Negotiating Competing Intellectual Property (IP) Interests of Software Developers & Customers

Posted by Tom McKeever | Nov 27, 2023 | 0 Comments

Avoid Unnecessary Conflict, Improve Time to Market, Preserve Relationships--and Ultimately Get What you Need

Developers and clients hotly debate which should own or just have a limited license (or as some customers argue no license) to intellectual property (IP) developed by the contractor.

Resolving their interests seems intractable.  The customer is paying so they should own the IP, right?  But to have an ongoing business the developer needs to re-use IP for future customers.  Negotiations often get stuck here for weeks if not months especially with large enterprise customers used to getting their way.  So, what to do?

Except in rare cases where both parties both need to own/patent the same IP, each party can get what they need with some reflection and a bit of compromise.

As the customer, is the developer building technology core to your value proposition—so that it gives you a material competitive advantage or are they just building something ancillary---e.g., if you are a healthcare company and the developer is building IP to supplement or support existing IP?  As the developer, do you really need to own the IP?  Is it core to your value proposition?   And both parties need to seriously consider whether the developed IP is even patentable.

Spoiler alert. In almost all situations, you don't need to own the IP to exploit it as intended.  Here is why.  There is a simple solution that speeds time to market and doesn't risk highly valued developer/customer relationships in protracted difficult negotiations.  Like many things in life, you may not get what you want but if you try you just might get what you need.

Either the customer or the developer takes title/owns the IP; the other gets a license to the IP that is akin to ownership, including the right to distribute though multiple tiers, create derivative works etc.—just without ability to patent it.  Don't fear giving on this point.  As the customer ask yourself—is it really about ego and “winning”?  Let it go.  If the developer, does ownership really matter if you can service your existing and future clients while adding revenue and to your code library?

Have questions? Contact us for guidance in the nuances of product development, SaaS agreements, IP rights and service agreements. Whether you're a customers buying development services or a developer looking to retain the IP rights you need for future work, we can help foster your growth and success with simple, understandable, creative problem solving advice based in the law.

About the Author

Tom McKeever

Leverage Tom's deep technology law experience and solid business judgment to your unfair advantage.


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