I recently helped a client win an intellectual property case against their customer over the following question: who owns the intellectual property to the software developed by the developer?
Most people will answer this question with: “the intellectual property belongs to the client who paid for the software development.” Unfortunately, for those who answer that way, the actual answer is: “it depends on what your contract says.”
When software code is copyrighted it becomes intellectual property under the laws of the United States. Now, most people believe that if they pay someone else to write software, the person paying for the service is the rightful owner of the work product, which is the terms used for the software created by the contractor. But, is that really the case?
This belief has its roots in 17 U.S.C § 101 of the Copyright Act in the “work for hire” doctrine, which generally states that the works created by an employee within the scope of employment are the property of the employer.
Three criteria must be met for the “work for hire” doctrine to apply: the work product must be specially ordered or commissioned; the customer and developer must have a written contract stating that the deliverables are a “work for hire”; and the work product must come within one of nine categories: a contribution to a collective work; a part of a motion picture or other audiovisual work; a translation; a supplementary work; a compilation; an instructional text; a test; answer material for a test; or an atlas.
In the case of Nearshore IT services, most software does not come under any of the categories under the aforementioned Copyright Act, and Nearshore companies or contractors are not typically “employees”, so the “work for hire” doctrine does not have a clear application to those relationships.
The case I mentioned previously involved the customer’s failure to pay substantial sums to the developer for the software development work. To make matters worse, that customer then went into bankruptcy, leaving the developer with a substantial amount in unpaid bills.
How did the nearshore company win the case? They had a contract that was properly drafted and that took care of the question of intellectual property ownership in the case of payment problems. As a result, the developer obtained a favorable result in the bankruptcy case.
It is common practice to expressly write in the agreement that the work product or deliverables are “work for hire.” It is also good practice for customers to also obtain assignments to the work product or deliverables from software developers. To effectuate a proper assignment, there must be words of an irrevocable intent to transfer software ownership, such as “software developer hereby assigns all right title and interest to the work product”.
Of course, the software developer can make the “assignment” subject to certain contingencies, such as receipt of payment. Proper language can help developers protect ownership of the work product and tie ownership to payment for the services rendered.
Next time you are reading your software development agreement, don’t skip over these “boring and legalese” parts of the agreement, as they can help you in the long run.
“ The Smith Law Group is very responsive and goes the extra mile in getting work done timely. Gabriela and her associates are thorough and very organized. We have used them on several small projects relating to organizational documents and letters, but we were also very pleased with a recent sale transaction Gabriela advised us on that took a lot of review and updating in a compressed timeframe. We were successful in getting the sale documents in order, and highly recommend this firm for corporate work. ”
“ When we were looking for an international lawyer in the United States, we were told to reach out to Gabriela Smith. Gabriela very quickly and diligently started working on our international negotiation, and she achieved the outcome we wanted. Working with Gabriela turned a very difficult situation into a simpler deal. We recommend The Smith Law Group. / Cuando buscabamos un abogado internacional en Estados Unidos, nos recomendaron a Gabriela Smith. Gabriela inmediata y diligentemente represento a nuestra empresa en una negociacion internacional y logro el resultado que buscabamos en el caso. Trabajar con Gabriela hizo que una situacion dificil se vuelva en un problema menos para nosotros. We recommend The Smith Law Group. ”
“ We have been working with Gabriela for the last year and she has been really helpful in
helping us coordinate and organize the global structure of our companies and with international compliance matters by being proactive, responsive and fully dedicated. ”
“ I own a minority certified small business and was looking for an attorney who was not only an expert in their field, but also someone who genuinely cared about my small business. I found The Smith Law Group and was thrilled that they represent big and small companies and give them all the attention they deserve. The Smith Law Group helped my business with the first agreements that we signed for some big projects. We are thankful for their commitment to us and recommend their services. ”
“ The Smith Law Group no es un estudio jurídico más. Es un grupo de abogados dinámicos y que realmente entiende sobre negocios y las prioridades de los ejecutivos de empresas. Se hacen parte de la empresa y le ponen sumo interés a los asuntos y al éxito de sus clientes. The Smith Law Group es de confianza y es nuestro abogado de referencia desde hace muchos años.
The Smith Law Group is not just another law firm. It is a group of dynamic lawyers who have a profound understanding of business and of the priorities of seasoned executives. They become a part of the team and pay close attention to the matters they handle and care about client success. We trust The Smith Law Group and they have been our law firm for several years ”
“ Gabriela le suma a su know-how y comprensión de los negocios en Estados Unidos y América Latina, una clara vocación de servicio demostrada en su alta disponibilidad y profesionalismo. Por lo cual interactuar con ella se hace muy sencillo. Recomiendo a Gabriela Smith para asuntos cross-border de alta complejidad.
In addition to her know-how and the added value of understanding business in the United States and Latin America, Gabriela loves to serve her clients, which is something she has demonstrated in her ability to respond quickly and in her professionalism. Thus, it is very easy to interact with her. I recommend Gabriela Smith for complex cross-border matters. ”
“ The Smith Law Group was recommended to us by EHR industry leaders. Gabriela is our go-to attorney for complex software licensing deals and has successfully drafted and negotiated these deals. She is extremely responsive and diligent with our requests and has profound knowledge and understanding of our industry. She takes the time to understand what we need and really cares about our work, products, and services. ”
“ The Smith Law Group es uno de mis proveedores preferidos. La confianza de poder delegar tareas o consultas especificas en un outside counsel sabiendo que todo se va a ejecutar y resolver de manera eficiente, rápida y con un nivel de calidad first class, es fundamental para un área de legales interno. El nivel de personalización en la atención por parte de sus profesionales, y la agilidad para trabajar ajustado a los procesos internos de nuestra compañía ha sido un agregado de valor enorme para las operaciones del área que dirijo. Definitivamente un asset valioso
The Smith Law Group is one of my favorite providers. The trust generated in being able to delegate tasks or specific consultations to an outside counsel knowing that everything will get done and resolved in an efficient and timely manner, and with “first class,” is fundamental for an in-house attorney. The level of personalization in the performance of work by these attorneys, and the agility to work while also adjusting to our company’s internal process has been an added-value to the work I perform. The Smith Law Group is definitely a valuable asset. ”
“ CMP has worked with The Smith Law Group for five years on a variety of corporate legal issues – from acquisition and contract to Human Resource issues. We have always found them to be responsive, professional and provide pragmatic and insightful legal advice. Their legal services are the best I have experienced. I highly recommend The Smith Law Group. ”