Featured Article from Software Licensing

Software Developers Shouldn't Overlook In-House Licensing and Usage Policies

December 21, 2016

Many software producers make a major mistake when it comes to IP protection and proper licensing of their solutions. While most companies understand how to protect their offerings from piracy and hacking once they are on the market, they make that their main focus, not realizing that problems can just as easily occur within their own corporate walls.

Failing to realize the risks of improper “in-house” software licensing and IP protection could prove to be a costly and detrimental mistake, according to a recent blog post from Flexera Software, software licensing and optimization specialists. The company described two common problems it has observed based on real-life in-house scenarios in which companies failed to properly license and protect their assets.

In one instance, a software developer was hired by a global reseller on long-term, contractual basis. The company developed small but valuable pieces of software code and applications for use internally within the reseller organization. The developer included text lines within the code covering the fact that he was the copyright owner as well as that all rights to the software belonged to him and could only be used with his permission. However, his contract with the reseller contained no such language and subsequently assigned all IP rights to the reseller.

When the reseller subsequently decided to outsource its IT department, all the software and code went to the new services provider. The developer sent a notice declaring ownership and requesting money for usage, and ended up receiving a substantial fee from the reseller. The end result was that the company changed their employment contracts to ensure they retained ownership of all intellectual property developed for them, as well as to ensure they were routinely checking on copyright protection for any software developed in house.

Another case observed by Flexera indicates the dangers of relying on the “status quo” to protect IP and software licensing rights. In this instance, a hardware manufacturer embedded software into its hardware solutions for years, including a line item on their invoices stating they had sold specific items of software to their customers. While in this case most customers were unaware or unconcerned about the situation, the company still opened themselves up to risk. In the event a third party wanted to monetize on the software portion of the offering in some way, the company wasn’t truly protected. In that case, a legal professional could have counseled on whether the software product needed to be branded and sold separately to protect IP and avoid issues with third-party misuse.

In-house software licensing and IP issues are more common than most companies imagine, and when evaluating monetization and optimization of solutions, companies need to look at their internal practices and policies as well as staying on top of customer-facing licensing protection. The alternative could be substantial losses and fees paid to contractors and other third parties that take advantage of ambiguous licensing and protection to further their own goals.

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