IP Tech Knowledgy

Software development agreements should address copyright ownership of the three aspects of rights that are included in creating most final products. Software created for a new customer may include (i) routines the developer has used on past projects, (ii) coding the developer designs specifically for the new customer that other future customers will not use, and (iii) new coding developed for the current project, but that is not specially focused on the present customer’s business, and could be used for future customers.

Each type of software can be treated differently in the agreement. For the developer’s existing coding, the developer usually retains ownership, and grants to the customer a nonexclusive license to use that portion of the software for the duration of the license term. Material that a developer creates specifically for a customer is usually assigned to, and owned, by the customer, with the developer receiving a license back to use the material for its work with the customer. The hardest aspect to parse is the ownership of software and materials newly created which the developer could also reuse. The developer would want to own this aspect so it can work for other customers and not have to worry that its similar coding might infringe on coding it created and assigned to the current customer. The customer might feel that it paid for the work, so it should be the owner of any new creations.   

The relationship and bargaining power of the parties will dictate how this middle category is divided. Both parties could use the material into the future if the developer retained ownership and licensed this portion to the customer. Conversely, the customer might want to own the new material, yet only allow the developer to use that material for specific purposes that do not impair or compete with the customer’s business. The agreement could get into fine tuning of distributing the rights based on the needs and bargaining power of the parties, addressing each of the three categories of software.

Ned T. Himmelrich
410-576-4171 • nhimmelrich@gfrlaw.com