Copyrights on web & software projects

June 30, 2007 1:06 AM

Who owns the copyrights to a web / software project that we develop for a client? How much should we charge for exclusivity, ie serving only that ONE client in the market?

I run a web and software development company. Recently, we were engaged to work on some custom software projects. Nothing out of the ordinary - but the projects are very industry-specific solutions.

An issue with copyrights and project exclusivity came up - which I would like to seek your thoughts on. If we are developing the entire software for the client - who holds the final copyright to it? Can they resell it themselves, or are we breaching ethics if we package it to sell as another name / product?

The same issue also arose with a web design project - we had been working with this client for many years - but recently one of its shareholders broke off to start another company - essentially becoming an overnight competitor! Due to our good record, the new company engaged us to work on their site too - which the old company didn't like, of course. So - what are the ethics involved in this?

We don't make millions like advertising companies do to be able to afford serving just one client in a market. For us, the more projects, the better!

If a client asks for exclusivity - how much is the market rate that we should jack our prices up? 50%? 200%? 1000%?


Thanks for your input on this.

posted by arrowhead to computers & internet (10 comments total)

IANAL. Copyright law varies by jurisdiction, in some respects. In the U.S., if you are developing software as a work-for-hire, the copyright belongs to the client; but unless stipulated contractually, custom development by contractors is not always considered work-for-hire. If you developed something independently, with intent to license its use to more than one organization, then you'd license it to clients under a use license. These are very, very different kinds of agreements, and both need specific language to be useful in protecting you and your clients' interests.

Your engagement agreements and licensing documents need to be set up by a competent IP lawyer, or you can get in major trouble because of your knowledge of one client's systems, business practices, and software, when working for other clients, unless you can prove a complete clean room process was adhered to, which it certianly sounds like, from this post, you wouldn't be able to do. You also have to consider issues of code re-use if you are "borrowing" Open Source code, or example code from other, non-commercial sources. And you have to maintain your source in a reasonably confidential manner, if your product is proprietary, in order to protect it. This may include trade secret practices, or even patent process.

Without being alarmist, and beyond ethical considerations, and client relations, I would point out that this is a situation where you need the services of an IP lawyer immediately. You are doing things which, in the U.S., have cost other people their businesses in lawsuits, and which could cost you yours.

Yet if you're outside the U.S. entirely, as are all your clients, other considerations may well apply.
posted by paulsc at 1:30 AM on June 30, 2007

The ethically and legally sound thing to do is to come to an agreement ahead of time about these things. For future projects, you mustn't just leave it to chance.

As for past project, we can't possibly tell you who owns the copyright to the software you've already written. The question is simply beyond the scope of what can be resolved with AskMe, and you need to see a lawyer, if it's important.
posted by Mr. President Dr. Steve Elvis America at 1:43 AM on June 30, 2007

We generally have intellectual property riders in our contracts which indicate that any code developed for a client remains our property. Depending on the client, we will license it to them, or offer them a non-exclusive license. Further, we will sometimes agree to not distribute or sell the product to any competitors in the field within, say, 200 miles. (Sometimes unrestricted by distance.)

This is because, while the projects are industry-specific, a lot of the code framework we've built is completely reusable for us, and in the case of one project, we built a reporting system we can easily pack up and use in any number of ways that hurts the client we developed for not at all.

You definitely need to have this clarified ahead of time. What's written in your contracts? Any mention of intellectual property at all?

Paulsc brings up some good points, but you really can't retroactively make determinations about this. And if it *was* work-for-hire, then they likely own the code. Consider: a client could rightfully be very upset by the idea of having paid $40,000 for a custom software solution to be developed, hopefully giving them an edge in their market, only for you to turn around and flip the software, including some innovations you may have brought to the software only as a result of their input and their business processes.

Be VERY careful and don't distribute to direct competitors of your clients without knowing absolutely where the IP issue lands.
posted by disillusioned at 1:59 AM on June 30, 2007

It's entirely a function of how your contract with your client was written. All of this should have been negotiated ahead of time. If you didn't do that, well, you're SOL.

I would say that the wisest course of action is to assume that the client owns everything, and that for that your client will pay what you negotiated at the beginning. If that seems too low, then consider it a learning experience and don't make the same mistake the next time.

But trying to renegotiate terms in the middle of the project is a really, really good way to get a nasty reputation, not to mention to get your tail features sued off. In the long run it simply isn't worth it.
posted by Steven C. Den Beste at 2:12 AM on June 30, 2007

"tail feathers" that should have been.
posted by Steven C. Den Beste at 2:16 AM on June 30, 2007

A few years ago a company I worked for had reason to commission some software. We didn't know anything about how the system works, but we paid the guy an hourly rate, and agreed that the copyright on the binary would be ours (we had to redistribute it to our clients), while the copyright on the source code would be his.

This also meant that we had to use him for any updates we needed, but he was a decent guy who had no reason to rip us off and it worked out very well in the end.
posted by humblepigeon at 2:23 AM on June 30, 2007

Christ, you must, absolutely must have a lawyer for these questions! This is your livelihood. Don't fuck it up.

This is not legal advice, not only because it has the word "fuck" in it.
posted by Ironmouth at 8:14 AM on June 30, 2007 [1 favorite has favorites]

Don't listen to Steven on this one. Get an actual lawyer. IAAL, but not YL
posted by Ironmouth at 8:16 AM on June 30, 2007

I agree that you should get a lawyer. But the lawyer may ask you for a policy decision, and I offered my advice on the policy you should follow. Trying to optimize short-term gain in this situation would not be wise IMHO.
posted by Steven C. Den Beste at 9:26 AM on June 30, 2007

There are issues beyond your legal rights as well. If you piss this client off it may bode ill for future business. These things get around. If the client was expecting the rights and unless you really need them yourself for some reason the prudent thing to do would seem to be to assign all the rights to the client, regardless of your current legal rights. If you really need rights in this for future work then you should contact a lawyer to help you work this out, and you definitely want to have a lawyer help set you up with some language you can use in the future. The basic framework that disillusioned describes above is pretty typical I think, but it really comes down to what both sides need in a particular situation.
posted by caddis at 9:31 AM on June 30, 2007