Articles & Publications

Issues to Consider Whether You Acquire Special Software or Build It

Posted August 21, 2012 by in Articles & Publications

Because software plays an increasingly larger role in the operations of most businesses, the issues involved with licensing the software not only is of interest to the developers but the commercial end users.

It is clear that today many entrepreneurs depend upon the software that operates basic business tasks, whether it is serving the enterprise's own customers or running internal financial and personnel controls. The effective operation of these specially developed software applications can prove to be the difference between a business meeting its goals or losing out to a competitor.

Customer Issues:

Unless the entrepreneur is large and able to support its own software development, most likely the business will need to work with outside software engineers to create the right software program with the right features. The way most businesses acquire their computer technology is by means of a computer software agreement, also known as a licensing agreement. As the one acquiring the software, here are some questions you should be asking during the negotiation of the development, operation and maintenance of the software.

What due diligence have you conducted with respect to the vendor/licensor?
What exactly are the tasks the software is to perform?
Is the scope of the license broad enough to cover all of your business' needs?
What is the term and useful life of the software?
How will the developer support and maintain the software application?
How are the fees or royalties calculated?
Is the software developer offering adequate warranties, indemnities and other protections, such as software escrow agreements?

Developer Issues:

When a software engineer writes computer code or builds a website to meet the specific needs of a customer or creates a totally new application to be used by a particular industry or profession, that developer should consider as part of the negotiation process not only the scope of work and what is being promised, but also the many intellectual property implications laying below the surface.

In today's economy, material incorporated in the software being used by businesses will include content that is protected by the laws of copyright, trademarks, patents, trade secrets, and other kinds of intellectual property such as the right of privacy and the right of publicity. Additionally, with the explosion in availability and popularity of open source software, a developer who incorporates such software into her programs must be clear about the restrictions that may be imposed by the licensor on the use of this free asset. Working with a practitioner familiar with the issues surrounding software licensing can help the technology company client develop best practices as they write code so that they address the mine field of intellectual property and other business issues.