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>Implied Licenses with Software Developers

>An interesting opinion denying a preliminary injunction in a software development case has just come out of the Eastern District of Washington. The defendant company, bVisual, was sued for copyright infringement by Numbers Licensing, an independent developer hired by bVisual to do software development work. Committing a surprisingly common error, bVisual failed to get a signed, written agreement with Numbers Licensing that placed ownership rights in the source code with bVisual. Therefore, when the two parties later got involved in litigation, the court found that the developer still owned the copyright in the developed source code on bVisual?ÇÖs computers.

However, all was not lost for the defendant, as the court also found that bVisual had an implied license to continue using and modifying the source code. The court found that the relationship between the parties, the defendant?ÇÖs payment of a substantial amount of money for the software, and the fact the plaintiff waited more than three years before asserting its rights in source code, all supported a finding of an implied license. The opinion was good news for bVisual, but a temporary reprieve allowing use of the source code does not have the same benefits as ownership rights in the software.

Even when a company succesfully asserts an implied license to continue to use software developed without a proper upfront contract, the company must still contend with the cloud of uncertainty that hangs over the software. For example, a third party looking to invest money into the company, or a third party looking to take a license from the company will see that a piece of intellectual property used in the company’s business is actually owned by an outside developer. The failure of a company to get a proper contact in place with an outside software developer may seem like a small matter, but such an oversight can cause future funding to fall through and potential licensors to walk away.

Gavin George is an associate in the Intellectual Property Practice Group of Haynes and Boone. His practice covers all areas of intellectual property law, with an emphasis on technology transactions and data privacy in the information age. His practice includes technology agreement drafting and negotiation, intellectual property analysis and due diligence, and consulting on evolving data protection and social media issues.

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September 2009