A software development agreement (Software Development Agreement) is a contract where one party (Developer) agrees to develop a software application for another party (Client). Concise drafting is key in Software Development Agreements to ensure that the resulting software meets the Client’s requirements and also does not allow for scope to the detriment of the Developer.
Common clauses in Software Development Agreements
The provisions in this sort of agreement will vary according to the size and scope of the software to be developed, but commonly include:
- acceptance testing – details any testing requirement the software must pass to be accepted by the Client;
- confidentiality – imposes obligations on the parties to keep all confidential information strictly confidential, except in listed circumstances;
- development stages – deadlines for the provision of software modules (also known as “deliverables”) by the Developer;
- escrow – requires the Developer to deliver the software to an escrow agent and outlines timeframes and responsibility for payment of such delivery;
- hosting – details which party is responsible for hosting the Software;
- indemnity – requires the Developer to compensate the Client for any loss or damage which results from a breach of the Contract;
- intellectual property ownership – states which party owns copyright in the software source code and any other materials provided to the Client;
- marketing – details whether the Developer is allowed to use the Software development as part of its marketing and advertising campaigns ;
- moral rights – the Client may request moral rights (that is, the right to attribution and the right to freedom from derogatory treatment) in the software are waived in the Client’s favour;
- restraint of trade – the Client may request that the Developer does not create competing software for the Client’s competitors for a specified period of time after expiration or termination of the Agreement; and
- warranty period – how long the Software should work without major errors or bugs.
Common problems with Software Development Agreements
A common issue is not adequately addressing ownership of intellectual property (IP) in the software itself. Under the Copyright Act 1968 (Cth) ownership of copyright in an original work generally rests with the original “author” of the work – in this instance the Developer. However, this can create issues for the Client who may wish to expand or modify the software in the future. Alternatively, assigning all copyright in the software to the Client can cause problems for the Developer, in that it prohibits them from using their common core libraries. To avoid these sorts of issues, it is best that they be documented in the Developer’s standard form contracts.
Links and further references
Cases
Intelmail Explorenet Pty Ltd v Vardanian (No 2) [2009] FCA 1018
Legislation
Further information about Software Developer Agreements
If you need assistance drafting a Software Development Agreement, please telephone me for an obligation free and confidential discussion.
Malcolm Burrows B.Bus.,MBA.,LL.B.,LL.M.,MQLS.
Legal Practice Director
T: +61 7 3221 0013 (preferred)
M: +61 419 726 535
E: mburrows@dundaslawyers.com.au
Disclaimer
This article contains general commentary only. You should not rely on the commentary as legal advice. Specific legal advice should be obtained to ascertain how the law applies to your particular circumstances.
Related insights about Software Developer Agreements
-
Legal challenges arising from data loss
Organisations must protect confidential data from external and internal threats. Learn steps to secure data, potential data breach implications, and how a data breach notification bill may require affected entities to notify consumers.
-
Data Breach Bill 2016 – key data security considerations
The Privacy Amendment (Notifiable Data Breaches) Bill 2016 has been passed, making notification of data breaches mandatory from 23 February 2018. Find out how this could affect you and what measures you can take to protect your data.
-
What are Software Development Agreements?
Having a Software Development Agreement (SDA) is essential for any successful software development project. Learn more about the key clauses involved and how to avoid potential issues.
-
Legal risks in the in-app purchase model
Software developers and publishers are offering users the chance to make In-App Purchases within their software, but there are legal risks involved. Learn how to protect yourself and your business by understanding the requirements of distribution platforms and Australian consumer law.
-
App developers – take care with Apple Developer License
Creating apps for Apple devices requires adherence to Apple’s Developer Agreement, Program Licence Agreement, and App Store Review Guidelines. Learn about your rights and obligations when it comes to agreeing to Apple’s terms and conditions, and the consequences of ignoring them.
-
Data security – the increasing burden
The consequences for an Australian business victim for a breach of cyber security are forecast to exponentially increase. In February 2015 the Parliamentary Joint Committee on Intelligence and Security (Committee) recommended the introduction of mandatory data breach notification scheme (Scheme) by the end of 2015.[1] Whilst the details of the incoming Scheme are currently scant,…
-
Reverse engineering of software – legal boundaries?
Reverse engineering software in Australia is complex, with legal implications and cases providing authority on “infringing” verses “non-infringing” reverse engineering. Courts have provided some protection to intellectual property (IP) through licence agreements and distinguishing between ideas and expressions of a program.
-
Proposed anti-bullying laws to target social media platforms
The Federal Government is introducing legislation to protect children from online bullying on social media. Find out more about the powers the Children’s e-Safety Commissioner will have to address this issue.
-
Cupid Media risks privacy of the dateless
The Privacy Act 1988 (Cth) (Privacy Act) requires entities to take reasonable steps to secure personal information.
