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RevStar Consulting | What To Ask a Software Development Partner Before Signing a Contract | Blog Image

Custom software offers a slew of benefits but most notably for organizations looking to achieve big goals with big data. But how do you know if you actually own the software you’re paying to build? Several concerns have arisen for small and large businesses who are branching out into custom software territory. Who owns the source code? Are you getting true access to your software and owning it outright when it’s complete?

Source code licensing should be a prime concern if you need custom software. What happens when you pay for something but don’t own it? The project itself can be derailed, and your business may suffer because of the shady practices of a software developer.

In this article, we’ll explain what questions you should be asking software developers before signing a contract. Ownership is near and dear to our hearts.  We care about our customers and their rights to their own software. You should, too.

Who Typically Owns The Code?

If you hire a freelancer or software developer for your business, that code typically belongs to the developer. Freelancers and solo developers don’t have to answer to corporate requirements as far as ownership goes, but they often like to retain the rights to the source code as a sort of “signature” that the work is theirs. 

If the developer(s) is working for a company, the business will usually own the source code. Source code falls under the category of intellectual property, because the developer or company has created something ‘from the mind’. You might have commissioned them to build your software for you, but they own the intellectual property.. There are certain caveats, such as open source code, but we’ll get there later in the article.

So, how do you make sure you ACTUALLY own the right to your software?

By drafting something called a“ Software Development Agreement”. This agreement’s purpose is to spell out the terms of the development process and the final product—including the rights to the intellectual property (source code). 

Open-Source Code

Another factor that comes into play is open-source code. This is code that is created for use in the public domain. According to Medium:

“In general, open-source refers to any program whose source code is made available for use or modification as users or other developers see fit. Open-source software is usually developed as a public collaboration and made freely available.”

Developers will often utilize open-source code as a foundation to build on for custom software.

How Does This Affect Ownership? 

This begs the question of whether or not open-source code in your development project affects your rights to the end product. There’s always the potential that you and/or your developer will need to obtain specific rights to use open-source code, but if you obtain the right permissions you can use open-source code in your product. It’s always a good idea to get legal advice if you’re unsure moving forward. 

Two Common Types Of Ownership

License of Copyright: A license of copyright can give the new owner of the software either exclusive rights to the software or non-exclusive rights, depending on the terms of the agreement. When you have exclusive rights to your software, only your company or organization can use it.

Assignment Of Copyright: This is the process of transferring copyrights from one entity to another. In the case of software development, it will be your development firm or freelancer transferring either exclusive or non-exclusive copyrights over to you. 

What Should Be Included in a Custom Software Licensing Agreement

When you draft a custom software licensing agreement with a developer, you want to be certain that you’re keeping your rights in mind by gaining ownership of the software you paid for. These details are usually worked out before the project begins. For a good relationship between developer and client, the agreement should be as detailed as possible and be understood by both parties.

Here what should always be covered in a licensing agreement.

  • Exclusive or non-exclusive—Who owns the software? Who gets the rights to use it? Are you sharing rights with the developer or retaining sole ownership of the custom software?
  • Sublicensing rules—Does any other third party get any of the rights to your software?
  • License Assignment or Unilateral Transfer of Rights—Is the creator transferring their rights to the software to you or your organization?
  • Open Source Licenses—Is your developer using open-source code? Do you need any licenses for your code?
  • License Restrictions—What are the restrictions of your licenses to both open-source code and your custom code?
  • Term—What is the length of the agreement? Under what circumstances will the term end, and what needs to happen before then?
  • Delivery—When and how will the terms of the agreement be delivered? What can you expect from the end-stage?
  • Deployment-Is your software being built directly on your own cloud or on-premise environment? Or will it be on your partners? Make sure your software is housed on your server before it’s deployed.
  • Fees, Taxes, and Payments-What will the cost of the project be, in total? What fees, taxes, or extra expenses should be expected?
  • Maintenance and New Version—Who will maintain the code/software? Are you responsible for paying for maintenance, or is this service offered by the developer(s)?
  • Title, Intellectual Property Rights, and Infringement-Who owns the overall rights to the code and software, and what actions are taken should those rights be infringed?
  • Security Measures and Usage Tracking Disclosure-What security measures are being taken to protect the software from hackers? What kind of information will be included in the usage tracking disclosure?
  • Confidentiality-What are the confidentiality terms of the agreement? Who can see it, edit it, or share it?
  • Termination and Effects-What are the effects of early termination of the agreement?
  • Indemnification-If there is significant loss or damage to the project during the creation process, who covers the expenses? What compensation is offered?
  • Limitation of Liability-What are the limits of the liability for both parties involved in the agreement?
  • Governing Law and Dispute Resolution Options-What is the overall governing law of the agreement and what options are available to resolve any disputes? Do you need legal counsel on hand?

A thorough software licensing agreement can save you legal trouble and confusion down the road. Remember, it’s always better to own your software outright.

Protect Yourself with the Right Partner 

During the negotiation phase of your project, all of the terms of the licensing agreement, including final ownership of the custom code and finished software, should be spelled out. The quicker you handle this portion of your process, the quicker the firm can get to work. It helps protect your interests and keep your developer bound to the terms of the contract. If you don’t understand the contract or need further assistance, don’t be afraid to seek legal counsel. 

When you work with a company like RevStar, you don’t have to worry about endless red tape, excuses, and legal jargon. You own your software outright, because we work for you. Your custom-built software is designed to your specifications and then yours to own forever.

Schedule a call with RevStar Consulting to get a free consultation.


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