Software Development Agreement: Who Owns The Code?

software development agreement and code ownershipWhether you’re a developer or you’re paying to have a software application developed, one of the most important issues you should resolve in the software development agreement is who owns the code.

Unfortunately, many app development contracts ignore this issue. Instead the parties focus on the scope of work, payment milestones, and the like without giving a thought to intellectual property ownership.

Now if you’re a software developer, you’ll want to be able to recycle code on future projects. On the other hand, if you’re paying for a mobile app or other software to be developed, chances are you believe you’re purchasing ownership of the code. And that’s at least partially false in most cases because of what’s in the development contract and what’s omitted.

For example, developers frequently use open source and public domain code on projects instead of custom coding everything. And they’ll reuse code from prior projects for other clients. After all, there’s no sense in reinventing the wheel. Of course, the developer took this into account when quoting a price for the project in the first place.

So, how do you avoid a legal mess because of vagueness in your software agreements?

Ideally, the software development agreement will clearly identify…

  • For custom coding, which party owns the code, which party will receive a license to use the code, and the scope of the license.
  • Which parts of the code is open source and the type of license the client receives to use that open source code.
  • Public domain code that’s included in the app.

Now if a client wants exclusive ownership of custom code, the client should expect to pay a premium for that exclusivity. In some cases that makes sense, particularly if there’s a likelihood the custom coding could be used by the developer to create a competing application.

Of course, whatever’s decided with respect to ownership and licensing, it should clearly be documented. For example, a copyright assignment, software license(s), and the like. So that both parties are on the same page as to their legal rights. This reduces the chance the developer, client, and third parties will end up in software litigation over app ownership and licensing rights.

What if you’re in the middle of an app development project but the contract is missing essential ownership and licensing terms? An experienced software lawyer can help you modify the agreement so that the parties know what they’re really getting out of the deal.

Author Mike Young, Esq.

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