Software Contracts

Software contract solicitors

There is a growing demand to create or customise technology to fit specific business requirements. Often this will involve customisation and merger of an existing software package or adding functionality and varying existing base technology. The ability to customise software is itself an asset along with the existing software packages – all of which need protecting.

We work with businesses to protect their assets from being used and abused without permission.  We are happy to quote and scope a project so please do call us to discuss.

How software can be protected

Software can be protected by the law of copyright. Copyright can also protect preparatory design material such as flow charts and graphical user interfaces, as well as end product computer programmes.

Rights can be protected under a variety of contracts. For example, trade secret agreements, software collaboration agreements, and development contracts. We are experienced in tailoring these contracts to your technology and commercial outcomes.

Software development contracts

There are generally two methods for developing software – waterfall and agile.

  • Waterfall method – where the software development process begins with a detailed specification which will be developed through design, coding and testing.
  • Agile method – where detailed demand for the end product is typically not specified at the outset, but overall project scope and goals are agreed.

Copyright will protect technology created under either method.

Securing revenue and ownership

You will only be able to benefit from the protection of copyright if you can establish you are the creator. If you cannot establish you are the creator the revenue arising from the software is potentially in jeopardy.

As a minimum, 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 creates a ‘paper trail’ to evidence the creator’s ownership should a dispute arise.

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

Issues to avoid if using contractors

If you have outsourced entirely to an external software developer, there is a legal presumption that software is owned by that contractor unless you can prove otherwise. Good evidence could be a written contract detailing your ownership (but bear in mind any verbal or email variations).

In our experience it is when there is a sale that the issue of copyright ownership becomes acute. An inability to establish ownership will impact on the value of the asset and the business as a going concern. Sales are often held up whilst negotiations take place. Buyers of the business will not proceed without ownership. This hold up is often resolved with a cash settlement to the developer in exchange for assignment of the copyright but this may affect the purchase price.

Software escrow

Software developers can get into financial difficulty or be otherwise unreliable. If you are licensing software this is an important risk to your business.

With a software escrow arrangement a copy of the software source code is kept by a neutral third party agent. This enables you to access it if the relationship with the developer breaks down. These terms need to be carefully drafted. We are experienced in advising on these situations.

Protecting confidential information and code

Software developers can get into financial difficulty or be otherwise unreliable. If you are licensing software this is an important risk to your business.

With a software escrow arrangement a copy of the software source code is kept by a neutral third party agent. This enables you to access it if the relationship with the developer breaks down. These terms need to be carefully drafted. We are experienced in advising on these situations.

Negotiation points – what is important

  • Exclusivity – is the licence limited to certain parties, industries or territories? ‘Exclusivity’ is not a strict legal term so you must be clear what you mean
  • Description – detail the technology being licensed/developed
  • Scope – what are the parties allowed to do with the product?
  • Duration – fixed term, rolling renewal, extensions, early termination (and consequences)
  • Payments – one off, annual or royalty-based?
  • Quality control and information sharing provisions to monitor sales and data visibility
  • Improvements – who owns any improvements to the product?
  • Sub-licencing? There is no automatic right so express provisions are needed
  • Assignment? Will there be conditions or restrictions?
  • Indemnities and warranties
Registering your licence

Patents, trademarks and registered designs often need to be registered with the relevant registry. Failure to register leaves your business vulnerable.   It is a relatively simple step but hugely important.

Kim Whitaker

Senior associate solicitor in the company and commercial law team with over 25 years experience.

Let us take it from here

Call us on 020 7438 1060 or complete the form and one of our team will be in touch.