How to protect intellectual property when outsourcing software development?

One of the highest legal risks associated with software development outsourcing by a company (Client) to a software developer (Developer) is intellectual property (IP). IP covers copyright, trademarks, industrial designs, patents, trade secrets, know-how, etc. and it can take a wide range of forms (databases, source-code, logo, graphic interface, notebook, etc.).

When bound by such an outsourcing relationship, the Developer is to create a software program/application in a customized way, based on the Client’s directions and requirements, and adapted to such Client’s needs. The Client, on the other hand, is to pay a sum of money in exchange for the services provided by the Developer.

Many companies fear that if they hire a Developer, he will use the newly created software pretending that it is his property or that he will use the accessed know-how in favor of the next client. To avoid running such risks, it is in both parties’ interest for them to conclude a well written contract covering the way in which the software development outsourcing is to take place. Only by approaching these aspects right from the start will the Client and the Developer lay the basis for a successful project and for a long-term partnership.

Without aiming to cover the topic in an exhaustive manner, this article mainly takes the Client’s perspective and the way in which it can ensure the preservation of the IP rights within the context of the outsourcing relationship.

When deciding to outsource, consider the following steps:

1. Make an inventory of the IP you already own

2. Have you identified the right Developer?

3. Key provisions in an outsourcing contract

4. What happens in the absence of a written outsourcing contract?

The absence of a written contract clearly setting boundaries for the Client’s and the Developer’s rights and obligations may lead to confusion, especially where other elements must be considered as well (for instance one of the parties being a foreign national – situation which triggers a possible conflict of governing laws, the existence of other commercial agreements between the two parties covering other projects, etc.).

Clarity is relevant with IP rights especially if the Client intends to use parts of the software for other projects as well or wishes to sell the software (the buyer will request that you guarantee your legitimate ownership of the object of the sale).

Read the full article as published in Today Software Magazine.

Photo credit: Creative Commons License (CC), kalez on deviantart.