Software development contracts are arrangements where the software producer commits to creating a software solution (computer program) for the client, who in turn agrees to pay a specified fee. Participants in this transaction are typically technically knowledgeable and capable of identifying flaws in the product delivered by the other party, raising a number of legal issues that might not always receive due attention. If you’re curious about the key points we’d like to highlight, read on.
Applicable Law
This primarily refers to substantive law, though the choice of procedural law is also significant for future relations. The choice of applicable law is made through a clause that might state, for example, “This contract is governed by the substantive law of the Republic of Serbia.” The selection of substantive law is crucial regarding ownership of a computer program created in an employment context. As a software client, if the producer transfers or permanently assigns rights to the software, it can only be done if the producer possesses such rights. We’ll learn that depending on the substantive law of a country, it often determines who holds the copyright over software developed in an employment context.
Definition and Specification of Contract Subject
The most critical aspect of these contracts often remains incorrectly or insufficiently defined, mainly due to a lack of understanding of copyright laws governing computer program authorship. The author, a natural person, transfers certain rights over their protected content to the user and rights holder. These rights are solely proprietary and include reproduction of protected content, distribution, licensing, or renting, and public communication of the content. Therefore, the contract’s subject is specific copyright rights over the protected content, not a copy of the work or code. It’s crucial to enumerate all rights being transferred explicitly. Moral rights, which are permanent and non-transferable, include the author’s right to be credited on the work and to protect its integrity. In a software development agreement, the author can consent to the acquirer modifying and adapting the work as needed or dictated by market conditions.
Intellectual Property Transfer in Contracts Between Legal Entities
In negotiations for software development contracts between legal entities, the intellectual property of employees involved in software development is crucial. Under Serbian law, this is governed by the Copyright and Related Rights Law, stating the employer is the perpetual holder of property rights on software unless otherwise stipulated in the contract. Thus, there’s a legal presumption that an employer employing personnel for software development holds all property rights on that software and can freely dispose of them. However, this may not be the case in all countries, making it advisable to familiarize oneself with the relevant provisions of the applicable substantive law.
Third-Party Rights (Pre-existing Technologies) and Open Source Software
Special attention should be paid to third-party rights whose protected contents are incorporated into the software solution covered by the contract. There must be an appropriate legal document confirming that the service provider has the necessary rights to further transfer or assign legal rights on the protected content. Otherwise, both the user and the service provider could face legal repercussions. Regarding open-source software, using these solutions in commercial contracts is not recommended, as open-source software is subject to special licenses that often include restrictions on further commercial use.
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