Wigley Law have a really good article on IP ownership of software in New Zealand. The article is specific to New Zealand, but while the copyright law may be different in other countries, the concepts are similar. If in doubt, talk to your lawyer … this is not legal advice!
The default position of the law (in New Zealand) is that whoever commissions a software project is the owner, unless explicitly agreed otherwise. Commissioned is a term that’s been defined by case law to include systems that are based substantially on the client’s confidential information & processes. This means that the copyright law favours the client for any software that is based on the requirements of the client, even if the developer initiated and paid for the majority of the project.
What does ‘ownership’ actually mean with software anyway, when it can be copied unlimited times and ‘owned’ by multiple people? Ownership is a bundle of rights, all of which by default belong to the copyright holder. The rights are:
- The right to develop the source code (exclusively or non-exclusively)
- The right to license the source code (non-exclusive)
- The right to sell the source code (exclusive)
- The right to use the product (exclusively or non-exclusively) perpetually, or limited by time/field/market/etc
- The right to license the product (non-exclusive) in all or some markets/countries/etc (with royalties or not)
When a software project is developed for a client, then there is often less value than expected in owning the IP. As the diagram from the article shows, the code developed specifically for the project is often only a small part of the overall codebase, so the client will need licenses of the remaining code in order to use the source code.
For the developer, owning the IP carries responsibilities they may not want. From my experience, developing a software project for a client and keeping ownership of the IP can effectively make the software a product. Your client has purchased a license from you and their expectations are as if they’ve bought shrink-wrapped software. They expect you to support and maintain it and the quality of the product is your problem because you own it. This is fine if you are selling the software to numerous customers, but maintaining a product for one customer can be a lose-lose situation for everyone.
If you’re going to charge a one-off price to develop software for a client, then it may be best for the client to own the IP (and have licenses of any library code). If you’re worried about losing future work, then you can structure the contract with a first right of refusal on any future development with agreeable terms.
Part of the signoff on software projects (for external clients) should to be agree on the ownership of the IP by following three steps:
- Agree on the ownership before beginning development
- Document it, sign it and store it with your lawyer
- When scope changes and new features are added, make sure the agreement is still valid
For more info – email Stuart from Wigley Law.
