Intellectual Property Leverage and Licensing

Software development businesses usually have few tangible assets.

Their real assets are intangible and need to be protected and maintained. Below we examine some of the types of intellectual property which may arise and some steps that need to be taken to prefect and maintain that ownership.

• An assignment of copyright must be in writing to be valid
  • The copyright in software developed as a contractor will be owned by the contractor unless assigned in writing.
• Retain the copyright wherever possible to increase the value of your business and possible future royalty streams.
• When licensing the use of your intellectual property, you should consider your own long term possible uses.
  • Exclude library code from any assignment
  • Limit the number of users authorised per licensing fee
  • Limit the transferability of the licence
  • Record and enforce your licensing restrictions and develop a name for enforcing your rights (Litigation to recover damages may not always be costs effective)

• Should be in writing and signed by all parties
• Ideally should be non-exclusive and non-transferable
• Intellectual property Indemnities
  • You should consider the possibility of concurrent development of a very similar product or the pre-existence of a product unknown to you.
  • You should document your development process, for example by putting into escrow copies of your various development versions of the software
  • Do not agree to an international indemnity as he risk is usually too great unless extensive (expensive) searches are undertaken

• Registered trade marks should be obtained wherever possible for business and company names and product logos and names.
  • Without registration, another party may register a name which you use and force you to discontinue your use.
  • Registration increases the protection and legal remedies available to you.
  • In Australia, registration may be continued indefinitely, subject to renewal fees being paid each ten (10) years to IP Australia.

• Software patents are difficult to obtain, as a patent will only be registered if your innovation is commercially useful and novel.
  • Patents give the owner the exclusive right to manufacture, license, sell, import and use the invention.
  • Searches must be conducted for “prior art”, which can be expensive.

• Eligible Layouts

• Examine the licence:
  • Is it non-exclusive?
  • Is it limited in geographical area?
  • Is it transferable?
  • Is an Intellectual Property indemnity provided?
  • What is the duration of the licence when compared with the time required to establish a market for the product?
• Employees and Contractors
  • Obtain an intellectual property assignment
  • Sign a confidential information deed
• Escrow
  • Increases the value of the intellectual property, as the source code is available for continued use and development if the licensor goes into liquidation or dissolves its business.

• Calculation
• Audit
• Performance

• The more control you maintain over your intellectual property, the higher the potential value of your asset.
• The increased security of continued use by licensees, the higher the potential value of your asset.
• Consider that the more comprehensive your documentation to support your ownership and rights the more valuable your intellectual property.

This article is a guide only and should not be used as a substitute for proper legal advice, readers should make their own enquiries and seek appropriate legal advice.