How to avoid IP rights traps in software development?

  • It might harm business. The client could get into the “vendor lock” (Giants like Oracle and Microsoft tend to apply these “vendor lock” strategies making the clients very dependent on their technologies).
  • It can be costly. Every minor change in the project may require high costs.
  • It might hurt the client’s customers. In the end, it could mean that the client is held hostage by the service provider and so their service to their customers is entirely dependent on the decisions between them and the service provider.
  • It might harm the client’s collaboration with investors. The client must own all IP, source code, knowledge, and materials for investors. It is an immediate red flag for them if it is not the case.
  • Employees — have the moral right to own the IP developed during employment; however, they are usually restricted by the employment contract.
  • Consultants/individual contractors — unless a written contract, they may own the IP.
  • Vendor company to develop software — even though clients pay for their services, they are not necessarily the owners unless it is documented.

All the code developed on clients’ request could be roughly divided into three major types:

  • Usage rights for the existing code: depending on the definition stated in the agreement, we negotiate terms of its usage with the client.
  • Access rights for the open-source code: we help clients obtain all the necessary licenses or perform all the required compliance operations (copyright notifications, etc.).
  • Full ownership for the unique code developed: yes, FULLY transferred rights so that the client will be the actual owner (commercialize and replicate it for his\her benefits).

What else could the client do to protect IP rights for their app?

  1. Pay special attention to the Ownership section in the software development contract. Ensure that all the code developed for the project is stated as ‘work made for hire.
  2. Add The Source Code Ownership section in the vendor agreement for additional protection and assurance. State all third-party software used along with the usage terms, conditions, and restrictions.
  3. Check employment agreements and consultancy agreements. Their contracts must contain the at-will assignment of all the inventions and the associated IP rights developed during the employment period. It mainly concerns the senior executives.
  4. Keep a written record of who helped design and create the source code.
  5. Perform an IP audit regularly using, for example, external juridical help. Double-check and triple-check.

Bonus track for startups

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