How to Protect Software Intellectual Property Rights When Outsourcing Product Development
Tags: product, legal, security, webdev
Published: 2023-05-07 20:37:58

Software intellectual property protection is one of the core things to care about when developing your product. You may not be vocal about your product’s market ambitions. But, let’s face it, everyone who starts a new business deep down hopes for amazing success. You carry out research and brainstorming. Your team continuously generates and tests hypotheses. You embody groundbreaking ideas and create new values. After devoting a lot of time to development and marketing, you believe passionately in your product and its well-deserved recognition that will one day come. That’s why you diligently ponder those technological highlights that will help you stand out from the competition and make a difference. And that’s why you’re concerned about the right to own the property of everything you manage to create.

Intellectual property law in software development is a double-edged sword. First of all, you worry about the security of your own copyrights, patents, and trade secrets. On the other hand, you constantly come into contact with someone else’s intellectual property. Any careless actions can be considered as an infringement of intellectual property rights.

Therefore, intellectual property is a sensitive area that has complex regulations and subtleties that must be followed at all stages of software development. We will reveal this topic. 

This article will tell you how we protect software ownership at MobiDev. You will learn about the specifics of software intellectual property protection when outsourcing. We will indicate the relevant points that you need to pay attention to when working with an outsourcing company.

Then, we review four main types of intellectual property rights that you’ll certainly be dealing with in IT projects. We’ll also highlight the risks inherent in intellectual property and best practices for protecting it in software product development. So, let’s start with the basics.

Image by [Nayeli Leal](https://unsplash.com/@nayle33) on Unsplash

##Types of Software Intellectual Property Rights 

Before considering how software can be protected as intellectual property, let’s recall something basic.

When we talk about software intellectual property rights, we often focus on the following most common types:

- Copyright, which is the exclusive right to use creative work.
- Patents that are granted by governments to protect inventions.
- Trademarks, which identify product suppliers and service providers
- Trade secrets – confidential information that is not publicly known and has economic value

Can you encounter any other type of intellectual property rights in your projects other than those listed above? Yes, indeed. After all, both IT business and intellectual property are very multifaceted areas. There is a lot of interweaving of different ideas and developments, combinations of different products, and so on. 

For instance, you plan to install the developed software on the innovative original form devices created by your company. Or the designers of your team have developed such a cool visual style that someone will definitely want to “borrow” it. Therefore, it would be appropriate to legally protect the unique visual design. In such cases, you are dealing with **Industrial design rights** that protect the visual design of utilitarian objects. 

It is believed that **Design rights** appeared as early as the 18th century. Just imagine how far in advance humankind began to prepare for the appearance of your favorite gadgets.

Ideas and technology spread around the world, but keep in mind that intellectual property laws vary greatly from country to country. Let’s give a typical example in this category. Another type of intellectual property rights is the **Database right**. This right protects even those databases that consist of non-unique data. The main thing is that such databases should be intellectual creations through data selection and content arrangement. 

So, at the moment, for instance, **Database right** is recognized in the legislation of Australia, the United Kingdom, and the European Union, **but not in the United States**. Accordingly, in the US, anyone who wants to protect the intellectual property right of a self-created database does so through the copyright mechanism.

There is no need in this article to list all the possible types of intellectual property rights. Instead, let’s focus on the core and most common issues related to intellectual property protection in software. Based on what you have read, you will know how to act and who to involve, even when faced with rare and non-standard cases related to creative results.

There are four main types of intellectual property rights that are primarily essential for software development:

1.**Copyright** grants the author of an original work exclusive rights to it. Wondering what type of intellectual property rights protects your software code? Well, it’s this one, right here. In addition to code, copyright protects original images, web content, and similar forms of your self-expression, etc. The term of copyright is limited and, depending on the country, expires 50-70 years after the author’s death. The author’s work then becomes public domain.
2.**Patents** protect inventions. The main features of an invention are novelty, that is, previous non-disclosure, non-obviousness, or, in other words, inventive step, and utility. The term of the patent is limited. Patent owners can prohibit any use and sale of the invention by others or allow such use under specified conditions.
3.With **trademarks**, you will protect your company brand, logo, domain name, etc. Such intellectual property ensures that customers clearly distinguish your products and services from competitors’ analogs. Each of us instantly recognizes the trademarks of global brands. A trademark needs to be persistently promoted, and its legal protection must be renewed periodically. However, this intangible asset has an ‘accumulating effect’. Each subsequent successful project completed by your company increases the value of the trademark. After all, over time, a promoted brand starts to work for you, bringing additional margins when selling products and services.
4.**Trade secrets** are confidential information that is your hard-earned competitive advantage. This includes, for instance, technical and user data, work patterns, research and survey results, etc. There is a lot of information and subtleties in the IT sector that you will not learn from publicly available sources. Classic examples of trade secrets are the algorithms of search engines and social networks.

###HOW CRUCIAL IS SOFTWARE INTELLECTUAL PROPERTY PROTECTION FOR YOUR PRODUCT?

Imagine your startup as a country. Intellectual property is the Fort Knox of this country. You develop software that brings value. Be ready to protect your rights to it competently. However, you may be lucky enough to create value before the development is complete. Suppose you wrote code, collected data, and came up with some supporting tools and frameworks with an auxiliary purpose. You just wanted to facilitate and push the project. But it may turn out that these creative things have value and appeal to many, even more so than the final product.  It’s worth taking care of that too. Otherwise, you can see later that competitors have  taken everything but the kitchen sink.

All issues regarding software intellectual property protection should be settled in advance between the co-founders and the startup team. Many well-known projects entail a multi-year train of misunderstandings and lawsuits. 

It is enough to at least recall the Facebook [lawsuits](https://www.reuters.com/article/us-facebook-winklevoss-idUSTRE76L4MR20110722) involving the Winklevoss twins. However, in this case, in addition to unpleasant emotions and court costs, one of the storylines for the movie ‘The Social Network’ (2010) also came out.

This film, by the way, won prestigious awards. But, if you want to win awards differently, then you should think about how to protect software intellectual property from the very beginning of the project.

We have found that intellectual property is your real gold reserve, on which you can base both monetization models and non-monetary motivation for you and your team. Therefore, so that no one is left with a chip on their shoulder, you should have a software intellectual property protection strategy. There is more about this, as well as how intellectual property protection prevents threats, further on in this article.

##Software Intellectual Property Risks

Risks pervade all product development activities. Permanent risks are also inherent in the issue of intellectual property. How high are the risks in information technology? High! The media willingly covers conflicts about the infringement of copyright and patent rights. Let’s recall a few of these conflicts:

1. Apple Inc. [sued](https://en.wikipedia.org/wiki/Apple_Inc._v._Samsung_Electronics_Co.) Samsung Electronics Co., Ltd for infringing on several Apple design patents as well as its utility patents in 2011.
2. Oracle America’s [lawsuit](https://en.wikipedia.org/wiki/Google_LLC_v._Oracle_America,_Inc.) against Google Inc. in 2010 for copyright infringement. 
3. In 2010, Microsoft [accused](https://www.theguardian.com/technology/2011/dec/20/itc-microsoft-motorola-patent-android) Motorola of infringing upon its patents regarding the Android-based devices. Microsoft also [sued](https://www.cnet.com/tech/tech-industry/microsoft-sues-barnes-noble-over-android-devices/) Barnes & Noble in 2011 for infringing on its patents regarding the e-reader.
4. In 2017, Blackberry [sued](https://www.reuters.com/article/ctech-us-blackberry-lawsuit-idCAKCN1GI2J2-OCATC) Facebook Inc., Instagram, and WhatsApp for allegedly infringing on various BlackBerry messaging patents. The lawsuit concerned both the Facebook social network and the WhatsApp and Instagram apps. 

This list can be continued indefinitely. In addition, it is constantly replenished with new cases. At the same time, the listed cases feature high-profile brands that are leaders in many business and technology ratings. We can say that today’s real “Star Wars” are happening in the field of intellectual ownership.

It would seem that high-tech giants should be able to avoid copyright and patent litigation. But we see the opposite is happening. What about smaller companies?

It is reasonable to assess the risks associated with intellectual property as high. Let’s list and describe the main ones.

**Internal risks** are not related to the activities of third-party individuals and organizations. They may arise due to imperfect management of your project or company. 

Let us now consider the **external risks** that arise due to the possible actions of third parties.

###POSSIBLE INFRINGEMENT WHEN USING THE INTELLECTUAL PROPERTY OF OTHERS

We must remember that intellectual property legislation is a double-edged sword. The majority of this article is devoted to protecting your rights in this area. But it is essential not to give a reason for others to accuse you of violating someone else’s intellectual property rights. 

It’s a good idea to periodically check whether someone has intellectual property rights to pieces of code, design elements, other technology solutions, etc., that your team uses in development. Carelessness in such matters can lead to lawsuits. In this regard, it is worth mentioning the following:

###OPEN SOURCE SOFTWARE LICENSES 

Many project teams use open-source software. Most often, such use is free of charge. However, the lack of payment does not mean that there are no other conditions or restrictions for using such software. 

In the sea of free software, there are many pitfalls. In addition to copyright, there is also a copyleft. The software you need for your own development may be, for example, under a GNU General Public License. In such a case, what will be developed based on such free software will also be distributed for free. Such a sharp turn may conflict with your marketing and financial plans. You should anticipate such possible consequences in advance.

Even permissive free software (such as BSD or MIT) licenses may contain terms that you need to be aware of and strictly follow. It may be about the mandatory indication of the authorship of such software and the like.

It should also be understood that while you are monetizing your websites and apps, someone may be looking to monetize your intellectual property ignorance. You may be suspected of impropriety where you least expect it.

For example, there are copyright trolls and patent trolls. Such people or companies do not use their intellectual property rights to create products and provide services. Moreover, they often do not even allow paid licensed use of their technologies. Instead, such parties prefer to profit from intellectual property litigation, hoping for significant amounts of damages.

Suspicion of infringement of intellectual property rights of third parties is not always due to your actions. The carelessness of your joint development partners and contractors can cast a shadow on you as well. We will certainly return to these questions in this article. 

External risks related to intellectual property rights are often compounded by internal risks. Above, we mentioned possible gaps in the protection of your intellectual property. For example, you did not register your trademark in time in the country where you plan to expand your activities. Someone may get ahead of you by registering and using the trademark. In this case, in order not to be a lawbreaker, you will have to settle the situation via unplanned expenses.

###DOMAIN NAMES

There can be no frivolity regarding the domain name. Otherwise, you will feel what cybersquatting is like. Also, you will be puzzled over what to do when someone has already registered the domain name you want.

###INFRINGEMENT OF YOUR INTELLECTUAL PROPERTY RIGHTS BY THIRD PARTIES

This is the main risk and the main concern of everyone who owns the intellectual property. Such Infringement may be unintentional due to the infringer not knowing that you have the corresponding rights. There is also a chance that the disputes will be resolved without litigation through negotiations, payment of compensation, and compliance with the license terms of using your software.

However, you may encounter deliberate and well-prepared and disguised infringement of your intellectual property rights. Then you have to defend your interests, including in court. Success in litigation depends on the effectiveness of your protection of software intellectual property.

Sometimes you may not even know who exactly stole your intellectual property. This can, for example, be due to hacking of your information networks and illegal access to software code and data. Attackers can illegally use your trademark or create a fake duplicate of your website by copying its design.

At the same time, there is often a risk of infringement of your intellectual property rights by parties known to you. Among them can be both your competitors and customers and partners.

Outsourced software development is a sensitive area from the perspective of intellectual property rights. With such a scheme of cooperation, the customer and the contractor have to give access to each other’s intellectual property, relying on mutual good faith.

As a software engineering company, we are well-versed in the protection of intellectual property rights when working on our clients’ projects. Accordingly, we will talk about how we protect software intellectual property using best practices from our experience.


##Best Practices to Protect Software Intellectual Property Rights

As we discussed above, there are many risks related to intellectual property. Accordingly, even development exclusively by the in-house team will not solve all such problems. In addition, the need for additional capabilities and specialized expertise often dictates the outsourcing of software development. However, following best practices can significantly mitigate the risks of intellectual property outsourcing.

Therefore, we recommend the following steps to protect software intellectual property.

**1.Choose a trusted software engineering company.** 

It takes two to tango. From the moment you decide to engage external experts for software development, you can no longer ensure reliable protection of intellectual property on your own. A concerted joint effort is needed in this area. Sometimes a powerful fortress can be lost through one small gap in the wall. Therefore, you should be sure that there will be no such gaps on the contractor’s side.

Usually, you choose a development company based on their technical background, domain expertise, implemented similar projects, cost of work, etc. Add the correct practice of intellectual property protection to the list of outsourcer selection criteria. Do not consider this aspect of cooperation secondarily. See if the potential contractor touches on copyright issues in the negotiations and how they plan to proceed in this area. Make sure that your contractual partner has approved and implemented its own internal clear and correct information security policy.

Find out if the outsourcing company’s personnel know and follow best practices for protecting intellectual property in software development. Find out if the contractor has in-house legal expertise. Check the potential contractor’s experience and reputation. Put your mind at ease knowing that this company has not violated the intellectual property rights of its customers. Find out how the outsourcer manages the risks related to intellectual property and what documents it has made about it. The right software engineering company understands the priority of protecting software intellectual property and knows how to provide it.

It is essential to see the potential contractor’s understanding of the customer’s concerns regarding the minimization of copyright and patent rights risks. That is why, for example, we at MobiDev always explain to the customer the specifics of our internal processes and procedures regarding the protection of intellectual property.

**2.Sign a Non-Disclosure agreement (NDA) at the beginning of negotiations about a possible partnership.**

Having clarity with regard to defining the scope of confidential information, identification of violations, liability of parties, etc., as always, is essential. Remember that the term of the NDA can significantly exceed the project implementation period. A well-drafted NDA is an indispensable tool for protecting intellectual property.

**3.Establish principles and relationships regarding software intellectual property in a Master Services Agreement (MSA).**

This is common practice. When outsourcing, as a rule, exclusive rights to intellectual property objects created in the process of contract execution belong to the customer. Software development contract with intellectual property rights prevents misunderstandings and allows you to focus on creative work.

**4.Make intellectual property protection part of the project.** 

Pay attention to the details of how to protect intellectual property in project team workflows. Ensure that everything agreed upon in this regard is strictly followed. The devil is in the details. Find him and get him out of there. The protection of copyrights and trade secrets begins with the conclusion of the agreements we wrote about above and continues throughout the entire period of cooperation.

Observance of all these points must be constantly checked and ensured throughout the entire project implementation period. However, experience shows that following the best practices we have described will allow you to protect software intellectual property when outsourcing and mitigate the corresponding risks.