Learn the basics of Software Licensing agreements: what they are, why are they important, and what you should include in your Software Licensing Agreements.
Software Intellectual Propety Protection: everything an ISV needs to know
Every ISV should have a general understanding of the legal implications of the software they distribute. This guide covers Software IP: what it is, how it's stolen, and what you can do to protect your Software's intellectual property.
What is Software Intellectual Property?
Software intellectual property, also known as software IP, usually refers to software in the form of source code, compiled binaries, or certain procedures and routines on ways to use certain software. Software IP is protected by law against copying, theft, or other use that was not granted by the IP owner, who is usually the software publisher. Software IP belongs to the individual or company that either created or purchased the rights to that code or software. Any unauthorized use of it by someone else is illegal, and the offender exposes themselves to the risk of expensive fines.
Why should you worry about your Software's Intellectual Property?
The Software IP is one of the primary assets that ISVs can use to monetize (apart from consulting services). Even if you are open sourcing your source code, protecting your entity's IP should be seen as paramount to your organization's success for many reasons:
- Keep your ideas safe: When you have a great idea for a product or service, there will always be people who will want to duplicate your success and sell your ideas as their own. The Software industry is riddled with this from happening, such as Bill Gates getting his idea for a GUI to put on top of DOS after seing a demo from Visi On at a computer fair.
- Protect Business Growth: The software industry tends to be very efficient and does not make a lot of room for many alternatives. If you are a small business, it’s important to protect any unique products or services that you own as competitors can use your success to take away market share, resulting in loss of revenue. Losing market share early on in a business’s development can be devastating and time consuming if trying to chase up the guilty party without any legal protection.
Common Ways Software IP is Stolen:
Piracy is the unauthorized reproduction, use, or distribution of IP. Software Piracy is probably the most common form of software IP Theft, and some estimates that unlicensed software represents around $46 Billion in lost revenue to software vendors.
Counterfeiting is the imitation of IP in order to take advantage of the original IP’s superior value though an unauthorized, often inferior product.
High profile incidents of IP theft can quickly cost companies:
- Credit ratings
- Brand reputation
- First-market advantage
- Entire business lines
How to Protect your Software IP:
File a Copyright:
A copyright is the protection of an idea or other information that has been developed by the copyright holder. Although copyright is automatically assigned by the creator for any original work, registering your copyright it is noted for public record which gives notice that you have claimed legal copyright protection for your intellectual information. Another benefit of a copyright is that it provides you with the ability to sue anyone who infringes upon your copyright. Therefore, a copyright is needed if you want to pursue legal action against those who use your intellectual information for their own gain without your permission.
File for a Patent:
A patent grants property rights to the inventor of a new invention. If your software has a distinct feature that separates it from your competition, you will need a patent to protect your competitive advantage. The benefits of having a patent include right exclusivity, establishing market positioning, increased return on investments, and the opportunity to license or sell the invention. You might be surprised that Amazon owns the patent for the 1-click checkout, for example.
Reconsider using Source Code Licenses:
If you use a source code license, you are giving a licensee a non-exclusive and non-transferable license to your software; permission to use and modify your licensed software. This is a risky move to take because you are possibly allowing your source code outside of your organization. This arguably weakens your company’s trade secrets as the source code is no longer being kept completely secret.
To eliminate these issues use a source code escrow to ensure the rights of your software are protected. A source code escrow protects all parties of a software license by having a 3rd party escrow agent hold the software’s essential information. This helps keep the source code safe while still providing the protection a licensee needs.
Have Developers Sign an IP Assignment Agreement:
The developers who are developing your intellectual property need to sign an IP assignment agreement stating that all work developed within the company belongs to the company. This helps to dissuade an individual from selling your intellectual information to a competitor or using it to profit from their own use. If one of your developers does take either course of action you can use this document to take swift, legal action.
Using a License Manager:
Licensing management systems help protect intellectual property of software by issuing licenses to users that allow them to use the software only in an authorized manner. Each license helps control the use of the software so every use complies with the contract.
How does LicenseSpring help Protect your Software IP?
We are a Software License Platform that makes it easy to configure your application according to your license agreement, without punishing your honest customers with crippling anti-piracy procedures. We strive to be easy to use and configure, and we charge per usage, not based on licensed revenue.