Organizations partner daily with external parties in the form of consultants, software developers and creative agencies to turn ideas into marketable products and services. If the question of ownership is not addressed at the start of the relationship, it has the potential to hinder the beneficiation that should occur as a result of the engagement. The question that needs to be addressed before any work begins is “when a third party helps develop your idea, who ultimately owns the result?”. Is it the third party that brings its prior knowledge and expertise to the table, or is it the business that had a brilliant idea and needed help unlocking and implementing it?
Both organizations will agree that intellectual property (IP) is often their organization’s most valuable assets. Presented in the form of software, business processes, inventions, designs, brand identities, written material, film concepts, music, databases and confidential business information, it has the potential to produce recurring revenue long after the individuals that brought it to life have closed their laptops. Therefore protecting these assets is a strategic business decision that impacts directly on future commercial opportunities.
To understand how this can play out in the real world, consider the case of a start-up that decides to develop a mobile platform to connect small-scale farmers with buyers. The founders contribute the business concept, understand the local agricultural market and define the platform’s functionality. They then hire an external software development company to build the application.
The developers write the code, design the interface and recommend additional features. Over time, the developers rely on code developed for other software that they own to help them bring the solution to life. Once the platform has been fully developed, the founders of the start-up discover that their contract does not clearly assign ownership of the software to their organization. Instead, they find themselves in a situation where they have paid developers to provide them with a solution that they need to pay annual fees to continue benefiting from. The supplier has retained the rights to their pre-existing components, leaving the start-up with a complete solution that depends on a license to use the finished product that they had initially intended to own. This uncertainty can complicate future investment, expansion or a change of supplier.
Working backwards from this scenario, we discover the importance of protecting intellectual property (IP) before work begins. The first step is to establish clear contractual arrangements before sharing confidential information or commissioning work. This can take the form of a non-disclosure agreement. Thereafter, organizations should identify what they already own, what the supplier will create, what third-party materials may be incorporated and who will own or license each component.
Failure to understand these important steps before the work progresses could leave your organization in the same situation as the Agricultural Research Council who hired BenguelaSoft CC to build software on their behalf. The developer rebranded the software from BeefPro to BenguFarm-Beef and started to re-sell said software to other clients. Once the ARC had taken BenguelaSoft to court, they found out that due to the fact that a clear agreement was missing at the start of the exercise, their developer indeed had the rights to re-sell the software (https://www.saflii.org/za/cases/ZASCA/2020/30.html).
While the above-mentioned case is very nuanced, it does highlight the importance of engaging in clear written agreements at the beginning of your software endeavor. To help you understand how to go about this an ensure that you have ticked all of your boxes when contracting with your IT supplier, refer to chapter 3 of “Managing IT Suppliers : A Practical Guide To Vendor Management (https://exclusivebooks.co.za/products/9781041104155)”. You’d rather benefit from your software upfront than need to take your developers to court.
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