Express provisions contained in a software development contract must clearly define what obligations and rights are given to both the customer and developer upon entering into the contract. This provides protection for businesses who invest in software development. Should a breach of contract arise, expert evidence is essential.
The issue of software development disputes and patent disputes has become mainstream news in recent years following the drawn out Apple-Samsung clash over the design of their smartphones.
Although the popularity of the technology giants’ consumer technology has shed some light on this highly active area of intellectual property law, it remains a complex and difficult area for businesses to tackle and requires specialist advice.
The financial success of a software company is usually linked directly to its ability to develop and protect new technology but other types of businesses are also investing considerable amounts in producing new software.
The development of valuable software requires businesses to protect the investment with robust contractual licensing provisions and where necessary, through enforcement of software patents obtained.
A software development contract arises where a company is hired to develop software in line with the customer’s user requirements and specifications. The software developed should be transferred to the customer, but often it is not. A licencing agreement is one where a business pays the owner of the software for use of the technology developed. Customers usually expect the developed software to become their property following development, but that is not the default position. The developer owns the software, subject to the terms of the software development agreement and any terms implied into the development agreement.
A problem that arises in many claims related to software development contracts is that it is not clear what the developer’s obligations under the contract are and what rights their customer has in relation to the software that is created.
This is a particularly serious issue in cases where there is a dispute about who owns the intellectual property in the software if relationships sour upon completion or termination of a contract. Copyright in software vests in the developer by default so express provision for the transfer of rights must be included in the contract and particular regard must be given to the extent of those rights.
In the US case of Automated Solutions Corp v Paragon Data Systems [2006] a hardware company sent a notice to the software developer with which had jointly developed software, terminating the contract on the basis of material breach – a repudiatory breach of contract. However, the court found that there was no breach and that by terminating the contract the hardware company had in fact breached the contract itself, meaning that it lost its entitlement to use the software which it did not own. Drafting of software development contracts should avoid such pitfalls by providing for specific terms of contract.
In order to protect investments in software development, both parties’ obligations must be clearly defined at the start which is where the skills of a specialist information technology lawyer are essential. Where new software is patentable, businesses having software developed for them would be well advised to add this extra layer of protection.
Proving a breach of a software development contract or breach of a software patent can involve a highly technical analysis of software code and therefore expert evidence is often required in such cases.
In software patent disputes for example, two stages of analysis are needed in order to prove that a particular software product infringes a protected patent. The first is code analysis, which involves the expert analysing the allegedly infringing product to see what portions of the code implement the patented invention. This is more likely than not to be a time consuming task.
The second part relates to the expert’s evidence whereby the legal representatives argue for or against infringement based on the strength of the expert analysis produced.
Given the technical nature of software, disputes over breach of software development contracts or software patent disputes can often be complex and prolonged affairs. General commercial lawyers and solicitors will often be out of their comfort zone due to the highly specialised subject matter of software patents and patent law, as these are areas of dedicated learning in their own right.
For specialist advice in respect of software development, technology disputes and software patents, contact Leigh Ellis on 020 7353 1770.
For business legal advice and more information on software development contracts and technology and IT agreements, contact us online or call us on 020 7353 1770.
