In my earlier blog “You May Think Selling Your Software is a Good Idea – But Are You Sure?” I looked at the initial challenges traditional hardware manufacturers could face when trying to leverage the opportunities of integrating and using software within their hardware products.
When discussing IP protection, the discussions are often based around how software producers can protect their software from piracy and hacking once they’ve gone to market. Today, I wanted to share two common faux pas, both of them based on real scenarios which occurred ‘in-house’. They were easy and expensive mistakes to make – but could have been be avoided.
It’s my Software – No, it’s Mine!
A global reseller hired a software developer on a long term contractual basis. Over several years he had developed small but crucial software code and applications for use within the organisation. Within the code he included text lines stating he was the copyright owner and that all rights to the software belonged to him and could only be used with his expressed permission.
His contract of employment did not include any clauses which protected and assigned all intellectual property rights to employer.
The employer subsequently outsourced the IT department. The contractor sent a formal notice asserting his ownership of the software and offered the opportunity to pay him a significant amount of money to use the software and allow a third party to use the software on their behalf. You can imagine the fall-out that followed – it wasn’t pretty!
The legal position in this matter can vary from one legal jurisdiction to another. In this case the employer settled (a substantial fee) with the contractor, were assigned ownership of the software and quickly changed their employment contracts for both all direct employees and contractors to ensure there was no ambiguity as to their ownership of any intellectual property developed on their behalf. They also ensured that they had processes in place to protect and copyright software developed in house. Check to make sure you have the necessary protection in your organisation. The company may have won if they had got litigious but the contractor chose his timing well and gambled they would settle quickly.
Oh **** I’ve been selling my software for years
In this case, a hardware manufacturer had been embedding software into their hardware offerings for years and had diligently included in their invoicing to customers a clear line item indicating they had sold specific items of software.
This was a case of shutting the stable door after the horse had bolted and depending on whose opinion you seek can be difficult to resolve. In most cases the end-customer is unaware of the situation and frankly not concerned. The value and uniqueness of the software may also not make it something that a third party can easily monetize. Seek legal opinion and also establish whether you can (or need to) use the monetization opportunity to launch a distinctly different product feel that could avoid or minimise any aggressive behaviour should a customer think they are the ‘owner’ of the IP.
Both scenarios are far from un-common and often need a pragmatic approach to overcome. Especially when you are just starting to move towards software offerings, it will help to have software experts on board from the start and to standardize software management processes across different product lines. Likewise, in both of the above cases, bringing Legal in early on could have helped to avoid these problems and getting it right from the start.
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