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What IP Rights Exist in Software Code and What Does It Mean for Your Business?

Table of Contents

In Short

  • Software source code is automatically protected under copyright as a literary work, securing ownership and preventing unauthorised use.
  • Ensure valid written IP assignment clauses are included in contracts with contractors and developers to establish ownership and prevent disputes.
  • Use tools like copyright notices, software escrow arrangements, and detailed records of development to strengthen your IP protection.

Tips for Businesses

Safeguard your software by establishing clear ownership through contracts with valid IP assignment clauses. Consider software escrow agreements to protect critical source code in case of supplier issues. Document development timelines and use copyright notices to deter infringement. Seek legal advice early to protect your software’s value and prevent costly disputes.

Software is a key asset for many businesses, adding value and allowing commercialisation, which can result in strong revenue streams. If you do not protect it, however, you risk losing control over how others use it and risk misusing the software, which could highly damage your business. This article explores some of the key intellectual property (IP) rights which exist in software code and why protecting these rights is essential for your business. 

What are the Benefits of Protecting Software IP?

Software IP refers to the legal protections that apply to different components of your software. 

Protecting your software’s IP is vital for many purposes, for instance:

  • it establishes clear ownership, allowing you to control how the software is used, licenced, or distributed; 
  • without IP protection, competitors could duplicate or misuse your software products, undermining their commercial value and damaging your competitive position. For instance, certain competitors may try to copy your valuable software code and commercially exploit it; and
  • IP protection of your software can also increase the overall worth of your business — this can be a significant factor when attracting investors or negotiating a business sale. 

Protecting Software Source Code as Intellectual Property

While various IP rights can apply to software, copyright is the key protection that automatically protects your software source code in the UK as soon as you create and record it. This protection applies to a developer’s unique, original source code and does not require formal registration. 

Copyright automatically protects unique and original software source code as a literary work under law. To qualify for protection, the work must be original. This means the author creates it through their skill, effort, and judgment rather than copying it from another source.

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How Can You Prevent Software Ownership Risks?

When collaborating with external developers or freelancers to create software, businesses may face ownership arguments (which could escalate into disputes). 

Under copyright law, the default position is that the author of a work is the first owner of copyright unless an employee creates the work during their employment. However, copyright in software developed by freelancers or contractors does not automatically belong to the commissioning party. 

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To ensure ownership, you must include written intellectual property assignment clauses in contracts (signed by both parties) to transfer rights to your business. When you outsource software development, you must explicitly address ownership.

Companies should ensure clear contracts are in place before work begins to avoid ambiguities and costly disputes. Contracts should include valid written assignment clauses that transfer ownership of IP rights in the software to the customer business. 

Staff

The law generally states that employers own work their employees create during employment, but employers should still reinforce this in employment contracts to prevent grey areas and risk. However, ownership does not automatically transfer to contractors or freelancers, and you must address it through valid written assignment clauses in contracts.

Where you have developed the software, your business can strengthen its ability to show evidence of copyright protection by carefully documenting software versions and updates, such as using timestamps to show your ownership. Detailed records of software authorship development timelines can serve as records that can serve as evidence of ownership in the event of a dispute. 

Adding a copyright notice can also warn others of your IP protection.

Software Escrow

When you ask a developer to develop software for your business, protecting the source code and ensuring access to critical materials are essential. Without robust safeguards, you risk losing control over the source code if the supplier becomes insolvent or fails to meet their obligations.

A software escrow arrangement can help address this risk. Under this arrangement, the supplier deposits key materials (such as the software’s source code, operating manuals, and necessary tools) with an independent escrow agent. The agent holds these materials securely and only releases them to your business if specific triggers occur, such as the supplier’s insolvency.

This can be a key tool for business customers to protect access to source code. Such agreements must explicitly define triggers for releasing materials (such as supplier insolvency or a breach of contractual obligations) to ensure protection. They can give you comfort, especially when software code is particularly business-critical.  

Should You Work With a Lawyer to Protect Your Software IP?

Software is a crucial asset for many businesses. Protecting it early on with clear legal advice is invaluable, as it can help secure ownership, prevent disputes, and safeguard its commercial value. 

Working with a solicitor can help you take the proper steps to protect your software and avoid costly complications later on.

This support can include the following: 

  • a solicitor can identify which rights apply to your software and guide you on the practical steps needed to secure them; 
  • they can help you avoid ownership dispute issues, which can arise when working with contractors, or external developers; and
  • if someone misuses or copies your software without permission, a solicitor can advise you on the best course of action, including formal legal proceedings where necessary.

Taking early legal advice ensures you maintain complete control of your software, protect its commercial value, and avoid costly complications later.

Key Takeaways

Protecting your software code IP is vital for safeguarding its value and securing your business’s competitive edge. Copyright automatically protects software code and is the key IP right covering it. By taking proactive measures, such as establishing ownership through valid written agreements where necessary and seeking legal advice on IP protection, your business can ensure its software remains secure and commercially valuable.

If you need legal advice on protecting your software code, our experienced data, privacy, and IT lawyers can assist as part of our LegalVision membership. For a low monthly fee, you will have unlimited access to lawyers who can answer your questions and draft and review your documents. Call us today at 0808 196 8584 or visit our membership page.

Frequently Asked Questions 

How can legal advice help me protect my software?

A solicitor can identify the IP rights that apply to your software, help you secure ownership of IP in software through clear contracts with valid assignment clauses, and guide you on preventing misuse of your software and how to enforce your rights.

How can I protect my software if I licence it to third parties?

You can protect your software by using a robust software licence agreement that clearly outlines its use, limits unauthorised copying, and clarifies that you retain ownership of the IP rights. 

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Sej Lamba

Sej Lamba

Sej is an Expert Legal Contributor at LegalVision. She is an experienced legal content writer who enjoys writing legal guides, blogs, and know-how tools for businesses. She studied History at University College London and then developed a passion for law, which inspired her to become a qualified lawyer.

Qualifications: Legal Practice Course, Kaplan Law School; Graduate Diploma in Law, Kaplan Law School; BA, History, University College.

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