People smiling and looking at a monitor.
Insurance for Your Business Made Simple
What kind of work do you do?
Choose from the nation's best insurance providers
Logos of Insureon's partners.

Know your intellectual property rights on work-for-hire software

A copyright protects your software from other people modifying and reselling it without permission, but it’s applied differently depending on whether you build software for your own company or for clients.

Who owns a software copyright?

Whether you’re developing software on your own or writing custom software for a client, it pays to know your intellectual property rights. For a software developer, one of the most important types of intellectual property is the copyright, which gives its owner the exclusive right to copy, sell, distribute, or adapt a piece of work.

Copyrights are guaranteed by the U.S. Constitution. Without them, anyone could modify or resell your software at will.

Ownership of the copyright for a given piece of software depends on whether you were hired to write or edit the software, or if you came up with an all-new software product on your own. In either case, it's a smart policy to protect your interests with the appropriate legal contracts.

How do you enforce a copyright on your software?

As the owner of a copyrighted software program, you have the exclusive rights to duplicate, modify, and share the software you’ve created. Copyright laws protect your software’s source and object code, as well as original user interface elements.

If anyone else tries to copy, sell, or alter your software, they’re in violation of your copyright. They could be liable for damages or legal penalties.

How do you get a copyright for your software product? You actually don’t have to. Thanks to the U.S. Constitution, your original work is automatically copyright-protected, so you don’t need to apply for protection like you would with a patent. Your copyright protection lasts as long as you live, plus an additional 70 years.

End-user license agreements

Still, it can’t hurt to ensure that users recognize that your software is copyright-protected. An end-user license agreement does the job, alerting users that the software is protected by copyright laws as well as intellectual property laws and treaties.

Such agreements give you a way to specifically prohibit the sale or transfer of the software by the end user. They require the user to purchase separate licenses for each user or computer. At the same time, these agreements limit your liability for damages if the software proves faulty in any way.

End-user license agreements come in two forms: “click-wrap” (accessible electronically on a CD or online) or “shrink-wrap” (printed and included in an actual software package).

Software copyright assignment agreements

If you decide to sell your software product outright to another company, you’ll need to legally transfer the copyright.

A copyright assignment agreement documents that the copyright has been assigned to another party. It lets you retain specific rights that you specify, such as trade secrets and background technology.

This type of agreement protects you from any future liability related to the software. It also releases you from any responsibility for providing training or instruction regarding its use.

Compare small business insurance quotes for your company

How does copyright work if you build software for someone else?

If you’re paid to create software for an individual or business as an employee or independent contractor, the arrangement is known as “work for hire” or “works made for hire,” and different intellectual property laws apply.

Work for hire is an exception to the recognized standard that the person who creates a work is the copyright owner of that work.

According to U.S. copyright law, if you’re hired by someone to create a piece of software, the person or business that hired you is the legal author of that software – not you. Whether or not your name is on the product, the copyright belongs to the company you wrote the software for.

What is considered work-for-hire software?

The U.S. Copyright Act of 1976 defines work for hire this way:

A "work made for hire" is— (1) a work prepared by an employee within the scope of his or her employment; or (2) a work specially ordered or commissioned for use as a contribution to a collective work, as a part of a motion picture or other audiovisual work, as a translation, as a supplementary work, as a compilation, as an instructional text, as a test, as answer material for a test, or as an atlas, if the parties expressly agree in a written instrument signed by them that the work shall be considered a work made for hire. (17 U.S.C. § 101)

So, before you start coding as an independent contractor, it’s important to ensure that both you and your client sign a written contract stating that the software you create will be considered a work for hire.

The document that enforces this arrangement is called a custom software agreement. It includes a statement of work that defines the scope of services you will perform for your client, as well as who will own what rights to the resulting product.

What about software modifications?

If your client asks you to modify a piece of software it already owns, it may be wise to have the client sign a software customization agreement before you begin. This type of contract clearly defines the scope of the work you’ll do. It also requires the client to warrant that they have the necessary licensing rights to permit you to modify the software.

A customization agreement clarifies ownership of all intellectual property rights related to the software, specifies what information should be considered confidential, limits your liability, and allows you to set your price and payment terms.

Get free insurance quotes and compare policies

TechInsurance helps small business owners compare business insurance quotes with one easy online application. Start an application today to find the right policy at the most affordable price for your business.

Explore reviews from our customers
Learn More