Basics: Software Contracts

Basics: Software Contracts

When addressing such a broad topic as software contracts, the first thing the reader must consider is that there is not a single type of software contract, but rather a plurality of contracts that regulate the entire lifecycle of the product and the different modalities in which it can manifest.

Therefore, we need to provide contractual mechanisms that regulate its creation, including the corresponding allocation of intellectual property rights, its exploitation by third parties, its improvements, the provision of maintenance services, and so on.

Additionally, as mentioned earlier, the regulation of exploitation will depend on the nature of the software itself and the chosen exploitation formula by the rights holders. For example, we find everything from simple licenses, which are sometimes established as adhesion contracts, to contracts with On-site, SaaS, PaaS, IaaS modalities.

Regarding the contract for the creation of the software, Royal Legislative Decree 1/1996, of April 12, which approves the consolidated text of the Intellectual Property Law, dedicates an entire title to computer programs and specifically regulates the specific regime of the salaried author who “creates a computer program in the exercise of the functions entrusted to him or following the instructions of his employer, the ownership of the corresponding exploitation rights for the computer program thus created, both the source code and the object code, shall belong exclusively to the employer, unless otherwise agreed.”

The exploitation rights

As we can see, the ownership of the exploitation rights that we will reproduce below, being specific to works of this nature – as if you are a reader of these basic chapters on intellectual property, you will know that they generally include reproduction, distribution, public communication, and transformation – is the exclusive ownership of the employer, as was the case with commissioned works. However, it should be noted that this refers to ownership of the economic exploitation rights and never the moral rights.

These exploitation rights are as follows:

“a) The total or partial reproduction, even for personal use, of a computer program, by any means and in any form, whether permanent or temporary. When loading, displaying, executing, transmitting, or storing a program requires such reproduction, authorization must be obtained from the rights holder.

b) The translation, adaptation, arrangement, or any other transformation of a computer program and the reproduction of the results of such acts, without prejudice to the rights of the person who transforms the computer program.

c) Any form of public distribution, including the rental of the original computer program or its copies.”

In any case, when regulating a contract of this nature, it is vital to pay special attention to the annex specifying the characteristics of the software to be developed, the schedule of deadlines for execution, and the budget for its development, in addition to the clause assigning the intellectual property rights, which, as we know, must include the temporal, spatial, and material scope of the assignment.

Furthermore, it is crucial to determine whether we can make modifications to the software and obtain a commitment from the developers for its updating or, in any case, for solving any problems that may arise during its implementation. In many cases, a product testing period is established.

The reader must understand that in the world of software, the need for updates and ensuring interoperability with other products is vital to guarantee the viability and durability of the commissioned computer program.

It should be noted that, from the perspective of intellectual property, the contract should reflect that when we refer to the computer program, we are not only referring to the source code but also to all technical documentation and user manuals of the program.

Regarding software exploitation contracts, which will be modulated depending on the nature of the exploitation, it is important to consider that they have evolved from classical licenses where you would install the specific program on your hardware, accept its conditions, and then enjoy it, to using tools that allow you, as a user, to have access to an integrated solution, where the provider hosts both the hardware and software in their infrastructure, allowing you to develop, execute, and manage your own applications without designing or maintaining the infrastructure (this is the Platform as a Service or PaaS model).

The importance of defining

In these contracts, it is crucial to define:

• The spatial, temporal, and material scope of the assignment, which is usually included in the clause called “object”.
• The payment modality and form.
• Possible termination and breach clauses.

Additionally, there are three additional fundamental aspects specific to contracts of this nature, which are improvements, personal data treatment, and technical assistance.

Improvements are essential. Without delving deeply into this topic, which I find particularly interesting, we differentiate between purely technical improvements that extend the useful life of the program and those that allow it to evolve, such as those that add new functionalities.

On the other hand, data protection is crucial because these types of products often collect a large amount of personal data that will likely be processed by third parties. Therefore, it is essential to delimit the purpose of the treatment, the retention period, and the intended use of such data.

Finally, technical assistance can be included as an annex to the contract or as a separate contract, commonly known as a Service Level Agreement or SLA. It usually includes aspects such as the scope of coverage, response time depending on the incident, and, if necessary, compensation in case of failure to meet the agreed terms.

At Letslaw by RSM, we specialize in intellectual property and digital law, and we would be delighted to assist you.