Software Development Contracts and Independent Contractors

Posted by David Breiner in October 2013 on 11/27/2013

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In today’s world, contractors are often hired to develop software. Common sense would dictate that if a hiring party paid a contractor to develop software, all rights in the software, including copyrights, should reside with the hiring party. Unfortunately, this is not always the case. 

Under U.S. copyright laws, independent contractors retain the copyrights in the software they develop. This means, absent a clear agreement otherwise, the exclusive right to make and sell copies of the software lie with the contractor, not the hiring party. Accordingly, a contractor may sell, if they so choose, copies of the developed software to a hiring party’s competitors. So how does a hiring party prevent the above situation from happening? By using written contracts. 

When preparing a contract for an independent contractor, the hiring party should consider exactly what he/she wants to own as well as the nature of the work being prepared by the contractor. If the work qualifies as a contribution to a collective work, a part of a motion picture or other audiovisual work, a translation, a supplementary work, a compilation, an instructional text, a test, answer material for a test, or an atlas, and the hiring party wishes to own the copyrights in such a work, then the contract may include language indicating the work is a “work for hire” and that all copyrights in the work will be owned by the hiring party. In the event the nature of the work does not fall within any of the aforementioned categories, then the contract should include an assignment clause which states the copyrights in any copyrightable works produced under the contract are assigned to the hiring party. 

With the above in mind, it is important for hiring parties to have written contracts in place before engaging independent contractors. Such contracts, at a minimum, should clearly define what copyrights the hiring party wishes to retain and include the proper “work for hire” and/or assignment language to ensure those rights will belong to the hiring party. In the event a contractor is engaged before a written contract is signed, ownership may still be transferred to the hiring party via an assignment.

David M. Breiner is an associate at BrownWinick and his practice includes patent application preparation and prosecution. David can be reached at (515) 242-2411 or breiner@brownwinick.com.