If you’re engaging a software house or independent contractor to produce software for you, you might think that you will own all the intellectual property in the software once it’s produced. After all, it’s your idea, you’ll probably contribute a lot to the design and specification process and (crucially) you’ll be paying for it.

Unfortunately, copyright law isn’t that helpful.

The default position: non-exclusive licences

Any work carried out by your own employees in the course of their employment will automatically vest in you as their employer but if you use independent contractors or software houses, the situation is very different – they will own all the copyright unless it’s assigned to you in writing.

If you don’t have anything in writing at all, you will benefit from a non-exclusive licence to use the software. This means that, not only will the developer own all the rights in the software, but it can do whatever it likes with the software after it has been written (provided there’s no breach of any confidentiality obligations owed to you).

Even if the software is produced solely for your business and is so specific that it couldn’t possibly have any use to any other person, the Courts have been reluctant to imply anything more than a non-exclusive licence into the agreement between you. The argument is that if you wanted more than a non-exclusive licence, you should have written it into your contract.

The best position for you: assignment

If the developer will agree to it, you should insist on an assignment of all intellectual property in the software. This means you will own the software and be free to modify, adapt, sell or sub-license it as you see fit.

This is most likely to be appropriate where a developer writes specific code, solely for you, with little or no element of re-use (that is, common modules or libraries of code that the developer re-uses in different projects).

You must ensure that the assignment is carefully drafted within your agreement.

The compromise position: an exclusive licence

If the developer doesn’t ever assign ownership of its code as a matter of policy, or if it’s just not practical because of the amount of code it generally re-uses in its development work, you should insist on an exclusive licence.

This means that the developer will still own all the copyright in the code but you have an exclusive licence to use the parts developed specifically for you. The developer cannot then allow other businesses to use that code.

Again, you must ensure the licence is carefully drafted and you should ensure that it includes any rights you might need to adapt or sub-license the code as appropriate.

Matt Worsnop is an Associate Solicitor at BHW Solicitors in Leicester and writes regularly on software law matters. Matt can be contacted on 0116 281 6235 or by email at matt.worsnop@bhwsolicitors.com.

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