You had a brilliant idea, set up your company, and now it’s finally time to make your dreams a reality and bring your product to life! When hiring a developer to help build your software or mobile application, it is important to take the time to agree on points such as:
- The scope of the project;
- The relationship between the parties;
- Confidentiality obligations; and
- Ownership of intellectual property.
A long-form software development agreement can cover all of these points, but if you’re looking for customized and specific terms, you may decide to draft agreements specific to your needs and retain them as schedules.
Software Development Agreement
A software development agreement is a standard agreement stating a developer’s intent to develop a software product, or “work”, for a company.
Boilerplate terms that a standard software development agreement will cover include:
- The scope of work to be provided, including project milestones, testing procedures, and pricing;
- The transfer of intellectual property from the developer to the company; and
- The parties’ liability and indemnification obligations.
Often, parties will include or negotiate additional clauses based on their needs, like:
- Subcontracting rights;
- Warranty provisions; and
- Insurance obligations.
Typically, a software developer may not be considered an employee of the company, so covering the contractual nature of the developer’s work can serve to clearly assert this boundary. For example, a company entering into a consulting relationship with a developer will often include the following terms:
- Compliance with the company’s policies;
- Limitations on the consulting relationship (i.e., the consultant is not an employee); and
- Non-competition and non-solicitation obligations.
When a developer has access to a company’s customer data and records, it is understandable the company will want to prevent this information from being disclosed to its competitors.
All employees, developers, and even subcontractors should be bound by confidentiality provisions. Depending on how comprehensive a company wants the confidentiality obligations to be, it can either include a standard confidentiality clause in a software development agreement or include a specific confidentiality agreement in a schedule to the agreement.
A confidentiality agreement will generally include the following terms:
- The inclusions of confidential information;
- The purpose the information may be used for; and
- The handling of the confidential information and return of the confidential information.
Intellectual Property Transfer Agreement
The developer is developing a work product that is based partly on the work of the company, but mostly on the work of the developer. The developer may have other employees or subcontractors working on the final deliverable for the company. To protect its rights to the fullest, many companies will ask the developers to and have their employees/subcontractors sign separate intellectual property transfer agreements.
Such an agreement could include clauses such as:
- A transfer of the intellectual property and a license to the developer’s’ background intellectual property;
- A transfer of moral rights; and
- A representation of no third party infringement in developing the “work”.
To see a standard software development agreement, visit our Small Business Law Library!