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Copyright vs Exclusive License?
cdanzig asks: "My company recently hired a development house to do some contract work for us. They did great work, but they are claiming that they now own the copyright on the code and are issuing us a permanent and exclusive license. My bosses are concerned that this will hamper our ability to make changes to the code or prevent us form being able to claim the software as a company asset. What is expected protocol between a client and a development house? What is the long-term difference between owning a copyright and owning an exclusive license? If we paid for the development of the code, is it fair for us to demand ownership?"
If your company didn't negotiate this when you hired the development company, it's your company's fault. But all is not lost. You may be able to prove that the software is a work-for-hire. Get a lawyer. Your laywer might be able to negotiate in a way that you can not, because it will be clear when the lawyer calls that you would consider a lawsuit. Tell the lawyer you want the other company to provide the copyright, and your legal fees.
Next time, have a lawyer work with you before you sign a contract with any company.
FYI: I am an expert witness. I get paid to testify in lawsuits when engineers don't call laywers before they accept a license or sign an agreement.
Bruce ~
Bruce Perens.
IANAL but... From the perspective of someone who has done a lot of freelance work, both development and graphic design, retaining copyright is not unheard of, but it sounds like someone screwed up in the negotiation process. When doing freelance work, it's common to retain copyright, even when offering an exclusive license, because it allows the developer to create derivative works. This allows the freelancer to re-use code modules in other projects without having to worry about being sued by clients. From the perspective of a business, this doesn't necessarily hurt you. Depending on how your license is written, you may still have the right to modify the source for your use internally. You'll really need to get a lawyer to work out the details of your rights.
Whenever I have done freelance work, I have always stated up front where I stand on retaining copyright. In general, I retain copyright for projects unless stated otherwise - but I let the client know that upfront and that it is open to negotiation (in general, I charge the lowest rate for clients who want a non-exclusive license, more for clients who want an exclusive license where I retain copyright so I can use modules in future projects, and the most for transfer of copyright).
As for work for hire, as a rule of thumb, a project is work-for-hire if the project is created using company resources, so if the contractor used your companies computers and office space, then it could reasonably be considered work for hire, whereas if you gave them specs and they came back with a disk, it might be harder to make the work-for-hire argument. Once again, you'll have to talk to a lawyer about that, since there are all kinds of subtleties and differences from state to state, country to country, etc.
I would say, get a lawyer and try to work out your situation in this instance, and consider that you may have to chalk up a lesson learned. In the future, discuss this with contractors before hiring them.
Famous Last Words: "hmm...wikipedia says it's edible"
As one of the contract negotiators for a software development house, there is a big difference between permanent exclusive, and transfer.
A permanent exclusive license states that you have the right to use the code indefinitely. And (in our contracts anyhow) state that you also have the right to modify, and reuse the code in other internal projects. This is the cheaper option for the client, as it means the development house can also do the same -- create derivatives, alter and reuse the components in other projects to other clients -- we just cannot resell the software as a whole to someone else.
On the other hand, transferring the copyright means that the client now owns the code. Period. We are unable to reuse the code, nor create derivatives. This costs the client a hell of a lot more, as any R&D, and modules can not be used in future projects for the development house to improve efficiency in future projects.
In the end, the poster really should have a lawyer, or just have an experienced (meaning burned) persons look over the contract, and ask the questions that need to be asked before anything is signed.
This sort of thing happens enough among uneducated (legally speaking) developers and companies that there's a term for it---non-exclusive license of copyright---which is essentially a contract issue. This is an equitable issue (unjust enrichment) which falls under state law. The long and the short of is is that they cannot prevent your using it, redistributing it, or even selling it to another software house; but neither can you stop them.
/. We are not lawyers, and this is not legal advice.
The normal rule is the author of the work owns the copyright. However, when the work is done by an employee for an employer, or when the contract explicitly transfers ownership, we typically have a work-for-hire. When the contract is silent and the author is not an employee, we can have a non-exclusive transfer of license. Since the author did the work and was compensated, then the compensating party has the right to use the property free of any license control. The _Foad_ case is a good example of this. (http://www.ivanhoffman.com/nightmare.html)
The author cannot prevent you from using the software because you paid for its development. Heck, the author cannot prevent you from giving the software to a third party for them to improve it. Foad involved an architecture firm creating plans of a shopping mall for a contractor who sold the construction project to another contractor. The second contractor then gave the plans to its outsourced architecture firm who removed all references to the original firm and essentially copied it. The Ninth Circuit said the nature of the relationship between the original parties created a non-exclusive license which allowed for this. In law, this is grounded in equitable principles of quasi-contract or unjust enrichment. The court in _Foad_ split in two directions (2-1) on the underlying cause of the transfer, but were unified in the existence of the transfer.
This is a state law issue because Congress implicitly ignores non-exclusive transfers, and the occurrence of these transfers is contractual in nature. Contracts are usually governed by state law.
I think they can revoke the license; but only by paying you back all that you spent. When the grant is made "for compensation" (usually money), the grant is irrevocable. In two circuits, the revocation can only happen when the license is between 35 and 40 years old!
Get thee to a good IP attorney and stop asking
As an aside, the Open-Gaming License put out by WOTC (Hasbro is it now) is a explicit non-exclusive license grant.
What those who want activist courts fear is rule by the people.
My local engineering association recommends only giving out licenses for all engineering works. The reasons are fairly obvious. Firstly, you can design a building (or a software program) for a client to use, without owning all the copyrights associated with it. For instance, suppose the consulting company used some example source code from Microsoft in the production code. They are allowed to do that. They aren't allowed to give the client the copyrights to Microsoft's example source code. It doesn't take long to realize that all those subsidiary libraries, code snippets, etc., are very difficult to get full copyright ownership on. However, using them in a piece of code is allowed and often encouraged. A license that ensures the client has the rights to use the software, and sidesteps the complexities of the copyright issues.
The other reason engineers stick to licenses is that portions of the engineering work may be in proprietary libraries used on a variety of client's projects. Again, this is okay, as long as the exact same piece of code isn't being sold to multiple clients with each client understanding that they have sole rights to "custom" code.
Finally, if you are dealing with engineers, a critical issue is who holds the liability insurance on the contract. If your software house has liability insurance, you are going to have a hard time proving "work for hire." Specifically, it isn't work for hire if you try suing them for non-performance of contract. That's a liability. It is only "work for hire" if you as the customer are absorbing all risks and pay all costs, and the software company is set up accordingly. Similarly, "work for hire" will be difficult to prove if the software house provides its own software, laptops, and/or offices.
Unless I'm missing something...
First off, its historically very common in photography. And usually represents an arrangment where the the photographer agrees not to resell a photo to any other customer, but the buyer can't go and start reselling it either, except for maybe a one-time transfer where the buyer transfers the permanent/exclusive/transfer license that they have to another 3rd party.
The idea is that if you were buying a photo to resell, the photographer would probably want a royalty component. But if you are buying an image to use in marketing, and you don't want anyone else to be able to buy that image and use it a permanent/exclusive license is a middle ground between licensing a copy, and buying the copyright right. It also tends to be priced between the two.
In software its even more common.
For example, I do database design, and over the years, like anyone I've built up a library of common functions, scripts, procedures, libraries, techniques, and so forth that I tend to re-use. I don't want to assign you copyright because then I can't reuse it other projects.
In fact, I can't assign you copyright to that stuff, because its already used in other projects. If I had to sanitize your project so that it wasn't using my copyrighted stuff, and only used stuff that I could assign to you that would take considerable effort and time and undermine the value of the body of work I've built as an independant developer - ie it would cost you a lot more and waste a lot of my time. So I'd prefer to just agree to let you have permanent exclusive license to the final product, but I retain copyright.
I'm not being an 'ass' about it. In fact I tend to be very flexible. Even if you wanted to resell the final product I wouldn't object; I'd be happy to license it to you with that right. Hell, I'd probably even license it to you under the GPL or a BSD-style license if you wanted it that way.
Naturally, if I'm licensing the code for you to resell, I'd probably want royalty or a larger initial cheque, but thats beside the point. The more rights you get the more it costs.
But I'd still need to retain the copyright for two reasons:
1) The project contains code that has been used or will be used in other projects I've worked on. And I'm not assigning you any ownership of those. I can't really. Plus, if I can avoid it, I don't want to be forced to build everything from scratch every time I need something I've already built.
2) The last thing I need is your successor/boss/assistant to sue me for copyright infringment when he finds out some module in your application, to which "you have copyright" was derived from or reused in another project I worked on. I don't want to be prevented from reusing my own personally developed code base.
If you simply must have copyright on every byte of source, than I'll work under that condition too, but it'll take more time, and cost more.