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Technology - Software Development Agreements

A disappointingly large percentage of software development efforts fail and these failures can be attributed to any number of reasons including lack of proper planning, unrealistic projects, lack of qualified personnel and large staff turnover. Regardless of the reasons for failure, a failure can have expensive repercussions. Usually the outside software vendor has either been paid substantial sums or is expecting to be paid a substantial sum. In addition, and equally as important, the users data processing development effort can be set back several years, which can have a serious detrimental effect on the users business operations, including making the user less competitive in certain business areas.

In negotiating an agreement for software development, both legal and technical issues must be considered. The first step is always to determine why a client needs the software. Too often, clients state what they want, without really thinking through what they need, and this is true both with respect to legal issues and with respect to technical matters. The wants and needs aren't always in alignment. This can result in an artfully crafted and negotiated agreement that doesn't meet a client's real needs. Although a client, a businessperson, may have the long and strategic view, it is the client's technical personnel who will be the most important allies in determining a client's real needs and enabling to draft an effective agreement.

Computer software can be among a company's most valuable competitive assets - even if the company's "business" seems to be totally unrelated to software. Because many businesses don't think of themselves as creating software, however, even though virtually all do, they often fail to take adequate precautions to gain ownership of the intellectual property rights underlying the software and to protect it from misuse. Many firms do not realize that owning the physical software does not necessarily bring with it ownership of any or all intellectual property rights in that software. As the result a company might discover that consultants or even employees who developed valuable software for the company may be marketing or using copies for competitors. Worse yet - the consultants and former employees may be perfectly entitled by law to do so. On the other end of the spectrum, some companies discover that the "creative solutions" their consultants or employees have developed have, in fact, been copied from software belonging to others, and cannot be used without infringing the rights of third parties. Some even discover that there is nothing new about their "new" programs at all - they are simply copies of off-the-shelf programs. Lawsuits and substantial penalties may quickly follow.