VARportal™

Custom Developed Software … Do You Own the “Mona Lisa” or Just a Copy?

by Jay Brooks, Esq., and VARportal Business Services Provider Member

The scenario happens every day in the VAR world: Customer A needs a software project completed, VAR B contracts to do the work and they use the expertise of Consultant C to develop the software for delivery.  Who has the right to use the Consultant’s software?

Can Customer A use the software?  Typically yes. 

However … can someone else legally use the software?  If you are not careful, this answer is yes too.  In the worst case, Consultant C can sell or give a copy of his software to Customer A’s or VAR B’s competitor and they can legally use it in the marketplace against both of them.  This situation is usually the result of a lack of awareness, but it is a situation that can the solved fairly simply by properly including contract language to assign all copyrights to the developed software to Customer A.

In the scenario above, rights to the software are defined by the laws of copyright.  Copyright law protects an owner’s right to control the copying and distribution of their work.  Not commonly known, copyrights are obtained by the creator as soon as the work is put into a tangible medium (i.e. computer memory).  The software does not have to be “registered” with the Government for these rights to exist.  So, in this case, Consultant C’s rights exist when they create the software on the computer.  These rights are not forfeited by Consultant because he’s paid by someone or because he gave a copy of the work to Company A.  The contract can make the Consultant give Company A a copy and they can use the copy, but unless the contract is worded properly, the Consultant is still legally free to make and distribute other copies based on their rights to the original work.

Think of the Consultant’s work like Leonardo da Vinci’s “Mona Lisa”.  Owning the copyright is like owning the original painting and the right to make more copies from the painting.  In this scenario, Leonardo can create the original painting and go to Kinko’s to make copy.  Without getting all the copyrights, Leonardo may only be delivering a copy of the original to Customer A and VAR B.  If Leonardo still has rights to the original, like the Consultant with copyrights to the software, they can still sell other copies and can still sell the original to someone else.  You need to control the copyrights to the original to control the original and other copies.

The control of Consultant copyrights can be addressed by ensuring that the contract properly gives the copyrights to Customer A so that they can control the work as if they developed it themselves.  This will prevent the Consultant from controlling other copies. 

To control the rights to the work, all copyrights to the work should be assigned to Customer A.  Typical language that should be included in the contract to address this issue is:

“Consultant grants to Customer A all right, title and interest in Consultant's Work, including all copyright rights, in perpetuity and throughout the world.”

There is another method to obtain copyrights called creating a “work-for-hire”.  Although this is suitable for employees or other specific works when the agreement is signed before the work starts, software typically does not fall under the eligible subject matter for a work-for-hire agreement and assignments should always be preferred. 

The risks may also be addressed by carefully drafting non-disclosure provisions into the contract that prevent the Consultant from disclosing their work outside of the contract. 

The project can also be broken up so that the Consultant’s piece of the work is of no value without being combined with or used with other pieces controlled by you.

The lesson to be learned is that a contract for subcontracting work should be carefully drafted to ensure your risks are properly addressed including the risk of loosing control of software you paid for and expect to give you a competitive advantage.

Jay Brooks, Esq.

Intellectual Property Attorney

About Jay Brooks and John Brooks Law LLC:

John “Jay” Brooks has over 27 years of business and legal experience with over 20 of those years spent in the high technology and Value Added Reseller marketplace.  Jay’s legal practice focuses on protecting the Intellectual Property of small businesses and individual inventors.  He has been licensed to practice before the Patent and Trademark Office for more than 10 years and has experience in business creation, software licensing, filing patent and trademark applications as well as litigating intellectual property issues.

Representative legal work that Jay has performed includes: In-House IP Counsel for 100+ person Research and Development Company; filings before the US Patent and Trademark Office and the US Copyright Office and represented businesses in partnership agreements with Fortune 100 companies, world-class universities and small businesses.

Alongside his legal experience, he also brings a unique understanding of the technology business through such roles as:  Director, Business Development and Marketing, AimNet Solutions; Director of Enterprise Services, NaviPath (a CMGI Company); Service Line Director, Genuity/BBN and Business Development and Product Manager, GTE Government Systems.

In addition to being licensed to practice before the U.S. Patent and Trademark Office and being a member of the Massachusetts Bar, Jay is a member of the American Intellectual Property Law Association, the Boston Patent Law Association, the Volunteer Lawyers for the Arts, the Massachusetts Bar Association Lawyer Referral Service and the National Association of Patent Practitioners.