Do you own the software purchased?

Andre Muscat -

An extremely pertinent question and one that is often overlooked. The future belongs to those that put technology at the centre of their outlook, capabilities and leadership mandate.

Many companies, especially those already embracing a journey in digital transformation, find that intellectual property (IP) increasingly comprises the lion's share of the value of their assets.

Software and digital solutions are typically realised through:

  • Access to solutions as made available in public online repositories
  • Purchases from a vendor or intermediary (Reseller/Distributor)
  • Custom solutions built in-house from resources you directly hire/engage on systems and development environments you directly manage.
  • Custom solutions built via outsourcing to a professional services provider.

In particular to custom-built solutions, this is an area that is often realised in hindsight and often too late.

Did I acquire the asset or a license to use that asset?

For software made available through shared repositories/sites, look for something called "Terms of Service" (TOS) that accompanied your purchase.

For software bought/licensed through independent software vendors (ISVs), look for "End-User License Agreements" (EULA).

For software built custom for you by a third-party professional service provider, look for what your money has acquired in:

  • Master Services Agreements (MSA)
  • Statement of Works (SOW)

For software built by a development team fully hired and employed by a company X, that IP would belong to Company X AS LONG AS it is made clear in their employment agreement. Look for terms in these agreements around creational ownership / Intellectual Property.

These agreements may have different names; however, the principle is the same. To fully OWN the software you purchase, you need to have clear, unambiguous ownership of the INTELLECTUAL PROPERTY. Otherwise said, intellectual property represents a unique creation that offers your operation and anyone that uses that creation (solution, process, strategy, sequence etc) a significant advantage. This means that your intellectual property drives significant value within your company. This realisation then powers discussions around copyright, patents, and similar IP protection mechanisms.

When you see terms like "This software is leased, not purchased", it means you are being assigned a RIGHT TO USE that software/component without getting ownership of that software. E.g., by using Office 365 or Google services, you get a right to USE the software in return for payment, but you are not obtaining ownership of that software.

Important!

When engaging professional services, you need to be EXTREMELY clear whether the pricing you get includes:

  • YOU OWNING that intellectual property or
  • The provider will own the code and can do and re-use that code in however form they want. This generally happens in return for lower prices of development.

In today's digital age, where everyone is working to become a tech company, with a digital advantage advancing the value of its assets, this strategic component must be understood, especially if you are positioning your operation as a viable opportunity for someone to buy. Establishing the value and location of your IP is critical for determining sales strategies, licensing opportunities, or transfer pricing for IP assets as part of a merger and acquisition (M&A) transaction.