Software Copyright - Not Just the Code

Most business people don’t realise this, but when a business commissions the development of custom software, the code developed usually belongs to the external developers rather than the client who’s paid for it. The more savvy operators will ensure that their software development agreement has a clause which ensures the code is owned by the client. This article explains how this might not always be enough.

A few years ago, we met the owner of a start-up business who had a copyright story that stuck in my head.

The owner – let’s call him Mr O – engaged a software development company to design and build a reasonably complex web application that cost tens of thousands of dollars.  Mr O was careful to ensure that the written Software Development Agreement contained an assignment of both the source and object code by the developer.  This is essential because – as independent contractors – the developers would have owned the copyright to the web application even though they had been paid substantial sums for the work.

Unfortunately, the relationship between the entrepreneur and the software development company broke down shortly after the project was delivered, and the copyright assignment turned out to be insufficient to protect Mr O.  The Software Development Agreement didn’t contain an assignment of the copyright subsisting in any of the supporting documentation drafted by the developers … neither the software requirements specification, the technical design documents, nor the (very limited) user manual.  Mr O took his software to a new developer who found it so difficult to understand the code without these documents that it ended up being cheaper to re-build it from scratch.

At the best of times, developers don’t like working with custom code developed by third parties, but it becomes almost impossible if you forget to secure the rights to the supporting documentation as well.  This story stuck with me, and I always remember it when I’m drafting software development agreements … We hope it saves you a bit of heartache as well.