Order - Contracts List

SW017. SOFTWARE ROYALTY AGREEMENT


Where an employee writes software in the course of employment, the current law in the majority of jurisdictions (including Europe, USA, Japan and Australia) states that the software is owned by the employer unless otherwise expressly agreed in writing that it should belong to the employee. Indeed, the employee’s contract of employment may expressly provide for this. It is not uncommon for an employee with software writing skills (although not employed to carry out that specific task) to recognise that software could be written, for example, to automate/perform existing company tasks more quickly and more efficiently; or provide the company with a leading edge advantage over competitors; or perhaps allow the company to enter a new field of business by the exploitation of new software.

Whatever reason which gives rise to the opportunity, the company/employer and employee/Employee/Developer must discuss and agree if such a potential software development falls within or outside the ordinary course of employment and in either case, if the employee/Employee/Developer is to be separately rewarded for the same, for example, by way of a continuing royalty on the exploitation of the software.

This particular contract is drafted to cater for this latter situation. In this contract, the company/employer bears the cost of the development whether the employee works on its creation during his/her working hours or whether other programmers are contracted to do so ,the contract is left open on this point. This agreement provides for the payment to the employee of an agreed percentage royalty based on the end user price/licence fee of each copy of the software sold/licensed by the company or any distributor or agent.

There are suggested in this Contract several options as to ownership of the software, which must be the subject of specific discussions and agreement between the parties in advance of any development having commenced to avoid any ambiguity, especially because of the nature of the relationship between the parties as employer/employee. This agreement can equally be used if the Employee/Developer is not an employee, but an independent contractor, by amending Clause 8(a).
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