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Sub-contracted software developer owning software ?

Sounds like the developer wants to license the software for use. THis is actually what you get in most software EULA's.

If they want ownership, then a contract needs to be drawn up that both parties agree to...for the companies protection as well as the developers. It will probably cost a lot more since the developer is giving up any rights to future profit from the software

I'm not an expert in this area, but that's how I see the situation.

Hi rosco:

Thanks for your input.

Yep. There is probably some basic software programming contract law that is utilized everyday by software programmers, which I need to become aware of, so that I can advise our owner.

The problem is, our owner had the idea. He told the programmer, and now the programmer apparently would like to own the program. Is that how you term it?

Our owner doesn't want to buy the license to use it. He wants to own the software outright. Especially since he is working with the programmer to get it developed.

then its time to talk numbers with the developer and find out if he is even willing to do the job and hand over all source code etc upon completion.

I would also probably talk to a lawyer experienced with this type of intellectual property, and also maybe talk to another developer willing to create the program and transfer all rights to get an idea of a price for this type of job.

Hopefully an experienced developer can chime in and help out some more. good luck!

reply to Airplane777
I've been a software developer full time since 1990 (and part time for years before that). When taking on any development task, I try to make it quite clear up front that in the absence of a written contract to the contrary, I'll retain ownership including copyright of all developed code, but my customer will have a perpetual license to use it. If the customer wants to distribute and/or sell the program, then we need a written contract spelling out exactly what each of us is committing to. That's for mutual protection; I've never yet gone to court over any contract and only rarely have we needed to have one.

Most of the custom development that I do, though, involves the customer describing what he wants to accomplish, and me figuring out how to do it. It sounds as if your situation is a bit different...

Note that copyright law is a bit murky in this area. The person creating the code holds automatic copyright to it, UNLESS it's a "work for hire" in which case the hiring entity owns the work. The murky area comes in determining just when a program is a "work for hire" and that's why a written contract is needed for mutual protection. Best that your boss spend a few bucks with an attorney who knows copyright law and find out exactly where he stands. Keep in mind that ideas, in themselves, cannot be copyrighted; only their expression (in this case, the code) can be. Once the idea is passed on to someone else, the cat is out of the bag...
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Jim Kyle

reply to Airplane777
As you described it now, the programmer will own the code, but he could license it back to the person who hired him - could be a $0 license, or he could have royalty free use, or both.

your boss should have documented his requirements and executed an agreement stating who owns what, what work is being done, what the programmer must deliever, how to ensure your boss got what he wanted, and there should have been several termination clauses (agreement terminated due to missed dates, wrong implementation, misuse, etc).

Stop the work now. Go see a lawyer.
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Thanks for all the great input guys.

Our boss had the idea of what he wanted, and described it to the programmer. Our boss even helped the programmer out by finding some solutions to writing the code.

We want to be able to use the final product, mainly for all our B2B IT support clients...and even sell the product to other people who would like to use it.

I've been doing custom development since 1980. My standard contract gives me full, perpetual ownership of and rights to all work products, "know how" or other intellectual property developed; the client has a perpetual license to use the program product, or to subsequently modify it as may be necessary or desired as time progresses. The client is limited to using the program product solely for the purposes stated in the contract. The code or product cannot be sold or licensed to another party (though usage rights transfer automatically if the company merges or is sold). I am free to re-use the code and know-how as I choose without further consideration or obligation to the client.

In cases where there are specific business details or methods that are considered proprietary/trade secret by the client and are identified as such prior to commencement, and which have unique attributes that distinguish them from any other implementation of a similar process, those are excepted from my ownership rights. (There is very little of this in typical LOB and BO applications; it's mainly found in industrial and scientific domains.)

As for resale product, the terms and conditions have to be spelled out in the contract. I typically require my copyright be presented everywhere theirs is, prohibit distribution of source code to purchasers, and charge a considerably higher fee and require a guaranteed percentage of gross sales over the lifetime the product is sold. I also require the EULA restricts sale/use to only non-competitive customers (i.e., that don't produce the same or similar software product).

Do make sure you clearly identify and record in advance any aspects/attributes your company considers proprietary/privileged/trade secret, and include them in the contract.

For a resale product, make sure you arrive at a design strategy that makes it difficult for others to reverse-engineer the product. (There's no such thing as "impossible.") Be sure to have the EULA developed by an attorney with specific expertise in current software copyright law...this excludes 99% of corporate counsel. Do not be surprised if the developer wants a 100%-200% premium for development up front. Typically the developer will get 40%-60% of total product gross between initial development and percentage of lifetime sales. Depending on what a product does and how much of it the developer had to divine/design versus the client's input, it isn't unheard of for the developer's take to go as high as 90%.
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There is no giant fur-bearing trout.

reply to Airplane777
I'd go so far as to say the owner of the company is likely screwed.

Considering no NDA was in place (you said this was all verbal), that programmer can now do as he pleases.
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reply to Airplane777

reply to drew

I should have been a bit more clear I suppose. The cat is out of the bag on that idea and there isn't anything the CEO can do as far as I know.
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reply to Airplane777
In my personal experience, if a customer comes to me for a custom project, they are entitled to the source code for that project UNLESS I specifically state otherwise. I consider that situation to be 'work for hire' and the hiring party is paying for the source and the published product.

On the other hand, any snippets of code I write that I find effective/efficient, I'll certainly reuse those bits as needed. I won't repurpose the entire project as that's 'gray area' for me, but no problem lifting chunks of code where needed.

Perhaps your boss and the contractor could agree to share the code, with your boss hopefully having better resources to market it better/wider than the contractor.

But if in your boss's position and the contractor refused to 'sign over ownership', with everything being verbal, I'd strongly consider just not paying the programmer.
KM
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Don't Lie - Be Kind - Realize your Potential

reply to Airplane777
The reality is your screwed without having any form of contract in place including NDAs and ultimately the coder can do as they wish as you have nothing that says otherwise.

I never do third party development without a NDA and a contract stating that all product ideas, work and derivatives thereof are property of the company and the rate and terms of the contractor / company relationship.

Frankly you need to stop work / payments until the deal is agreed to and signed stating the expectations and terms of ownership of the final product. Typically the developer might feel he has you over a barrel given he thinks owns the product but it has been my experience in these cases the company is actually the one with all the marketing contacts/expertise and anyone who has ever sold products and or software knows that those are pretty well as important as the product itself, so at worst you can go for a partnership (and make them earn their partnership state) again documenting expectations, splits etc.

If you can't get the terms you want, then break off the relationship and hire someone else but doing the correct paperwork first as the existing developer can't stop you from working with someone else (he has nothing in writing either).

Blake
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Vendor: Author of Link Logger which is a traffic analysis and firewall logging tool