyping, only then is it time to consider how you’ll fund the next steps for your startup.

Your Own Money

Before approaching friends, family, or third parties to raise capital, look at your own assets. If you’re not willing to risk part of your assets, why should anyone else?

That being said, think twice before looting a retirement plan (e.g. IRA or 401k) for your new venture. This is particularly true the older you get with limited time to make up any losses before retirement.

If you can’t afford the down side of a 100% loss of the funds, you shouldn’t be using them in your business.

Don’t go into debt to fund your company. Mortgaging your house or running up credit cards rarely results in business success because it creates a sense of desperation that leads to very bad business decisions when debt payments come due but money is tight.

Business Bank Loans For Startup Funding

Unless you have significant assets to use as collateral or a proven track record of building successful companies, banks are unlikely to give you the time of day for a business loan. In other words, banks are rarely interested in loaning money for startups unless you really don’t need their money in the first place.

Friends and Family Startup Funding

Want to ruin a good friendship or having family members never speak to you again?

Borrow money from them or sell them equity in your new venture.

If you insist on doing it, make sure the loan is done in writing (e.g. promissory note), collateral given if requested, etc. And honor the repayment terms of the debt.

Be careful when fundraising from acquaintances, such as co-workers or friends of friends.

Why?

Because there are federal and state securities laws that must be obeyed if you’re offering equity in exchange for startup capital. The regulatory compliance costs often exceed the amount you’re able to raise by this method…and these people are likely to sue you if your company goes bust and they lose their money.

Angel Investors and Venture Capitalists

Although some angel investors are adrenaline junkies who invest primarily for the rush of being involved with a startup, you should assume both angel investors and venture capitalists are solely interested in a high monetary return on investment (ROI) with the ability to cash out on their terms.

If you are one of the “lucky” few to get this type of funding, understand there are many strings attached.

One of the primary strings invariably is control. To protect their investment, they will throw you out of your own company if you fail to deliver to expectations. These investors don’t assume every investment will pay off. However, they show little tolerance for founders who drop the ball through laziness, incompetence, etc.

Know thyself.

If your primary reason for starting a new company is to work for yourself, giving up a large chunk of equity and expecting to run things as directed by your investors is a recipe for disaster. You can’t fight those who control the purse strings and expect to win, particularly when they’re in the business of making money from your efforts.

Self-Funding Business

Despite the hype given in the media, your new venture is unlikely to become the next Google, Uber, Amazon, etc.

After testing the concept through pretotyping, if you decide to proceed, seriously consider a model where the business’ incoming revenues fund its growth rather than incurring debt or giving up equity.

And if your startup does have the potential to be the next billion dollar unicorn, investors will be knocking at your door rather than you begging for help when starting a new business.

Crowd Funding

What if you need a serious injection of capital for the startup because of the nature of your new widget is technology that requires hundreds of thousands or even a couple million dollars just to get off the ground?

If pretotyping shows there’s a hot demand for your idea, consider using a crowd funding site like Kickstarter or Indiegogo to get the money you need. Just understand there are strings attached to this startup funding too. Whatever you promise to those who crowd fund your company, be prepared to deliver.

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.

Evernote Privacy Policy Change: Much Ado About Nothing

By | Business Legal Alerts, Internet Lawyer, Privacy | No Comments

evernote privacy policy updateUpdateEvernote has rescinded its planned change to its privacy policy because of the backlash. Users must affirmatively opt in before the company’s employees will be reading the content of user notes as part of the machine learning process. This is somewhat silly because the same issue has been ignored for many years by Evernote users who also use “free” email services like Gmail and Yahoo mail.

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Original Article

Evernote is updating its privacy policy to reflect that some company employees may view your content as part of overseeing the machine learning process.

There’s an uproar because some users (e.g. technologically-impaired journalists) naively think their information is stored online secure from prying eyes.

Here’s What You Should Know About the Evernote Privacy Policy Change

First, the general rule of thumb is that anything stored online is not secure. Just ask the celebrities whose naked selfies were exposed in “The Fappening.”

Second, many of those complaining about Evernote’s policy change think nothing about using Google Gmail, Yahoo Mail, and other email services where machine learning is also supplemented by company employees viewing user content.

Third, Evernote is doing the right thing by disclosing how the machine learning process actually works with the assistance of real people. If the company hid this information, you’d undoubtedly see shakedown lawsuits because of the lack of transparency (Tip – if you’ve got a website or an app, you should have your Internet lawyer make sure your privacy policy is consistent with your actual practices).

If you don’t want your stuff seen by third parties, don’t put it online. If you want to access everyday tools that make your life easier (like Evernote and Gmail), then understand there’s a trade-off that includes a loss of privacy.

5 Things You Should Review For 2017 With Your Business Lawyer Now

By | Business Contracts, Business Lawyer, eCommerce and Technology, Federal Trade Commission, Internet Lawyer | No Comments

business lawyer reviewTo make sure your company is heading into the new year with minimal legal headaches, it’s time for an annual checkup with your business lawyer. If you hate lawsuits and government investigations, here are five things you should cover during your consultation.

1. Changes in Business Ownership.

It’s important to verify who owns equity in your company and decide if changes in ownership need to be made for tax or other purposes.

Frequently, a key player joins or leave a business but the legal paperwork gets overlooked to reflect changes in ownership. In addition, the marriage or divorce of an equity owner may result changes in ownership.

As time passes, it may also make sense to plan to transfer some or all of your equity to your children as they assume responsibilities at your company.

These are just a few scenarios. The important thing is to recognize that ownership frequently changes hands in a company and you want to do it correctly to ensure that the business is protected and taxes are minimized.

2. Entity Status.

If you’re operating your business as a sole proprietorship or a general partnership, it’s probably time to discuss with your business lawyer the advantages of converting your company into either a corporation or a limited liability company.

Your legal counsel can explain the pros and cons of each type of legal entity so that you can make an informed decision as to the best path for protecting yourself as the company grows during the coming year and beyond.

3. Existing Contracts.

Have your business lawyer review your existing contracts to ensure you’re protected and to spot potential legal dangers that can be prevented by taking action now rather than procrastinating.

Sometimes this may mean amending an existing agreement, replacing it with a new agreement that better reflects the deal between the parties, or simply taking certain steps (e.g. giving required advance written notice) to extend or terminate a contract.

4. New Agreements.

During your consultation with your business attorney, be sure to discuss new relationships with employees, independent contractors, suppliers, and joint venture partners.

It’s likely you’ll have a few of those relationships that you’ll need to paper over with legal agreements to ensure that you’re adequately protected in case things go wrong, to reduce the risk of misunderstandings with the other parties, and to avoid lawsuits in general.

5. Business Lawyer Review of Website Compliance.

Because the laws and regulations governing ecommerce are constantly changing, make sure your attorney reviews your website for compliance issues. According to Internet Business Lawyer Mike Young, it may just involve a simple update to your site’s privacy policy and other legal docs.

Occasionally, you may also need to tweak some of the language on your site to avoid getting in trouble with the U.S. Federal Trade Commission (FTC) or other government regulatory agency.

Note that this list of five issues is not all-inclusive. However, it does cover the most common legal problems that you’ll want to get fixed during an annual checkup with your business lawyer.