Agreements with software developers

18 May 2016

#Intellectual Property

Jacqui Doyle

Published by Jacqui Doyle

Agreements with software developers

Do you own the computer software that you have paid to be developed by an independent computer specialist? 

In most cases, people will say “Yes, I own it”. However, through a combination of legislative rules about the ownership of copyright under the Copyright Act and the manner in which most software developers operate as an independent consultant, it is likely that the answer should be “No”.

If you appoint a software developer who runs his or her own business to create a new application or software product and even if:

  • you are paying that developer to do the work;
  • the code is based on your concepts, specifications and design of the program, and
  • you give the developer a schematic plan of how the program should work,

when the developer creates the software code for that concept or specifications, the developer owns that code. This is because the software developer is usually an independent contractor and the Copyright Act stipulates that the author of original “work” (which is defined in the Act to include computer code), is the owner of that work. The software developer as a contractor would own his original “work”.

You might suggest that there was a clause in the consultancy agreement or proposal which you entered into when commissioning the work that states clearly that “the software code and all intellectual property in the software code when created belongs to the business owner”. Unfortunately, while the intent is there, such a clause will not ensure that you own what the consultant is developing for you. 

There would have to be either wording in the consultancy agreement or proposal going one step further to specifically assign the intellectual property in question to you or alternatively, there could be a separate document in writing transferring that copyright material prior to or once it has been developed. The Copyright Act prescribes the manner in which copyright material must be assigned and if there is no assignment in writing by the assignor and the assignee, there is no assignment at law. The wording suggested above does not achieve the actual assignment. Whilst there may be an implied right to ownership of the code, you have to take further action to acquire that ownership.

The position changes where the software developer is an employee and works for you in-house for the purposes of developing the new software code or product. In most cases, the software code developed in-house will belong to the developer’s employer and not the employee. This is specifically provided for in the Copyright Act but there are some conditions that need to be met. To ensure that you fall within the parameters of the Act, you should have an employment agreement with a clear job description, provisions regarding the ownership of the intellectual property he/she develops and even a restraint of trade if the software product is very valuable along with confidentiality and other general provisions.

If you have appointed a software developer as a consultant to develop software code for a particular application or a new product, go back to your documentation to make sure you own what the consultant has developed or is about to develop for you. 

This is particularly important if you ever wish to sell your business or simply exploit the software program or product in the future. Contact Jacqui on 3135 0682 if you need some assistance with your review of your consultancy documentation.

Contact Details

Dan Pearce, Partner
T: +61 3 9321 9840
E: dan.pearce@holdingredlich.com

Lyn Nicholson, General Counsel
T: +61 2 8083 0463
E: lyn.nicholson@holdingredlich.com

The information in this publication is of a general nature and is not intended to address the circumstances of any particular individual or entity. Although we endeavour to provide accurate and timely information, we do not guarantee that the information in this newsletter is accurate at the date it is received or that it will continue to be accurate in the future.

Jacqui Doyle

Published by Jacqui Doyle

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