A Customer Who Pays To Have The Technology Developed, Always Owns The IP (Lesson 2)

The natural and instinctive position is that because a client pays its service provider to develop a software product, the client must own the software. This is a common misconception. The Copyright Act 1968 (Cth) makes it clear that in most cases the ownership of copyright in software vests in the creator of the software (usually the developer).

If there is no agreement between a developer and his client with respect to ownership, the default rule – that the creator of the work (in most cases the developer who developed the code) owns the copyright in the software – will generally apply.

Why The Myth Exists

This myth about software ownership exists because many clients assume that if they outsource development of their software and pay for it, then it’s comparable to the purchase of other goods – such as staple commodities like milk and bread. They’ve paid for the goods, so it’s seems automatic that they should have exclusive ownership and the sole right to be the ‘consumer’ of them.

However, when it comes to the development of software and certain other copyrightable works, that is simply not the case.

I have seen many organisations get into trouble by failing to properly address intellectual property ownership in their software development agreements.

I have personally witnessed multimillion-dollar deals fall apart and into chaos because the relevant contract did not properly address IP ownership or because the client blindly signed a developer’s agreement without reading or properly considering the IP ownership provisions when executing the agreement.

It is incomprehensible that clients who engage developers to create valuable software platforms do so without having proper legal review or fail to get the most important parts of their draft agreements thoroughly vetted and amended to suit the commercial realities of the proposed deal.

Yet, it happens all the time. It is amazing how many organisations will sign important legal documents without even reading them because they think that the documents are “business as usual” and don’t require any type of review.

Senior executives involved in technology transactions for the development of software and other copyrightable technology need to ensure that they know where the software is being developed, who is developing it, that proof of ownership is obtained and that all relevant legal agreements are in place to ensure they have the rights they require in order to fully exploit the development.

Whether you are a decision maker tasked to outsource the development of your organisation’s software product through a software procurement, or you are a C-level executive tasked to manage the development of your organisation’s software (in which case your software might just be your organisation’s most valuable commercial asset!) you simply cannot afford to get it wrong.

One slip-up in this complex area of law can result in your ‘smooth’ deal suddenly resulting in a dispute that becomes an aggressive and protracted commercial litigation and, in the midst of it all, your intellectual property is exposed as the dispute wades through the Australian court system.

To your success,