Part II: IP issues in early-stage software development

What to do when your product contains third-party proprietary code … and more


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Congratulations! Not only do you have a great idea for a new software product that’s going to change the world, you also (hopefully!) read Part I, regarding key IP issues to consider.

In Part I, we focused on IP ownership and use of open source software. Now we’ll be looking at use of third-party proprietary code and tools, protection of IP rights, product clearance, and product licenses and services.

If you want to use a proprietary code package in your product, the same general rules apply as for open source – make sure whatever license applies to the code is fully complied with, and fully enables your business model.

Some proprietary code (or tool) licenses prohibit any redistribution. Just because you have a license to use the proprietary code does not mean you are permitted to redistribute the code.

Similarly, some licenses preclude reuse in a shared access, “service bureau” fashion, which would preclude reuse in a hosted environment, even if you can otherwise redistribute the code.

Most proprietary code licenses that permit redistribution do so subject to obligations to impose certain contractual terms on downstream users or pay royalties.

If your product includes third-party proprietary code, you may therefore need to ensure that required terms are included in your program/product licenses, and that your customer fulfillment system includes a mechanism to account for, and prompt the payment of, royalties.

Protection of IP rights

If your software product includes potentially patentable inventions, it may be wise to file at least a “provisional” patent application with the U.S. Patent and Trademark Office before you sell or offer to sell your product.

In terms of identifying potentially patentable features, ask yourself what are the three to five primary features of your product that you will emphasize as differentiators from the competition? One or more code modules that embody such features may include inventive, patentable aspects.

Filing a provisional application now gives you a year to decide whether to file full (non-provisional) applications in the U.S. and overseas.

Also, to the extent that you plan on publicizing the product using a catchy name (or, the name of your company), and you plan on using such names in interstate commerce, you should consider filing federal trademark applications on the names and associated logos.

Product clearance

As you approach the latter stages of product development, it may be wise to have your developers prepare a “certificate of originality” that lists who developed the product code what open source is incorporated the developed code and what proprietary code is incorporated in the developed code. This document will help you coordinate the review of open source and proprietary license agreements, as well as your agreements with contractors and customers.

Another way to manage infringement risk is to conduct a “right to use” study to identify unlicensed third party patents or patent applications that might be applicable to the product. Many folks fail to do such searches, and are then surprised by assertions of patent infringement. Others perform such searches after the product is commercialized, reducing the possibility of infringement avoidance. Therefore the best time to perform such searches is when the product is sufficiently developed to perform a search on its main features, while being early enough to change such features so as to avoid potential patent infringement issues.

In addition, such right to use studies should include clearance of your company name, logo, and product names, to ensure they do not infringe trademark rights third parties may have to similar names and logos.

Product licenses/associated services

Finally, you need to think about what the marketing channels will be for your product, and how you plan on achieving your revenue objectives through these channels. This will require the creation of customer, reseller and other product licensing agreements that preserve your proprietary rights and grant a scope of license that is appropriate for each type of recipient.

Customers typically ask for representations and warranties that your products do not infringe the IP rights of third parties. By following the guidance involving product clearance, you will be in a better position to grant such assurances should you need to. Your agreement should also address providing maintenance and other support services. Those are typically ordered on an annual basis, subject to a separate fee.

Mark Chadurjian, a former senior leader in IBM’s intellectual property law department, is of counsel to Downs Rachlin Martin PLLC, with offices in Lebanon, NH, and Vermont.

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