IP Rights of Software!
Discussion
Sticky situation with one of the in-laws:
Small Family Business
Shareholdings: Owner 75% Son 20% Niece 5% - three different share classes, but all directors.
Niece has done online courses unbeknowns to the business, and has recently revealed that she has spent the best part of two years developing some software.
This software is now in a saleable position, and has revealed it to the company as something that can potentially be sold by them.
Instead of existing products that they were re-selling, as it outperforms them.
Owner has listed the product on the company website for sale, and sales are already being made.
No additional renumeration has been mentioned, despite being asked for ("lets see how it goes" type of thing) - and the running costs during development and production are still borne by her. She also has mentioned that there is no dispute in that she worked on it in her own time, on her own equipment, this is well documented.
She is worried that the company(the owner) now own it, or that the sale of the product to end users implies ownership.
She is also worried that one of her roles within the company was finding other peoples products to re-sell, so she may not have IP rights.
As it is a family business affair, no real contracts of employement exist apparently, and if they are did they are long gone. (whatever that means)
So the question is, who would you assume owns the rights to the software?
Small Family Business
Shareholdings: Owner 75% Son 20% Niece 5% - three different share classes, but all directors.
Niece has done online courses unbeknowns to the business, and has recently revealed that she has spent the best part of two years developing some software.
This software is now in a saleable position, and has revealed it to the company as something that can potentially be sold by them.
Instead of existing products that they were re-selling, as it outperforms them.
Owner has listed the product on the company website for sale, and sales are already being made.
No additional renumeration has been mentioned, despite being asked for ("lets see how it goes" type of thing) - and the running costs during development and production are still borne by her. She also has mentioned that there is no dispute in that she worked on it in her own time, on her own equipment, this is well documented.
She is worried that the company(the owner) now own it, or that the sale of the product to end users implies ownership.
She is also worried that one of her roles within the company was finding other peoples products to re-sell, so she may not have IP rights.
As it is a family business affair, no real contracts of employement exist apparently, and if they are did they are long gone. (whatever that means)
So the question is, who would you assume owns the rights to the software?
IP in theory belongs to her, as she has developed it outside the business.
She holds all the cards, as it runs at her cost, so she can presumably turn it off. If she has effectively offered it for free to the business, and they are merrily selling it, she might need to have a grown-up conversation that starts "so, you're selling NieceSoftware v1, for £10, I expect to see £4 of that in 30 days, thanks"
She holds all the cards, as it runs at her cost, so she can presumably turn it off. If she has effectively offered it for free to the business, and they are merrily selling it, she might need to have a grown-up conversation that starts "so, you're selling NieceSoftware v1, for £10, I expect to see £4 of that in 30 days, thanks"
In the absence of any agreement to the contrary, by default the IP is hers. This would apply even if the company had paid her for her time. That's why contracts of employment and contractor engagements for software developers state that the developer agrees to sign over copyright and IP to the company.
Ideally she needs to get some proper legal advice and get the commercial terms under which the company is selling her software under a non exclusive licence agreed asap.
Ideally she needs to get some proper legal advice and get the commercial terms under which the company is selling her software under a non exclusive licence agreed asap.
Firstly she needs to make sure she has the source code secured away, off the company premises or computer hardware. Then she needs to work out what she wants. At the moment she's a very small minority shareholder & if the owner is like those I've known she may not even have voting rights.
Then she needs to get legal advice. Even if she is happy at the moment she needs to nail her rights down to guard against any future disputes. If the software is so much better than the competition & the company does well she should get a fair percentage of the the benefit, given that without her the product dies.
Then she needs to get legal advice. Even if she is happy at the moment she needs to nail her rights down to guard against any future disputes. If the software is so much better than the competition & the company does well she should get a fair percentage of the the benefit, given that without her the product dies.
Purity14 said:
Owner has listed the product on the company website for sale, and sales are already being made.
Owner may be assuming she has given him the software.The time to discuss terms was before handing it over, not afterwards! So whilst she might be brilliant at software, she's dropped the ball on the business side. Hope she can get it back.
Update:
She has all the sourcecode and logs of when she worked on it.
Owner initially said "lets see how it goes" before putting a value on it.
Then it appears on their website with it being sold already, she then tries to agree percentage on the product and gets another "lets see how it goes".
I dont think its going to work out well for her unforunately.
She has all the sourcecode and logs of when she worked on it.
Owner initially said "lets see how it goes" before putting a value on it.
Then it appears on their website with it being sold already, she then tries to agree percentage on the product and gets another "lets see how it goes".
I dont think its going to work out well for her unforunately.
When you say it's being sold already on the website - what physically has she handed over? An installer that customers are downloading? Or something else? Is the software branded as a company product? Who is supporting it ? Has she got the ability herself to remove it from the website or at least mark it as "out of stock" until commercials can be agreed between her and the company ?
I have a bit of (bitter) experience in something similar.
The IP of the product does not automatically rest with the Niece. Even in the absence of an employment contract or heads of agreement, the fact that she is a Director, there exists implied terms that she acts in the best interests of the company which a judge 'may' rule includes product development, regardless of if this was done outside of work time - which cannot be established because there is no contract to determine what 'work time' actually constitutes. Had she not told them about the software and gone on to market it herself, she would also have been in breach of these same implied terms.
The only thing I can see where she may have a claim is the reimbursing of any cost she incurred in developing the software.
Whilst there is a strong moral argument in her favour, she also needs to recognise that she has a shareholding in the company which may increase in value as a result of her work and without any of the financial risk compared to others.
From a practical perspective, I'd urge her to adhere to the principal that you catch more flies with honey than you do with a swat.
She's in good company - have a read-up on how Post-It notes were invented. Not exactly the same but some similarities nonetheless.
The IP of the product does not automatically rest with the Niece. Even in the absence of an employment contract or heads of agreement, the fact that she is a Director, there exists implied terms that she acts in the best interests of the company which a judge 'may' rule includes product development, regardless of if this was done outside of work time - which cannot be established because there is no contract to determine what 'work time' actually constitutes. Had she not told them about the software and gone on to market it herself, she would also have been in breach of these same implied terms.
The only thing I can see where she may have a claim is the reimbursing of any cost she incurred in developing the software.
Whilst there is a strong moral argument in her favour, she also needs to recognise that she has a shareholding in the company which may increase in value as a result of her work and without any of the financial risk compared to others.
From a practical perspective, I'd urge her to adhere to the principal that you catch more flies with honey than you do with a swat.
She's in good company - have a read-up on how Post-It notes were invented. Not exactly the same but some similarities nonetheless.
It is a seperate website (niece.com) seperate server and database and what have you, all paid for by her.
It is branded by her own label and logo which is her design and a supplimentary app uploaded to the app store under her name also.
They have listed the product on familybusiness.com, and they are collecting the money from users. (They sell other products)
Its a monthly payment subscription affair, sort of like a reseller, but they arent paying her, they are "seeing how it goes".
Ive been messaging all day, shes stressing about it because her uncle is getting very irritated talking about it - he sounds like a baby.
If I get an update ill post it up.
It is branded by her own label and logo which is her design and a supplimentary app uploaded to the app store under her name also.
They have listed the product on familybusiness.com, and they are collecting the money from users. (They sell other products)
Its a monthly payment subscription affair, sort of like a reseller, but they arent paying her, they are "seeing how it goes".
Ive been messaging all day, shes stressing about it because her uncle is getting very irritated talking about it - he sounds like a baby.
If I get an update ill post it up.
The issue here is about payment for selling through. If her "supplementary" app is a thin disguise for the actual function, Apple and Google are going to want their ridiculous slice of the pie, so she is a bit stuck for selling it, especially if the family business model is working well.
Hard conversations ahead, and the idea of stopping sales right now is a good one. Maybe the current users can become a test bed for production, because its unlikely they will want to pay twice.
Hard conversations ahead, and the idea of stopping sales right now is a good one. Maybe the current users can become a test bed for production, because its unlikely they will want to pay twice.
StevieBee said:
The IP of the product does not automatically rest with the Niece. Even in the absence of an employment contract or heads of agreement, the fact that she is a Director, there exists implied terms that she acts in the best interests of the company which a judge 'may' rule includes product development, regardless of if this was done outside of work time - which cannot be established because there is no contract to determine what 'work time' actually constitutes. Had she not told them about the software and gone on to market it herself, she would also have been in breach of these same implied terms.
The only thing I can see where she may have a claim is the reimbursing of any cost she incurred in developing the software.
I agree with the director status, that is a tough one.The only thing I can see where she may have a claim is the reimbursing of any cost she incurred in developing the software.
I think the reimbursement of the costs of creation in time as well as money would be the best result in this scenario too.
Ill tell her to send him a bill for 18 months of dev work, that will cheer him up :P
Purity14 said:
Update:
She has all the sourcecode and logs of when she worked on it.
Owner initially said "lets see how it goes" before putting a value on it.
Then it appears on their website with it being sold already, she then tries to agree percentage on the product and gets another "lets see how it goes".
I dont think its going to work out well for her unforunately.
I think she needs to issue that the company withdraw from selling it, without any agreement as to her "share"She has all the sourcecode and logs of when she worked on it.
Owner initially said "lets see how it goes" before putting a value on it.
Then it appears on their website with it being sold already, she then tries to agree percentage on the product and gets another "lets see how it goes".
I dont think its going to work out well for her unforunately.
EG I'd be expecting on a £1000 license / software only order as a reseller to make between £150 and £300 depending on the vendors kickback in general so use that as a starting point.
Just had an update.. lol
He told her that she should have made the product years ago. And that she wasn’t contributing as much financially as the son.. and that she was just focusing on support and acquiring new products to sell whilst the son was focusing on sales.
Now it’s selling he said that her share of profits will be greater, and that they are all on the same team with it being a family business.
But that she is happy to go on her own and try and sell it to him. And that he may consider reselling it.
She said she’s just going to work on getting better and just look for a new job, don’t blame her!
He told her that she should have made the product years ago. And that she wasn’t contributing as much financially as the son.. and that she was just focusing on support and acquiring new products to sell whilst the son was focusing on sales.
Now it’s selling he said that her share of profits will be greater, and that they are all on the same team with it being a family business.
But that she is happy to go on her own and try and sell it to him. And that he may consider reselling it.
She said she’s just going to work on getting better and just look for a new job, don’t blame her!
Purity14 said:
Just had an update.. lol
He told her that she should have made the product years ago. And that she wasn’t contributing as much financially as the son.. and that she was just focusing on support and acquiring new products to sell whilst the son was focusing on sales.
Now it’s selling he said that her share of profits will be greater, and that they are all on the same team with it being a family business.
But that she is happy to go on her own and try and sell it to him. And that he may consider reselling it.
She said she’s just going to work on getting better and just look for a new job, don’t blame her!
Are there other sites that sell the same sort of software? If there are she could look at offering it to them as well, at the going rate of course. At the current company she's earning via the profits from increased sales, at the other companies she'd be earning from direct sales of her software (& a percentage of the ongoing subscription charges of course). He told her that she should have made the product years ago. And that she wasn’t contributing as much financially as the son.. and that she was just focusing on support and acquiring new products to sell whilst the son was focusing on sales.
Now it’s selling he said that her share of profits will be greater, and that they are all on the same team with it being a family business.
But that she is happy to go on her own and try and sell it to him. And that he may consider reselling it.
She said she’s just going to work on getting better and just look for a new job, don’t blame her!
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