A Software Development Agreement is between a Customer and a Developer, by which the Customer contracts for the Developer to create and deliver a specified piece of software. Software is copyrightable as literary, see 17 U.S.C. § 107(a)(1), and could also include patented processes, see 35 U.S.C. § 101.
The agreement will (hopefully) culminate in either with the developer assigning ownership of the developed software to the customer—including any copyright and patent rights in the software—or the developer granting a non-exclusive license for the customer to use the software. For example, it may be that the customer has an idea for software to improve its own internal systems, but the customer has no intent, or capability, to produce and commercialize the software. If the customer does not care about whether other businesses, in the customer's industry or otherwise, can use the software, it may make more sense for the customer to simply get a non-exclusive license from the developer, leaving the developer free to commercialize the developed software.
Further complicating proceedings is whether the Uniform Commercial Code (UCC) should govern a Software Development Agreement. The UCC governs transactions involving goods, it provides default rules that govern contracts for goods where either the parties were silent regarding specific obligations under that contract, or where there is unresolvable uncertainty as to what the parties did agree. As mentioned, the UCC governs contracts for goods, it does not apply to services. The first issue is that software has been difficult for courts to classify, whether it is a good or a service. Licenses tend to be seen as services, while sales and assignments of software are more often treated as goods. Furthermore, a Software Development Agreement is a contract for a service, the development by the developer, that culminates in a good (depending on whether it is a sale or a license for the developed software). Whether a Software Development Agreement is covered by the UCC will depend on the case law of the relevant jurisdiction, and is something the parties will want to be aware of as they draft their agreement.
Key Issues in a Software Development Agreement:
A Software Development Agreement is between a Customer and a Developer, by which the Customer contracts for the Developer to create and deliver a specified piece of software. Software is copyrightable as literary, see 17 U.S.C. § 107(a)(1), and could also include patented processes, see 35 U.S.C. § 101.
The agreement will (hopefully) culminate in either with the developer assigning ownership of the developed software to the customer—including any copyright and patent rights in the software—or the developer granting a non-exclusive license for the customer to use the software. For example, it may be that the customer has an idea for software to improve its own internal systems, but the customer has no intent, or capability, to produce and commercialize the software. If the customer does not care about whether other businesses, in the customer's industry or otherwise, can use the software, it may make more sense for the customer to simply get a non-exclusive license from the developer, leaving the developer free to commercialize the developed software.
Further complicating proceedings is whether the Uniform Commercial Code (UCC) should govern a Software Development Agreement. The UCC governs transactions involving goods, it provides default rules that govern contracts for goods where either the parties were silent regarding specific obligations under that contract, or where there is unresolvable uncertainty as to what the parties did agree. As mentioned, the UCC governs contracts for goods, it does not apply to services. The first issue is that software has been difficult for courts to classify, whether it is a good or a service. Licenses tend to be seen as services, while sales and assignments of software are more often treated as goods. Furthermore, a Software Development Agreement is a contract for a service, the development by the developer, that culminates in a good (depending on whether it is a sale or a license for the developed software). Whether a Software Development Agreement is covered by the UCC will depend on the case law of the relevant jurisdiction, and is something the parties will want to be aware of as they draft their agreement.
Key Issues in a Software Development Agreement: