IP issue - Page 1
Forum section: electronics / general

author: JohnnyP
author_rank: Regular Contributor
timestamp: July 29, 2015, 05:54:31 pm
content: A company asked me to design a product, which is now in production. I billed them as the design progressed.They said they would also add a small royalty, say a dollar or two per unit.My design is based on a Freescale 9S08 processor. I wrote the program in assembly.Now they want me to add some features that are beyond my ability and probably should be coded in C.I told them it would take me too long to do this, and that they should get a real software guy to do it.They just called and said they may have someone to do it and they want me to send them all my files, including the software, so the new guy can have a starting point.They asked me to design a product. I gave them the schematic and the layout. They bought a programmer, into which I loaded the secured code.They have all the tools to make more widgets.The question is, do I own the source code? Do I have to turn over my Code Warrior files?

author: c4757p
author_rank: Super Contributor
timestamp: July 29, 2015, 05:57:11 pm
content: This is not something you figured out before you started?Don't produce IP for anybody without first figuring out who is going to own it...

author: Mechanical Menace
author_rank: Super Contributor
timestamp: July 29, 2015, 06:01:10 pm
content: Depends on the terms of the contract. Personally I wouldn't employ someone without making it clear in the contract I own all IP related to what I've employed them for or/and done in time I'm billed for. Might even go as far to stipulate it belongs to me if you used any equipment I supplied depending on the exact situation. I'm almost certain your contract will include clauses like that.Quote from: c4757p on July 29, 2015, 05:57:11 pm+1.

author: Corporate666
author_rank: Unknown
timestamp: July 29, 2015, 06:30:03 pm
content: Were you working as an employee, a contractor on their premises, or were you working as your own company (or sole proprietor) and billed them?It sounds like the last of those three. It very much depends where you are located, but generally you still own the intellectual property. Keep in mind that the rights to the IP and the original source files are two different things. If you gave the new designer the source, that doesn't mean you are explicitly or implicitly transferring the IP, although the client may feel if they have the source, they can do whatever they want with it. But from a legal perspective, they can't.The "standard" way this is done is that if the client wants source files, they pay a release fee. The release fee is a one time compensatory payment for the presumed loss of future revenue from the original created work. If they want to own the IP, that's something a bit different where you no longer have any rights to use that created work and they can do whatever they want with it - even sell it to a new client of theirs.If they are a seasoned and experienced buyer of contract services, they shouldn't have any issues with a release fee. If they do, you probably won't want to work with them further. And ALWAYS define ownership of IP and access to source materials up front!

author: donotdespisethesnake
author_rank: Super Contributor
timestamp: July 29, 2015, 06:45:53 pm
content: If you did not have a contract in place assigning copyright of the software to the client, then I believe that copyright stays with the author. "Work for hire" does not apply to software.This may not be what the client is expecting. Personally I think I would cooperate with the client, you may get some further work from them. It doesn't seem worth causing ill-will, or getting into a legal case.Of course, make sure a contract is in place next time. Really, you do need to consult a lawyer, or maybe get legal advice from professional bodies. They may have some pro forma contracts.I know some software consultants will make two quotes for work : one with IP assignment, and one without. The one without being much cheaper. Then it is clear to the client what they are getting, and that they have a choice of buying outright, or paying the consultant if they need further work.Disclaimers:IANALWill likely depend on jurisdiction.

author: JohnnyP
author_rank: Regular Contributor
timestamp: July 29, 2015, 06:53:39 pm
content: Yes, I work alone at home, and used all my own equipment.There is nothing in writing, nothing verbal.Originally, they asked me to copy a widget that was all analog. I spent a few hours looking at it, then decided it would be better to use a uP.As the design progressed, I would give them the latest schematic. These guys are not into electronics, so it was meaningless to them.At one point very early in the design, I gave them a flow chart and said "you might as well have this too, you're paying for it". The flow chart has changed quite a bit since then, but I haven't given them any more than that first one.

author: nctnico
author_rank: Super Contributor
timestamp: July 29, 2015, 09:26:04 pm
content: Quote from: c4757p on July 29, 2015, 05:57:11 pmCopyright law says that whatever you write by yourself is yours (unless when employed or when told specifically how to write the program). It is a common misconception that paying someone to write a piece of software means the copyright belongs to you.

author: c4757p
author_rank: Super Contributor
timestamp: July 29, 2015, 09:32:50 pm
content: Quote from: nctnico on July 29, 2015, 09:26:04 pmWhat does that even have to do with what I said? Of course, the law defines a default - but there are still going to be expectations on both sides, and you're a fool if you don't work those out at the beginning.

author: eas
author_rank: Frequent Contributor
timestamp: July 30, 2015, 09:39:59 pm
content: Honestly, this sounds like a good time for you both to get lawyers involved, and a good time for both sides to get more sophisticated about IP and contract law.Before you do though, build on your current relationship to set expectations about why lawyers are being involved and a rough outline of the goals.Both sides should understand that lawyers are supposed to represent their clients best interests, but left to their own devices, they will fill in the gaps about what their clients best interests are based on their own biases. I've found that many lawyers don't give enough value to goodwill in business relationships as evidenced by horribly one-sided contract language they include which any reasonable counterparty will read as "my client has the right to both braise your first born for holiday dinner and amputate your genitals. They may do so at any time for any reason, without warning, and you agree not to do anything about it." A related affliction of the profession is to put mitigation of downside risk above the value of potential upside.Many people make the mistake of being overly deferential to attorneys. I suspect that their hourly rates encourage this behavior.

author: Mechanical Menace
author_rank: Super Contributor
timestamp: July 30, 2015, 10:03:26 pm
content: Quote from: eas on July 30, 2015, 09:39:59 pmOh this so much. Legal is a tool and like any tool should be handled with care lol.

author: eas
author_rank: Frequent Contributor
timestamp: July 30, 2015, 10:11:16 pm
content: Quote from: Mechanical Menace on July 30, 2015, 10:03:26 pmI'd actually written that lawyers were tools, and spent some time whether the double meaning of "tool" would help my point or obscure it.

author: Mechanical Menace
author_rank: Super Contributor
timestamp: July 30, 2015, 10:26:05 pm
content: Quote from: eas on July 30, 2015, 10:11:16 pmProbably both both though

author: JohnnyP
author_rank: Regular Contributor
timestamp: August 02, 2015, 12:54:16 am
content: Quote from: nctnico on July 29, 2015, 09:26:04 pmThanks for all your replies.We talked with him today, it kind of blew up. He doesn't understand how I could bill him for programming time then not give him the code. He said that was dishonest, and that if I had told him in the first place he would have understood.In the end, we agreed to give it to him, he agreed to royalties up to a certain amount.He's a young guy that owns a large machine shop. He said he gives all the CAD files and G codes to his customers whether he runs the parts or they take it somewhere else. He assumed we would do the same.

author: AndyC_772
author_rank: Super Contributor
timestamp: August 02, 2015, 07:42:22 am
content: Quote from: JohnnyP on August 02, 2015, 12:54:16 amAh, there's your problem, in two words.You're far from being alone. There are a lot of people out there who believe - incorrectly - that just because they're paying for someone's time, they automatically own the rights to any creative work that's produced during that time.It can be very hard to make it clear to a customer that this isn't the case, and even if you get a lawyer involved (which isn't a bad idea at all), there's no guarantee that your contract will be interpreted the same way by your customer as you intended.My standard T&C's do actually grant customers access to source materials, and include a fairly broad licence to make use of them. I figure that if I do a good job, they'll come back to me anyway, but they'll also have the peace of mind of knowing that if I get run over by a bus, they already have everything they need to take a job elsewhere.That's a purely commercial decision which I made early on, having seen what happens when a company is refused access to source materials, and is held hostage to the original supplier. It's a crappy trick that some suppliers pull, which only ever works on a given customer once.Providing source code is not the same thing as granting outright ownership of the IP, though. If a customer wants full ownership of a design, then I first make it clear that if I'm going to lose ownership of the finished project, then I'll have to start from a completely blank sheet, and so their job will cost more purely in terms of the number of hours required.Any royalties over and above that are up for negotiation. A good starting point is to look at the relative value of your contribution as a proportion of the finished product. If the finished item is a PCB you've designed, using software you've written, then a 50/50 split of the profits might not be at all unreasonable. If it's a small part of a bigger system, adjust accordingly.

author: Karel
author_rank: Super Contributor
timestamp: August 02, 2015, 08:17:20 am
content: Speaking of royalties, how do you check if the number of produced/sold items (used to calculate the royalties) is the real number?

author: SeanB
author_rank: Super Contributor
timestamp: August 02, 2015, 08:50:49 am
content: You either rely on the honesty of the customer, or you build in something to serialise the equipment, and simply check that counter. You can also check with the auditors of the client, as they will also give the correct figures ( dodging tax by lying about income means the auditors also do jail time, no slap on the wrist fine option for not pointing this out ) and are able to reconcile purchases and sales, and will flag the apparent high failure rates indicated by the difference between purchases and sales of finished goods.If it is Internet connected you simply have a serial number, and have the firmware periodically or randomly simply send a UDP packet to a website and a specific port number you maintain at your own cost ( your own personal site) with only info being the serial number and a magic value to validate it, so a single packet is hard to detect. Your side simply records the UDP packets received, probably also geolocating roughly from source IP, and populates a database with the received number. Then you can simply see and match sales with units after a period. UDP so that you do not have to make a TCP connection, there is no hard fail built in if no reply ( you should not reply to this at all) and eventually you will get a packet through.

author: JohnnyP
author_rank: Regular Contributor
timestamp: August 02, 2015, 09:59:33 am
content: As to quantities and profit per unit, my wife and I trust the guy. He's been great up to this point. I believe what he says.I should have listened to my two friends and just turned it over and let it go. Then I would have asked him to google "nolo who owns the code", etc to show him he is wrong, but that he could still keep it.My friends were right, they said the hassle and loss of a friend wouldn't be worth a few $k. Now he thinks I was dishonest. I have to clear this up.I think I know what is really troubling me about handing over my files. Why should I give the new guy a jump start?I wasn't trying to keep it from him; I was really trying to keep it from my replacement. I need to tell him that when I hand over the files.He paid me about $9000 over several months for a finished design. He's not making much per unit, so I am going to tell him to forget about the royalty, at least until he makes back his investment.The competition just came out with a product that blows this away anyway, so I doubt there would have been more than a few $k in royalties anyway.

author: mikeselectricstuff
author_rank: Super Contributor
timestamp: August 02, 2015, 10:13:51 am
content: QuoteOne approach to this situation is to make a charge which represents documenting the code to a standard that can be understood by someone else. That way at least they feel they are getting something for the money.

author: mikeselectricstuff
author_rank: Super Contributor
timestamp: August 02, 2015, 10:21:40 am
content: Quote from: Karel on August 02, 2015, 08:17:20 amIME the issue with royalties, especially with smaller companies without formal systems in place, can be not so much dishonesty but disorganisation - accounting for royalties just drops to the bottom of the priority list & you end up in a situation where nobody really knows what's owed after a while.I'd only do a royalty agreement where there is a robust way of counting - for MCU type stuff the easiest way is to supply them with preprogrammed devices, or program devices for them.To mitigate the "what if you fall under a bus" issue, you could get a third party programming house to supply (or just program) parts against their orders and send you your cut.

author: Deathwish
author_rank: Unknown
timestamp: August 02, 2015, 10:22:52 am
content: Quote from: JohnnyP on August 02, 2015, 09:59:33 amNever mix business with friendship as they say, one will lead to trouble with the other, as for letting him of the royalties till he makes his investment back, that is going to be your cross to bear and will mean you will always be thinking that way, you will always be out of pocket doing that.

author: HighVoltage
author_rank: Super Contributor
timestamp: August 02, 2015, 10:48:58 am
content: I build a lot of "one off" test equipment for manufacturing sites and one of my customers/clients has become a friend over the years.One more reason, to write a contract, just a small one.It can be an email that states the project and the cost and what is included.I always have a line item for1. Hardware Test Equipment (the stuff I build)2. Manuals and schematics (What is included and what is not)3. Calibration and calibration certificate4. Stability (Cpk) analysis of the test system.5. Yearly calibration cost (So there will not be any discussion a year later)6. Delivery cost7. Training of employee cost8. Warranty stantement9. Cost of repair, after warrantyThis way there is no grounds for misunderstanding.And even then, sometimes I get some trouble.I just had a case where everything was stated on the estimate but one Item that I could not guess the cost, was not listed and it was stated that he, my client, had to pay for it at the end separately and directly to the supplier. Since it was a little more complicated, the price was very high and we ended up in a little fight. So, even when you think you covered everything, Morphy's Law will catch you almost every time.In your case, I would highly suggest, to do the following1. Make a full contract now that both sides will agree upon.(Although this will be much more difficult now, you need to have something in your hands, if it should really blow up in the future)2. Make a royalty agreement now.Although you might never see any money coming out of it, you are protected, if he will be successfull.And what if he makes small changes to your design?Will you still get royalties or part royalties?I have some contracts for royalties for now almost 20 years with some people I would call real good friends.But we are renewing our written contract every 5 years, so that we are on the same playing field.This way, we have at least covered the basics.Good luck!

author: AndyC_772
author_rank: Super Contributor
timestamp: August 02, 2015, 11:20:15 am
content: Quote from: SeanB on August 02, 2015, 08:50:49 amI do hope you're not advocating burying something covertly in the code which your customer, and the product's end user, don't know about.If I'd paid someone to design something for me, and I found it phoning 'home' without my knowledge, heads would roll.

author: lewis
author_rank: Frequent Contributor
timestamp: August 02, 2015, 11:43:22 am
content: I had to fire a customer recently, the hassle dealing with them far outweighed any financial benefit. We designed and manufactured a fairly complex product for them over a year ago, but recently they wanted to make significant changes to it to squeeze it into another product for a different market, some of which weren't possible or economical. Constant daily emails and phone calls (from different numbers!) asking when can I do it, continuous specification changes, refusal to take advice, and because they paid a lot for the initial design they expect it almost free. And we're not cheap. Basically the bloke is an f%*^#@g nightmare. It was a pain first time around, it would be even more painful now.So I fired him. And my blood pressure has returned to normal.But even after all this agro, I actually didn't want to fuck them over. So I gave them everything - source code, gerbers, schematic, literally everything necessary to manufacture the design. I think anything else would have been spiteful - I never EVER intend to work for them again, and I have far better customers whom I can now serve better and devote more time to.

author: SeanB
author_rank: Super Contributor
timestamp: August 02, 2015, 11:48:58 am
content: Quote from: AndyC_772 on August 02, 2015, 11:20:15 amIf the relationship is that toxic that both sides do not trust each other then having that would be the least of the troubles in any case.Just pointing out that there are ways these days to have firmware devices announce their presence in a way that is both not a hard failure mode ( send only, and no care if there is actually an answer so no risk of buffer overflows causing a problem) and a simple diagnostic that will eventually show up any units as present.

author: SeanB
author_rank: Super Contributor
timestamp: August 02, 2015, 11:52:11 am
content: Quote from: lewis on August 02, 2015, 11:43:22 amPity the poor guy who now is going to be asked to do the impossible, and who is given all this as a start, then has to tell them the same answer after some time and the same conclusions........ Hope you included every email in the documentation as well, just for completeness. 100% likely they would not read that massive file collection before sending it out, while the recipient will read it very closely.

author: lewis
author_rank: Frequent Contributor
timestamp: August 02, 2015, 12:07:05 pm
content: Quote from: SeanB on August 02, 2015, 11:52:11 amIt wouldn't be right (and potentially illegal) to include any private communication from the customer, only IP generated by us which is ours to give away.

author: AndyC_772
author_rank: Super Contributor
timestamp: August 02, 2015, 01:30:45 pm
content: Quote from: SeanB on August 02, 2015, 11:48:58 amIf you were to put something in the code which has the potential to harm my reputation as well as your own, then I'd guarantee it won't be the least of your troubles.Quote from: SeanB on August 02, 2015, 11:52:11 amWhy? That new guy has every opportunity to meet the customer, discuss the project, and either quote for the job or decline to do it.At the very least, a new customer relationship means a chance for both parties to set expectations. If the real answer is that the job can be done but it needs a detailed spec and adequate budget, then that's something they can agree on upfront.

author: EEVblog
author_rank: Unknown
timestamp: August 02, 2015, 01:55:35 pm
content: Quote from: JohnnyP on August 02, 2015, 12:54:16 amGood outcome.Once it hits lawyers it's game over for both parties. Always walk before lawyers get involved, it's not worth it.That source code would have been useless to you, so no skin off your nose.You get some more money out of it for zero work on your part, and no animals get harmed.Walking away with lesson learnedandmoney in your pocket = win.

author: c4757p
author_rank: Super Contributor
timestamp: August 02, 2015, 10:13:55 pm
content: Quote from: AndyC_772 on August 02, 2015, 11:20:15 amAdvice like that is a big part of why I never recommend this forum to people anymore.

author: JohnnyP
author_rank: Regular Contributor
timestamp: August 03, 2015, 06:21:42 am
content: We turned over the files today. Then I asked him to google "nolo who owns the code" and read example 1. He did a lot of arm waving and basically waived it off.He said one of my monthly invoices had a line item for x hours of programming (I don't know if it did or not, I don't have any in my files that say that, maybe I verbalized it), so that means he paid for the software. He said he explained that to his attorney yesterday, who said something like software for electronics is a little tricky, but he agreed with his client that he paid for it.I know, I know. (note to self) Just drop it, John.

author: Karel
author_rank: Super Contributor
timestamp: August 03, 2015, 07:28:06 am
content: Quote from: c4757p on August 02, 2015, 10:13:55 pmWhich forum do you recommend now?

author: AndyC_772
author_rank: Super Contributor
timestamp: August 03, 2015, 08:10:17 am
content: Quote from: JohnnyP on August 03, 2015, 06:21:42 amI'd expect a lawyer to be more specific about whether he'd paid for outright ownership, or simply paid for it to be created. It wouldn't surprise me at all to find that the second hand information you've heard from your customer is an edited interpretation of the advice he was actually given.Imagine you were to pay a musician to write and record a song for an event you're hosting. Most people, I think, wouldn't have any problem at all with the idea that the song can legally be played at that event without further compensation to the artist, because that's why it was written in the first place. But it would be a bit of a stretch to assume that you actually owned the song, and could re-record it, play it anywhere else, or sell it without further compensation being paid to the author.

author: JohnnyP
author_rank: Regular Contributor
timestamp: August 03, 2015, 09:09:00 am
content: Before we left he said an order for 5000 came in, but the client wants a couple minor changes to the layout. Maybe I'll volunteer to do that.

author: c4757p
author_rank: Super Contributor
timestamp: August 03, 2015, 02:39:21 pm
content: Quote from: Karel on August 03, 2015, 07:28:06 amNone. They all seem to be an excellent place for self-described experts to dole out terrible advice, to the point where it tends to require enough experience to answer the question yourself to figure out who is talking out of his ass. I'm growing rather tired of forums in general. But for some time, I was rather fond of this one and did tend to recommend it to people.

author: Rasz
author_rank: Super Contributor
timestamp: August 03, 2015, 05:46:09 pm
content: Quote from: JohnnyP on August 03, 2015, 09:09:00 amYes, do it for free too, after all you owe him now

author: JohnnyP
author_rank: Regular Contributor
timestamp: August 03, 2015, 07:27:17 pm
content: I'm still feeling bad about it, no need to rub it in.But, it just makes sense to do it. The layout is in McCad PCB-ST. I doubt whoever they get will have that.

author: nctnico
author_rank: Super Contributor
timestamp: August 03, 2015, 07:46:11 pm
content: I'd let it rest for a while. A layout is re-done quickly enough. Sometimes too much attention isn't good. Maybe you can make a courtesy visit later on and see how things are going.

author: JohnnyP
author_rank: Regular Contributor
timestamp: August 03, 2015, 07:52:52 pm
content: Thanks for all your replies.Onward and ...onward

author: SeanB
author_rank: Super Contributor
timestamp: August 03, 2015, 08:01:47 pm
content: Quote from: datumplane on August 02, 2015, 09:56:13 pmWasn't saying do it, unless you are <insert name here> etc who all have been found doing this in physical products, without any mention of it. Just pointing out things that can be done to verify, using something that both can agree on as both verify.