A technology or software development agreement is an agreement between your company and a third party to develop technology or software that your company will own or license. Your company might not have the headcount or expertise to develop a particular technology or software component, but having that technology or component is critical for your long-term commercial success. The technology or software that you need developed may not exist, so it may not available to license from a third party. Or, it may be less expensive to pay someone to develop it, rather than licensing it, even if it already exists. These are both good reasons to enter into a development agreement.
Key Legal Issues in Development Agreements
Key legal issues in development agreements include allocating ownership of any new development between the developer and sponsor, negotiating rights to license background IP, and commercial terms like payment of development fees and royalties, acceptance procedures for work product and warranties for product quality and infringement.
How Joint Development Agreements Work
Joint development agreements, in which two parties contribute or collaborate in the development of technology are especially challenging to negotiate. The most common ways to allocate IP ownership in these deals is:
(1) The party who invents the IP owns it.
(2) Allocation of ownership based on subject matter.
(3) The IP is owned by the party whose technology led to the invention.
Each one of these allocation methods come with their own challenges. For example, if ownership is based on inventorship, how do you deal with joint inventions or what happens when one party conceives the invention and the other reduces it to practice?
If inventorship is based on the pre-existing technology that led to the improvement, how do you decide which party’s technology led to the improvement or whether it was invented independently.
We work with clients to help understand their business goals and then we develop our negotiating and drafting strategy around those goals to navigate some of these thorny issues. We negotiate hundreds of development agreements and would be happy to help you with yours.