Copyrights – Intellectual Property Perspectives

3 Key Terms of a Software License

Who owns your software?

If your company has developed software, it should create a software license prior to distribution of that software. A software license is the key instrument that defines the rights in ownership, usage, and distribution of software between the company and user(s). Developers seek to protect rights in the product developed with their time, money, and staff. Users want to know what is being licensed and whether that license will meet their needs. A software license should be employed in enterprise software, consumer software, “cloud” software, customized software, and even in “open source” software contexts (it is a misnomer that if one desires software to be open source, that the company needs only to forego a software license). Failure to draft a carefully considered software license can lead to loss of ownership of key aspects of the software, loss of control of the business model, bad publicity, and other consequences. There are many options to think about for a software license but three key terms include:

Scope of Use – This element of the software license states the permitted and prohibited uses of the software. A license may, for example, limit the use of the software to the licensee’s own internal use or primary business activity. Such a restriction may support the licensor’s business model or effectively be required by law. For example, in credit card processing software, the software provider may also be providing related services and would seek to limit the uses of the software so that the licensee does not deprive it of revenue opportunities from those third parties. Additionally, the credit card processor may not be able to fulfill IRS reporting obligations if the user processes credit card transactions for third parties.

Intellectual Property – Since you’re reading an intellectual property blog, you probably knew this issue should be addressed. However, this issue should not be overlooked or oversimplified. Innovation in software can invoke multiple areas of intellectual property law and contract law, including patent law, trademark law, copyright law, and trade secret principles. Where software patents exist, notice of the patents should be provided. Copyright almost always exists in software, thus it should be addressed. Furthermore, the intellectual property clauses should not be oversimplified. For example, the intellectual property rights may not be as simple as “Developer owns all right, title, and interest in Software… we own it all, you can’t use it, the end…” Unreasonable restrictions on use of the software may lead to a backlash, lot revenue, or just may not fit the company business model. The intellectual property clauses may be more nuanced due to contemporary business models and social media influence, where the users may make substantial contributions. For example, use of the “Android” name and logo (ie trademarks) by third party developers is advantageous to the Android Market ecosystem. Likewise, the prolific placement of Twitter and LinkedIn logos on third parties websites promotes the use of the Twitter and LinkedIn systems, respectively.

Rights in User Data – Some user data is mission critical. For example, customer relationship management (CRM) can be the lifeblood of a business. Judging by some of the posts on Twitter, other user created data may not be so critical. In light of the software, the business model, and customer profiles, the software license should address the licensor’s and licensee’s rights in user data. This may include user created data, data about the user, or information generated about the user from the user environment. For CRM software on an in-house workstation and servers, where the business model is that the enterprise pays for the software, the license may state that the licensee has complete ownership of the user data and the licensor has no rights in the user data. For a mapping application, the license may state that the mapping company has complete ownership, including the right to redistribute user supplied corrections.

Older language and terms may not apply to the current environment, so a company should periodically review the software licenses. Newer paradigms such as software as a service, virtualization, and multi-core processors have changed the software landscape and thus may lead to ambiguity or undesired results from an existing license.

The above terms are just three terms among many for consideration for inclusion in a software license, so do your research for your specific software and situation.

Myths Regarding Integrating Internet Data Into Applications

Lookin’ for information on a chemical, well there’s a database for that. Looking for barcode information, well there’s a database for that. Lookin’ for a local restaurant, … you get the point. There is a lot of useful published data available on the internet in a convenient format. And there are lot of potential applications out there hoping to make that data even more useful.

In questions/comments after presentations, phone calls, intellectual property inventories, due diligence, and even on the internet (gasp!), I have heard many tales regarding use, reuse, and commercial use of published internet data. Frequently someone asserts that integration of the internet data into an application is a non-issue because it is posted on the internet. Some of the various reasons given include:

The data was made available for download.
The data was changed by 10/20/30 per cent.
The data was posted in XML format.
The data was semantically marked.
The data was reformatted.
The data didn’t have a copyright notice.
The creator of the data couldn’t be located.

Generally, a content creator has rights in original works as soon as it is saved. And generally these rights include exclusivity in copying the content, distributing the content, and creating derivatives of the content. In other words, if rights vest, the content creator substantially controls the use of the data. For these reasons the blanket statements above are myths.

It may be that the published internet data may not be be eligible for protection or have a very limited scope of protection. It may also be true that the content creator doesn’t care how the data is used or that it may licensed for commercial use. However, just because data is published on the internet, available for download, or accessible in a convenient format does not in and of itself mean that it is available for use in an application. Not only might the possibly impermissible use lead to the failure of your application, it may lead to liability for copyright infringement or violation of the terms of service. Due diligence should be performed before integrating the published data into an application. You should at least analyze whether the data is subject to copyright, whether there is a fair use of that data, whether it is being used in violation of the terms of service, or whether you are knowingly accepting some risk.

3 Key Terms in a Copyright License

Licensing is one method of commercializing copyrighted material. A license is an agreement which permits another (“the licensee”) to use the intellectual property of the owner (“the licensor”) in a certain manner, typically to sell products based on the intellectual property. A license can be a lengthy document with many options to negotiate, but three key terms will be discussed in this post:

1. The Grant – What is being licensed?

The first step is decide what is being licensed. This may not be as simple a questions as it seems. Take the scenario where a “song” is being licensed. The valuable components of a song might include music, lyrics, artwork, video, and the name of the band. If a licensee only seeks to “sample” the song, the license may only grant rights to use a derivative of the music. If the song is being used in a commercial, the license may only grant rights to the chorus of the music and lyrics. In a complex software system with multiple APIs and interfaces, perhaps a license might grant rights in a single interface.

2. Terms of Payment – Who, What, When, How?

The terms of payment should vary with the situation. The most commonly discussed approach is royalties, where the amount remitted to the licensor is based on sales of a product based on the licensed material. This may make sense where the subject of the copyrighted subject matter is simply being resold, such as the song of an artist. Even then further details need to be addressed, such as the frequency of payment and allowance for returns.

A royalty may not be appropriate for some situations. If the license involves use of part of a song in advertising, a royalty . Perhaps the terms of payment require the licensee to pay the licensor based on the number of times the advertisement is broadcast.

3. The term of the license – When does it end?

Many a content author has been disappointed by failure to consider this term. Those authors have entered in an exclusive license with a perpetual term and were unable to pursue alternate means to monetize their intellectual property when no sales (and thus no royalties) were being generated. For this reason, a licensor may use alternate approach to terminate the license. Perhaps the license may be for a certain time period or if net sales drop below a threshhold amount for a certain period of time, the license is terminated.

There are many other terms to negotiate, such as the scope of use, territory of use, warranties, and choice of law. However, these three terms are an excellent starting point for discussion between a potential licensor and licensee.

Licensing is a method of commercializing your invention. When you strike a licensing deal, you grant another company the right to make, use, and/or sell products based on your “intellectual property.” The intellectual property at the heart of any such licensing agreement is typically covered by a patent you’ve been issued. The party granting the rights is the “licensor,” and the party acquiring the rights is the “licensee.”