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Author: Shraddha Sharma, B.A.,LL.B. from Sardar Patel Subharti Institute of law


The introduction of the computer system ushered in a new era of technological innovation and has been largely responsible for the transformation of the technology and network sectors. Two operative platforms, the software and the hardware, run any computer. In layman's terms, we can say that the hardware is the tangible element while the software is the immaterial element. Both of these components are unique from one another in terms of any intellectual property that is awarded to them. Given that it mostly relates to physical things, such as computer systems or computer components like disc drives, memory chips, bus topologies, and monitors, such hardware frequently qualifies for protection under national patent laws.


The person who created the source code for the software or the author is generally considered to be the owner of the copyright to the software, which is protected by copyright laws. Copyright covers more than just ideas and facts; it also covers how they are communicated and presented in concrete form. Therefore, copyright protection is only given to the final tangible medium of expression that can be copied.

Because computer programmes were once thought of as immaterial objects, historically, computers and computer programmes were not given any such copyright protection.The laws governing copyright were further expanded to grant computer-readable software codes the same rights as "literary creations."

The term of "literary work" in the Copyright Act of 1957 covers computer programmes, tables, compilations, and computer databases. The categories of works in which the copyright is granted are outlined in Section 13 of the Act, and this list includes original literary works.

Computer software that does not have a technological effect is protected by copyright law, according to the Indian Copyright Act of 1957. Computer software must be original in order to be granted copyright protection, and it must also have been created with enough skill and effort to demonstrate that it is original.


As was said above, copyright does not necessitate a formal registration in order to acquire the IP right over the work, in contrast to other IP rights like patents, trademarks, etc. Although formal copyright registration offers benefits for demonstrating IP rights in court during disputes, infringements, etc. As a result, the author acquires the copyright to the work upon its creation.

There are two groups of employees—or people—who assist in the creation of software or in the provision of services in a software development company, or in any other business.

The other group of employees consists of freelancers or contractors who are hired to perform a specific or specialised service. Upon completion of that service, the freelancers or contractors are qualified to receive a specific payment from the business, and their employment relationship with the latter ends. A section pertaining to the IP assignment in the contract that the company engages into with both of these groups of people clarifies who owns the IP right when they provide services to the firm.

Any intellectual property developed by employees would typically belong to their employers. With the employee, a different contract for the assignment of IP may be made.

The software or other products that employees produce are regarded as being work produced for payment. As a result, at the time of creation, employers have ownership. To ensure that no intellectual property (IP) belongs to the employee for any creations, the IP assignment clause in the contract has been carefully designed.

Even if an employee writes the software code for a firm that develops software, the copyright for that work would still belong to the employer or the business. However, it would be intriguing to comprehend a scenario in which such a person wrote software during his formal working hours for the organisation he is engaged with.

In such a situation, a business or the employer might have a claim on the software if it is related to the sector or range of services the firm provides, or if it falls within the purview of his employment. A business may decide to hire independent contractors or vendors to carry out tasks for them or even to create software specifically for the business. In such a situation, it is usually preferable to protect the firm's intellectual property rights by entering into a work-for-hire agreement with such freelancers and having the freelancers transfer any ownership rights over the work they particularly made for the company to the company itself.

The onus is on the business to be aware of this and make sure that such a contract is made with the independent contractors. In the United States, unless a contract clearly states otherwise, there is no requirement that any job produced by a freelancer would result in a work for hire. Therefore, it becomes crucial for any business working with freelancers, vendors, or contractors to sign a separate contract transferring IP rights ownership to the business.


Discussing who should own the copyright from the very beginning would be the wisest course of action in both parties' best interests. An internal software development team ought to have an IP assignment clause in their employment contract since they should ideally be made up of company workers. However, the employer should make sure an IP assignment agreement is reached with the development team if they have not already agreed upon such a condition. Once the programme development is complete, this assignment and ownership of the copyright will take place. Also significant is the requirement that such an agreement specifically specify that the work was "work-made-for-hire." Developers must negotiate a licence to the software in the same manner that third parties would if they want to have any right to use it in the future or for various projects. A clause identifying the code as a work-made-for-hire, assigning the code to the client upon completion, or granting the customer a licence to use the code upon completion will therefore be present in any well-written software development contract.


Over time, it has been noted that the largest software development organisations have begun working with outside software development teams to create or create software for them. These businesses see a variety of management and technical advantages in contracting out the work to outside contractors. However, these advantages also invited a few legal issues that the market actors had previously disregarded. In order to avoid these legal repercussions, it is necessary for any firm intending to hire an outside party to create software for them to have a specific checklist. Some of these factors that need to be looked into before or during contracting a vendor have been listed by us.

a. Contractual

The management must select whether or not to get into a formal contract with the external party, which is one of the most crucial factors. By establishing a written contract, you would provide the groundwork for all the other things to come and help to ensure that some crucial details are recorded and not lost in a verbal debate.

b. Possession

Understanding and choosing who is entitled to ownership of the software and intellectual property rights becomes extremely important, as was explained in the article above. Both sides should talk about and bring up the issue of who will own the technology. However, it's possible that some unique background or pre-existing IPs of these vendors won't be transferred to the business because they are clearly their property.

The decision of who will be the owner and any associated limitations are simply one part of the ownership element. Such third-party suppliers may be prohibited from disclosing to any other third parties and from subcontracting to others, among other restrictions.

c. Intellectual property management

The argument for IP ownership may also include this issue, but it is equally important to choose who will oversee the management of the IP and assure its security. This should ideally belong to the owner. However, the business may decide to speak with and solicit feedback from the software vendor.

d. Process administration

From a strictly business perspective, certain requirements for the development, its acceptance criteria, the creation of a beta version, the incorporation of updates, delivery timeframes, etc., must be met. Understanding and include such clauses in a contract that correctly reflects the demands and requirements of the service recipient is always in their best interests.

e. Liabilities and infringement indemnity

When an external software development team is hired to conduct the services, a clause regarding responsibilities and indemnity against any violation of third-party intellectual property becomes necessary. The question of whether we, as service recipients, are entitled to such indemnities and if they are enforceable in a court of law needs to be brought up.

f. Discontinuation

Last but not least, the termination of the contract is a crucial component of every agreement. The right to termination and the repercussions of termination must be specified in the contract's section on termination.


Many businesses in the US and other countries have used using external suppliers or software developers as a strategic tool. The aforementioned guidelines for completing due diligence should be taken into account if one is prepared to choose an external software development team. One should also be aware of the implications of doing so. To understand the role of IP in the software, it is, nevertheless, all the more crucial to look into the features of IP rights with a lawyer or IP specialist.


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