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Software and technology contracts

The world of software and technology contracts is a fast moving sector. To keep you up to-date we have set down some reminders on how to protect your ownership of the assets and revenue flow.

Securing revenue from software and technology contracts

The asset in technology is the software. Software is protected by the law of copyright.

Copyright law will only protect the ideas expressed by coding.  Copyright laws do not protect the ideas themselves.  Ideas can only usually be protected by trade secret and or confidentiality agreements.

Copyright and computer programmes

Copyright law can protect the computer programme.  Copyright law can also protect preparatory design material such as flow charts and graphical user interfaces. Therefore interfaces such as mobile Apps and websites are protected under copyright law.  A graphic user interface will have design and trade mark protection rights.

Software development methods

There are generally two types of methods for developing software. Copyright law will extend to protect the ideas created under either method:

Waterfall method:

The software development process will begin with a detailed specification, and develop through design, coding and testing.

Agile method:

Detailed demand for the end product is typically not specified at the outset, but overall project scope and goals are agreed between parties.

Limitation under copyright law

You will not benefit from the protection of copyright law unless you can establish you are the creator.  If you cannot establish you were the creator the revenue arising from the software, IT or technology contract is potentially in jeopardy.

Originality of the idea

You need to establish originality to establish ownership of the copyright used in the software or development contract. This means that the software developer has to establish that the work created is through his own skill, judgement and individual efforts.

Importance of documents

To be able to establish ownership of the software copyright your position is strengthened if you can rely on firm evidence of ownership. Under software and development contracts rights over the copyright in the software can be protected under a variety of contracts.  For example, trade secret agreements, software collaboration agreements and software development contracts.

Plugging the gap in the real world

Contracts should be in place prior to developing the copyright in the software. We appreciate this does not always happen in the real world. We help many clients by stepping in to see if we can plug the gaps to preserve the right to income from the software.

Copyright in software cannot be publically registered in the UK

It is not possible to register your ownership of copyright in your software in the UK on a public register. Public registers for copyright tend not to be operated elsewhere in the world.

Copyright ownership differs from trade marksdesign rights and patents where you can record ownership on a public register in the UK.  Public registers for trade marks, design rights and patents do exist elsewhere in the world.

The lack of public registers means that creation and ownership of the copyright in software has to be written down.

Practical tip for creators of software

Creators should mark their software with a copyright notice. This is the copyright symbol © followed by their name and the year.

Best practice is to keep the draft documents you used during the development of your software to reach the final product. This documentation helps the creator should a dispute arise to claim copyright by virtue of creation.

Contractors used in development of the software and technology

There will be an assumption that software is owned by a contractor unless you can prove otherwise. Good evidence is a written contract detailing your ownership.  In our experience it is when there is a sale of copyright that the issue becomes acute. An inability to establish ownership does impact on the value of the asset.

Often sales are held up whilst negotiations take place.  The fall out is usually cash settlements are paid to the creators for them to assign the copyright and other intellectual property over.  A buyer will not proceed without such an assignment.

Hidden cost of contractors

When pricing work which involves contractors you do need to consider the real cost.  There are hidden expenses and the risk looks set to increase.

Software and technology contract problem areas

There is a growing demand to customise software to fit specific business requirements. Often this will involve the customisation and merger of an existing software package or adding functionality and varying the existing base technology.

During such development projects, you will be faced with the software development contract. This is where common problems arise when services provided under the software development contract are not clearly set out.  We find that taking the time to draw up a functional specification will pay off.

Reminder of what is important in software and technology contracts

The areas to keep a watch on when negotiating software or technology contracts include:

Negotiation points

  • Provisions of services;
  • Timetable for the project;
  • Ownership of the intellectual property rights;
  • Acceptance testing;
  • Payment terms; and
  • Method for changes to the specification and services.

Restrictions

You will need to impose some restrictions to protect your assets and the revenue stream. Depending upon the project, typical restrictions to consider include:

  • Stopping reverse engineering;
  • Using your software by incorporation into other programmes – what is your share of the revenue;
  • Prohibiting copies of the developed software; and
  • Rules on access to source code and object code.

We do work with smaller SMEs negotiating with large corporates.  This can feel like a David and Goliath situation but with support and our experience a path can often be found.

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