How not to lose intellectual property rights to software

Sourse: AIN.UA

Is your business related to the development or use of intellectual property? This is a difficult and specific type of asset. If you do not consider its protection, you may lose not only the right to your own ideas, but also money and reputation.

We have sorted out all the “bottlenecks” that need to be taken into account in order not to lose intellectual property rights.

  1. When signing the contract on the software development, it is crucial to set the terms for distribution of intellectual property rights.

In most cases, programmers are individuals-entrepreneurs who develop software on behalf of customer companies.

Intellectual property law and IT industry are closely related, as computer programs are protected in the same way as literary works. This protection mechanism applies to all types of computer programs, which can be the information systems, Internet clients, database management systems, security tools, text and graphics editors, video games, drivers for various devices, etc.

The computer program is protected by copyright as a single object and consists of: source code, object code, accompanying materials and documentation received during the development of the program, audiovisual display of the program.

For this reason, in order not to infringe someone’s copyright, as in the case of employment, it is necessary to separate which rights to the computer program belong to the customer, and which ones – to the performer.

The legislation of Ukraine stipulates that the author of a computer program is a programmer or a group of programmers who worked on its development. However, they may not wholly own the software copyright.

If the customer company does not employ the programmer, but signs a contract with the programmer executing the contract as a individual -entrepreneur, then such a contract must introduce the following:

  • the procedure of the software property rights distribution;
  • procedures and terms for the transfer of the product to the third parties;
  • the rights to change the program without the knowledge of the author.

Under such a cooperation structure, the author, as a rule, fully transfers the results of his work (ready-made programs) to the customer. The programmer will continue to be the author, but the disposal right for the work results of this author will have the company-customer. In this respect, non-property rights are retained by the programmer, and property rights can be transferred to the customer on the terms specified in the contract.

Recommendation: if you want to reserve property rights to the ordered software, you should responsibly enter into the agreement with the programmers. This minimizes the risk of future conflicts.

  1. Formalize all relationships with employees in writing

Do you think that everything your employee creates will automatically be the property of the employer? No it will not, especially when it comes to intellectual property issues.

Let’s clarify how the rights are distributed when an intellectual property object is creating by the employee. Such an object is called a “work made for hire”.

«Work made for hire» shall be characterized with following key features:

  • the object of intellectual property is created using the experience, production knowledge, commercial secrets and equipment of the employer;
  • the object of intellectual property is created by the employee during the term of the employment contract with the employer and at the expense of the last;
  • the creation of the object of intellectual property was included into the list of the employee’s job responsibilities under the employment contract (job description) and refers to the specifics of the employer.

If the employer and the employee have entered into the contract, the property rights to the ” work made for hire” may be distributed between the employer and the employee in accordance with its terms. In that case, if the contract does not provide such conditions, the rights will be distributed in accordance with the applicable law.

What does the law say in this case?

The Civil Code of Ukraine stipulates that intellectual property rights to an “work made for hire” belong to both the employee and the legal or natural person – the employer, unless otherwise agreed by the parties in the contract.

At the same time, the non-property rights to the “work made for hire” belong to the employee who created it. Such rights can be divided into two categories:

  • the right to recognize a person as the author of the intellectual property object;
  • the right to the inviolability of intellectual property.

Non-property rights do not depend on the distribution of property rights and remain the property of the employee forever, even if all exclusive property rights belong to or are transferred to the employer. But the parties to the contract may agree certain order of their use by the employer.

Now it is visible, that the legislation in the field of intellectual property is quite flexible. It allows the parties to the contract to step away from the general rules and to decide on who will own what and to what extent before entering into the cooperation. Using this opportunity, the parties can agree whether employer will be granted with all exclusive property rights to the “work made for hire” or only particular part of these rights.

Recommendation: enter into a written employment contract with the employee. Include into this contract provision under which the employer becomes a lawful owner of all property rights to the intellectual property at the moment it was created by the employee. This provision will allow to receive rights to the already created intellectual property object or one that will be created in the future, as well as to avoid litigation.

  1. Enter into a non-disclosure agreement on the confidential information and fair competition

Business negotiations between potential partners require special care. Probably everyone understands that business is competition, and information is gold. Therefore, any carelessly disclosed information to your investor or partner may prompt him to create or develop ideas, processes or technologies that you have already invented but not properly protected by a registered trademark, patent, etc.

Nothing will prevent your partner from using unprotected information for their business purposes, developing it, improving and registering their intellectual property rights.

The non-disclosure agreement on confidential information and fair competition (NDA) will help you here crucially. Such NDA should be signed before any negotiation process and, most importantly, before any proxies are involved in its conduct.

In the NDA describe in detail the information you intend to share. Introduce the purpose of the disclosure to your investor or partner, as well as provide an adequate responsibility measure for intentional or unintentional disclosure of such information to third parties.

Before the cooperating, you should also mention whether you are not bound by non-disclosure obligations with any other third parties and take this into account in your NDA. Excessive caution has not harmed anyone and may preserve your intellectual property rights.

Such recommendations are more relevant for working businesses , but a little – for startups, which represent nothing but the ideas. As a rule, investors do not really want to sign such NDAs with the startups.

Recommendation: before negotiations or cooperation, always sign the NDA.

  1. Check your ideas on originality

Beginners in business often make the same mistake: create the concept of future business in their head, come up with its name, corporate identity, launch into production all of the above, but do not burden themselves with the question of checking the availability of the brand.

Many will object and say that anything similar was not found on the Internet, but this is only a superficial analysis. It is crucial to work with a qualified patent attorney, who will conduct a proper professional research for similarities. Independent surface analysis can lead to a claim from the trademark owner who registered such a mark earlier. If you do not respond to the legal requirements of the trademark owner and do not cease its activities under someone’s already registered name, you risk to face a lawsuit. As a result of court hearing you can be obliged to dismantle all your signs, pay the penalties, reorient the business processes, search the new name for your business.

Recommendation: check the originality of all names in cooperation with the patent attorneys, not just on the Internet.


Neglecting the management of intellectual property in the IT sector is a very risky matter. It can affect your business as a whole and lead to its last final days. Entrepreneurs shall be very careful with their own information, processing of documents related to the intellectual property, as well as relations with their partners and employees.