When having software developed for your business, you may believe you own the software the developer is developing for you. However, due to Australian copyright law, this assumption can be incorrect. If you want to own the software developed for you, it is best to ensure you have in writing an explicit right to own the software. This written right will ensure you have exclusive use of your software. Then, if you sell your business, or intend to sell or license your software, you will have the right to do so. This article explains whether you can own the software you are having developed for your business. 

Where Does Software Stand Under Australian Copyright Law?

In Australia, the Copyright Act 1968 (Cth) regulates copyright. The Act recognises copyright in literary works. Software code is considered a literary work under the Act. Accordingly, when a software developer writes a unique code, they will be automatically protected by copyright.

With copyright comes exclusive use and a right to bring an action for any copyright infringement. Fortunately, by putting in place the right agreements which contain the proper clauses, you can overcome this.

How Can You Take Ownership of the Software?

To take ownership of the software a software developer is developing for your business, you have a few options. Ultimately though, you need a written agreement in place to transfer the rights to you. The agreement you should put in place depends on the relationship between your business and the software developer.  

Software Developer Employment Agreement

The first option is to employ a software developer. By bringing the software developer into your business, you can put in place an employment agreement between you and them. When doing this, it is essential to make sure you are treating the software developer as an employee and meeting all of your obligations as an employer. You should then cover these terms in your employment agreement with the developer.

In this employment agreement, you can also include a clause which ensures all intellectual property (IP) created by the developer in the course of their employment automatically assigns to you. This assignment will give you ownership of the IP, which will include any software the developer creates while employed by you.

Software Development Agreement With an IP Assignment Clause

Where you are engaging an external software developer, you should receive a software development agreement from the developer. You should review the agreement to ensure it meets your expectations. If the developer does not provide you with an agreement, you should engage a lawyer to draft one.  

If, during or after development, you expect to take ownership of the code and thus the software, you need an IP assignment clause in the agreement. This clause will act to assign the IP created under the contract to your business.

A key issue to be aware of is that, usually, software development agreements provided by a software developer will only license you the right to use and sell the software. A licence means the developer will retain rights to the code. If you want to have ownership rights, you need an assignment clause to transfer the ownership. rather than just a licence clause. 

If they present you with a licence clause, you can try to negotiate with the developer for replacement with an assignment clause and if agreed, have the provision redrafted accordingly. You need to ensure this happens before you sign the agreement.

A lot of the code used in software development is precedent code. Precedent code forms the foundation of many software products and is therefore integral to a developer’s software business. Accordingly, a software developer is unlikely to want to assign this code over to you. Consequently, you may need to specify which code has been written only for your software and which you want to own. Once you have negotiated this, you will need to redraft the IP clause in your agreement to set this out and assign the unique code from the developer over to your business.  

A Separate IP Assignment Agreement

If the developer has already developed the software, it is not too late to take ownership of the unique code. You can use an IP assignment agreement at any time to assign IP to your business. That is, assuming the software developer agrees and signs the document. However, it is best practice to always transfer ownership before starting development.

What is Open Source Software?

You should note the prominent role open source software often plays in software development. Open source software is code where the owner has granted users a licence to use, redistribute and modify the code. This code is by its nature free for anyone to use, so where open source software has been used or will be included in your software development, the developer does not have the ownership rights to transfer it to you. Therefore, you cannot have exclusive ownership of that part of the code. Software development agreements will typically make provision for the use of open software and note this limitation.

Key Takeaways

You cannot assume that you automatically own the software you are having developed for your business. Australian copyright law recognises that the developer will own the software they have created. Therefore, you need to ensure the rights transfer to you via assignment, under:

  • an employment agreement;
  • a software development agreement; or
  • an IP assignment agreement.

If you have any questions, contact LegalVision’s IT lawyers on 1300 544 755 or fill out the form on this page.

Jacqueline Gibson
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