Notice: The following text is a rant and entirely my own opinion, not being a lawyer by profession, but a developer at heart.
Over the past month or so I was negotiating with a US-based company who wanted to retain my services as an expert on Rich Text and HTML parsing. Let me share a problem I had with a certain section in the contract that I was asked to sign, a problem that related to my previously created code and for-pay components.
Even experienced developers might be overly anxious to sign their next big contract to put food on the table without knowing what rights in their works they are signing over by this. This should serve as a gentle reminder: Better to read through the contract, all 19 pages of it, than having to be afraid that you inadvertently giving away your crown jewels.
If I learned one thing from Steve Jobs then it is to not trust contracts that are longer than a single page …
The “boilerplate contract” they sent me contained this section. Emphasis mine.
4B. Pre-Existing Materials. Subject to Section 4.A, Consultant agrees that if, in the course of performing the Services, Consultant incorporates into any Invention or utilizes in the performance of the Services any pre-existing invention, discovery, original works of authorship, development, improvements, trade secret, concept, or other proprietary information or intellectual property right owned by Consultant or in which Consultant has an interest (“Prior Inventions”), (i) Consultant will provide the Company with prior written notice and (ii) the Company is hereby granted a nonexclusive, royalty-free, perpetual, irrevocable, transferable, worldwide license (with the right to grant and authorize sublicenses) to make, have made, use, import, offer for sale, sell, reproduce, distribute, modify, adapt, prepare derivative works of, display, perform, and otherwise exploit such Prior Inventions, without restriction, including, without limitation, as part of or in connection with such Invention, and to practice any method related thereto. Consultant will not incorporate any invention, improvement, development, concept, discovery, work of authorship or other proprietary information owned by any third party into any Invention without Company’s prior written permission.
This wording would have codified a commercial right in my previously written code that is simply not acceptable. If I make use of any prior invention – like a commercial component or even open source code of mine – I grant the Company a broad license to start selling my works by themselves. I can understand that they want to be able to sell the software I am creating for them, but any license to use my “prior art” should be limited to within the works I create for them.
This might not be an issue for most developers who don’t have a portfolio of for-pay components that they are deriving part of the income from. Also the Company mentioned told me that they would “never do such a thing” and that they are “not in the business of doing that”. But why – if you permit my question – does your contract include this wording then?
The proper way to deal with a subject matter expert who brings prior inventions to the table is to insure a free and ongoing license to use of code that the developer chooses to include. This royalty-free license should allow the Company to sell their software to another party without having to check on the developer. I can understand the need for a US-based startup to own the rights to all software which contractors will build for them, so that they can sell their business with no problems to Facebook, say for a Bazillion Dollars. But those rights should be fair to their service providers.
This episode leaves a bad taste in my mouth. I feel like I’m a plumber who is called to fix an urgent plumbing problem, only to be presented with a contract that the caller also wants to have the right to sell my tools and materials. No Go!
Categories: Business
” if, in the course of performing the Services, Consultant incorporates into any Invention or utilizes in the performance of the Services any pre-existing invention, ….”
I think the key word you didn’t hilight was “incorporates”.
If you use something you previously invented to solve their problem you are promising to let them use it.
You are of course free to not use any of your previous inventions to solve their problems.
You are also free to say that you could save them some additional money by using a previous invention but that it would require additional licensing (and that you won’t be using it unless they do license it separately.)
I agree the language is broad. There can be another reason for it (having been on that side of the table): the company not wanting to have to track what source code they take in can be used where.
That one’s not too bad. The problem it’s trying to solve is where consultants reuse code that they may not fully have the rights to and possibly bind the client to paying for something they didn’t plan on. If you don’t pull in any of your products, then you don’t have to worry about it.
If you are seriously concerned, and you possibly should be, you need to have a lawyer review these. You can kinda sorta get away with not (don’t tell my lawyer) if you’re doing pure work for hire. If you’re doing something more complex, like adding features to an existing product of your own that you’re using for a project… then you need a lawyer.
I do this all the time. I have my own contract, which most people just sign, and then we get to negotiate everything else. It can be expensive, but there’s no way around it.