• Startups
  • February 07, 2022

Legal considerations when developing and supplying software

One thing anyone who is looking to launch a business developing and supplying software can be confident of is that when it comes to the opportunities for business success – you’re onto a winner. 

Our reliance on computers, the internet, and apps seems to increase by the day, with the Coronavirus pandemic accelerating moves towards remote working and online shopping.

One challenge, however, is that around the world, laws trail the speed of development by about 10-15 years, sometimes longer. Delays in implementing regulations have resulted in confusion and complexity in the law relating to software and data.

To help you navigate the often confusing legal landscape when developing and supplying software and use the law to protect your best interest and your brand’s reputation, in this article our Software Solicitors have answered some of the most common questions asked by small business owners in the sector.

Do I need a confidentiality agreement before entering into a software contract?

When initially working with a business with a view to them purchasing your software it may be in the best interests of you and the prospect to sign a confidentiality agreement (also known as a non-disclosure agreement (NDA), especially if the prospect wants to trial your software for a period before committing.

A confidentiality agreement is designed to prevent one party from disclosing confidential information supplied to it by another party. For example, if your product is a cloud-based CRM system, initial talks with a prospective customer may involve you having access to their client list. You may be asked to sign an NDA prohibiting you from disclosing that client list to a third party. 

If you are asked to sign a confidentiality agreement it is important to have the terms checked over by a Commercial Law Solicitor to ensure you understand what you can and cannot disclose and the consequences of breaching the agreement.

>> Download LawBite’s Confidentiality Agreement / NDA template for free

What is a software licence?

Software licensing governs how people and organisations who purchase your software can use it. 

Even free software will have a licence attached to it. The details of a software’s licence are contained in the software licence agreement.

The basic issues covered by software licensing are:

  • How many copies of the software can the consumer use? For example, if one licence is purchased can the user install the software on multiple computers (hint – the answer is always no).
  • What type of organisations can use the software? The licence may prohibit the software to be used for commercial purposes.
  • How long can the consumer use the software?
  • How the software is activated.
  • Whether the software can be resold (again, usually no).
  • Details regarding upgrading the software.

>> Download LawBite’s Software / App Licence Agreement Template for free

What is the difference between proprietary and open-source software?

At the development stage, you will need to decide whether your software will be proprietary or open-source.

Proprietary software is where the source code can only be modified by the person or organisation that created it. The software licence will clearly state that the user is prohibited from copying, altering, or tampering with the software. An example of proprietary software is Microsoft Office.

Open-source software is software that can be modified as the source code is made available to users. You may be surprised to learn that Mozilla Firefox is a customisable internet browser and free open-source software. Certain cloud computing apps such as Nextcloud are also open-source. Open-source software still comes with a licence which users must agree to. 

How important are indemnities and warranties in a software agreement?

You will be expected to indemnify your customers against certain issues, in particular that of intellectual property. For example, there may be a future claim by a third party that the software infringes their intellectual property rights. This may occur because some part of the program was written for you by a contractor, allegedly using code or design principles belonging to them.

As a supplier you will also be expected to provide the following warranties:

  • To repair or replace defective software within a certain period following delivery
  • That you have the right to grant a licence to the software
  • Warranties around data protection and cybersecurity

Wrapping up

The legal issues around software development and supply are extensive. 

SME owners who invest in expert legal advice, therefore, gain a competitive advantage in terms of customer trust and protection of their intellectual property and software licences. 

Get legal assistance from LawBite

As explained in this article, there are multiple legal considerations when developing software. It is important to be aware of them when running your business. 

Our Software Solicitors can advise and represent you on all aspects of software licensing, including matters relating to drafting agreements, contract issues, data protection laws, limitation of liability, service levels, and warranties and indemnities.

Contact us today to book a free 15-minute consultation to discuss your legal needs.

Additional useful information

In closing

Nothing in this article constitutes legal advice on which you should rely. The article is provided for general information purposes only. Professional legal advice should always be sought before taking any action relating to or relying on the content of this article. Our Platform Terms of Use apply to this article.

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