Skip to content

Software-Based Claims Attack Strategies

Under Italian laws, hiring a software-house to produce an industrial application may expose a non-IT savvy company to civil and criminal action filed by the software-house itself and/or by the other software-house that has been called to replace the one the initially did the job. This is the consequence of a lazy attitude towards a properly written agreement and a deep ignorance of the intricacies of the software development’s world.

Here is a fairly usual scenario: a tiles manufacturer needs a software to control the temperature of the ovens used to finally release the products. It asks a software house to write the application, securing in the agreement that “all the intellectual/industrial property belongs to the company”. By doing this the company feels on the safe side and believes to be shielded by no matter what problem.

But.

The agreement didn’t clarify the exact way the IP must be transferred, so the software-house delivers the software on a LICENSING basis and not as a full-ownership transfer. Once the agreement has been signed, the company doesn’t read the following papers at all and thus, de facto, the agreement has been amended (possibly) unbeknownst to the company’s legal department.

Let’s say, now, that the business relationship with the software house breaks and the company finds another partner, giving him access to the source code made by the previous developer. The company sees no problem in doing so since believes to “own” the software so the new developer just start working on the code.

But.

The company failed to identify the code given by the original developer (for instance, by adding disclaimers or comments both in the source and the executable version) thus infringing the moral IP rights that, under Italian Copyright Act belong to the author and cannot be sold or otherwise transferred.

So the software’s author steps in claiming that the company has violated his rights because allowed a third party to access and use a LICENSED code. And when the company tries to blame the new developer he counter the move by accusing the company of infringement of the Criminal Corporate Liability Act (Legislative Decree 231/2001) because of the lack of prior identification of the supplied source code as being authored by a third party.

Lesson learned: under Italian Laws a proper software development agreement should at least contains:

– a precise identification of the source code that has been released, with a duty, on the software-house side, to mark and duly comment the software,

– a clear statement about the IP ownership transfer to the company,

– a clear exclusion of any further change or amendment including the impossibility of turning the agreement from a full-transfer into a license,

– a clear provision that, whatever the legal status of the software, the company is entitled to be given the source-code,

– a clear clause that grants the company, whatever the legal status of the software, the right to allow third parties to access and modify the source code.

Furthermore, since such kind of agreements – once signed – rarely come back on the legal department desks, it is fundamental to train the technical and financial department involved in the further steps, to carefully scrutinize papers and communications so to avoid any “mudding” of the original stipulation.

A final note: when a third party is hired to work on the software, it should be made it clear that the software, while owned by the company, still bears the original author’s moral right, with all the legal consequences.