A critical legal risk associated with software development outsourcing by a company (Client) to a software developer (Developer) is intellectual property (IP). IP encompasses copyright, trademarks, industrial designs, patents, trade secrets, know-how and it can take a wide range of forms (databases, source-code, logos, graphic interface, notebooks, etc.).
When legally bound by such an outsourcing relationship, the Developer creates the software program and/or application in a customized way, based on the Client’s directions, needs and requirements. The Client pays a sum of money in exchange for the services provided by the Developer.
When outsourcing I would consider the following from the perspective of the client:
- Take an Inventory of already existing IP
The first thing I would do would be to identify the IP that you already own, how is it protected or not and what IP if any needs to be disclosed for the outsourcing development purposes ? Then, you should check whether the contracts you have entered into with other parties which covers both the IP that was licensed/transferred by you the Client to third parties and the IP that was licensed/transferred by third parties to the Client forbid you from disclosing such IP or allowing that it be utilized by the Developer without the other contracting party’s written consent.
- Are You Hiring The Right Developer?
Before you sign a contract with a developer I would do a couple of simple things. First, do whatever search you can do to see if this developer has a good reputation or not. I would also request to see other works the developer has created. You should also ascertain whether the developer has the means or resources and capacity needed to develop your software and to make sure your IP is protected against unauthorized use, loss or theft.
If you are hiring a developer outside of the United States it is critical to see what protections legally are available in the developer’s country in the event your IP is compromised.
- What are some Key provisions that should be in an outsourcing development contract?
It is not wise to permit a developer to begin working on your project without a well defined contract executed by both parties. To protect your IP rights, you should consider the following:
- If you are located let’s say in Florida and the developer is in Texas I would insist that choice of law and venue for enforcing the agreement take place in Florida.
- Make sure to draft strong confidentiality/non-disclosure language which covers the IP, the information you provide to the developer, the internal work processes, and any components of the software program/application, etc.
- It is critical that the agreement states that you own all of the IP rights in the software program/application created/developed by the Developer for the entire time that the outsourcing relationship exists.
- The agreement should state how the developer is to protect the IP, who can have access to it and that he is to preserve everything possibly related to the code or data.
- It is important that the Developer indemnify the Client in case the development of the software infringes upon a third party’s IP rights.
Most important, get a written contract!
Andrew S. Bosin is a Software Licensing Development Lawyer with a nationwide law practice located in New Jersey serving clients in New Jersey, New York, Buffalo, Queens, Manhattan, New York City, Westchester County, Islip, Oyster Bay, Rochester, Utica, New Rochelle, Tonawanda, White Plains, Binghamton, Saratoga Springs, Rockland County, Brooklyn, Long Island, Albany, Syracuse, Suffolk County, Nassau County, Bronx, Staten Island, Allentown, Scranton, Lancaster, Harrisburg, State College, College Station, Boston, Hartford, Providence, Connecticut, Atlanta, Chicago, Washington D.C., Dallas, Florida, Ohio, California, Austin, Texas, Maryland, North Carolina, Massachusetts, Colorado, Utah, Oregon, San Antonio, Austin, San Diego, Los Angeles, Silicon Valley, San Francisco, Houston, Salt Lake City, Toledo, Akron, Dayton, Provo, Portland, San Jose, Miami, Tampa, St. Petersburg, Ft. Lauderdale, West Palm Beach, Broward County, Dade County, Newark, Delaware, College Park, MD, Cook County, Phoenix, Denver, Boulder, Ft. Collins, Nashville, Memphis, Kansas City, Raleigh, Charlotte, Indianapolis, Boise, Eugene, Manchester, Burlington, Philadelphia, Pittsburgh, Pennsylvania, Vermont, Rhode Island, Boca Raton, Arlington, Virginia, Alexandria, Virginia, Reston, McLean, Cambridge, Quincy, Riverside, San Bernadino, Minneapolis, St. Louis, Cleveland, Columbus, Baltimore, Sacramento, Cincinnati, Orlando, Las Vegas, Round Rock, San Marcos, Louisville, Richmond, Tempe, Southbend, Bloomington, Knoxville, Oxford, Tuscon, Long Beach, Ames, Ft. Collins, Lawrence, Blacksburg, Charlottesville, Champaign, Oklahoma City, Birmingham, Salt Lake City, Baltimore, Mobile, Alabama, Utah, Washington, Seattle, Oregon, Portland, Eugene, Sacramento, Pittsburgh, Wake County, King County, Redmond, Kirkland, Bellevue, San Mateo County, Contra Costa County, Cupertino, Los Gatos, Sunnyvale, Mecklenburg County, Jacksonville, Gainesville, Boynton Beach, Orange County, Palo Alto, Harris County, Waco, Columbia, Missouri, Tarrant County, Bucks County, Lehigh County, Bethlehem, Pennsylvania, Burlington, Portland, Maine, Manchester, Concord, Nashua, Cambridge, London, Paris, UK, England, Dublin, Scotland, Edinborough, Amsterdam, Germany, Munich, Berlin, Madrid, EU, European Union, Spain, Austria, Vienna, Geneva.