According to most modern governments, copyright is a natural right for individuals to own the unique things they create. Instead of requiring a formal process of registration like patents and national trademarks do, you own the copyright to anything you create by default.
Of course, this also means that the things others create that you use in your business will have certain legal restrictions on their use. In this article, we’ll cover the three common sources of software that businesses use: employees, contractors, and the open source community.
Employers enjoy the greatest privilege in software ownership when it comes to work done by employees. The software created by employees is considered work-for-hire, meaning the company typically receives all rights of ownership. When an employee writes code, it becomes company property immediately. To ensure this is the case, it is best for employees to include a written agreement within the employment contract that specifically assigns any and all intellectual property to the company created by the employee during the course of his or her employment with the company.
This doesn’t just apply to software they’re assigned to create either. If the employee works on their own software on the side during work hours, the company may have a claim to that software if it would fall into the scope of his or her employment (as in, if it’s related to the industry or other things the company does).
Contractors are different from employees, in that the software they create must explicitly be assigned to the company through a contract. When you engage contractors to work for your company, be sure the contract has language that assigns ownership to your company.
This is a tricky point that many companies who hire freelancers and agencies might miss. At least in the United States, the work contractors create for your company (even if it’s initiated by you) does not count as “work for hire” unless the contract specifically mentions it.
Without this wording in your contract, it’s possible for the contractor to limit your ability to use the software. They might, for example, demand that only they be allowed to modify it to add features or fix bugs. You can view this pdf from the national copyright office to learn more about this.
Open Source Software Licenses
Open source software is so common these days that there’s a strong chance your company uses it. However, many businesses might not be completely clear on what they are allowed to do (and sometimes, required to do) by the software licenses of the open source products they use.
Since copyright is an inalienable right of people, all creators of software (even open source) retain ownership of their work. Because many people might contribute to a single open source project, it’s possible for that one software to have many different sections being owned by whoever wrote the section. What allows other people to use the software is based on contracts. In the case of intellectual property, these contracts are usually called licenses.
Licenses give you a contracted, legal right to use the software, as long as you follow what the contract says.
There are many variations of licenses open source software products can use. Generally though, they fall into two categories – open source software and free software.
Open Source Software vs. Free Software Licenses
Otherwise known as copyleft vs. non-copyleft software licenses. The term “copyleft” contrasts the term copyright in that it’s the practice of offering people the right to freely distribute copies and modified versions of work with certain stipulations. Certain forms of open source software (including popular ones like WordPress) use a license that requires all source code that uses the software to distribute their own code as well with the same license.
What this means is that if your software makes use of a copyleft software, you’re required to provide the source code to your software because your software has “inherited” the requirements of the copyleft software. In effect, it means that the purchasers or users of your software are allowed to give away or sell your software as well.
As a real world example, sellers of proprietary WordPress themes and plugins have no legal recourse if someone shares the PHP code of their creations. Since WordPress is GPL (General Public License), and the theme or plugin uses PHP code that interacts with WordPress, it must adopt the GPL as its own license as well, otherwise it’s not legally allowed to use or interact with WordPress.
Most open source software these days isn’t copyleft, however. Non-copyleft software is generally permissive. You’re allowed to use and incorporate the product without being forced to do things you may not want to do. The most popular (and recommended by the Open Source Initiative) of these licenses are the MIT, Apache, and BSD licenses.
The MIT and BSD licenses in particular are only a couple of paragraphs long. They give you much more freedom with the software, and the only requirement is to pass on a notification to the user that software using such a license is present in the source code.
Review Your Software Licensing Process
We hope this article was helpful in better understanding the legal fundamentals of how software ownership works. To make your software development process more legally sound, you should audit how new software currently enters your organization and make sure it checks the following boxes:
Have the contractors you used explicitly agreed their code was “work for hire”?
Does your organization track the responsibilities required of them by any open source software?
Is your company working with a software development partner who has your best interests at heart? Contact Flint Hills Group today to find out how we can help.
As a disclaimer, none of this should be considered legal advice. It is provided as general information which is not intended to create an attorney‑client relationship. The information presented here might not be up to date.