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I'm going to start a side job to create a custom program for a couple guys.
They've sent me a contract, which I'm attempting to understand.
It looks fairly standard, but I'm not sure about the part where they want full copyright to the finished work.

Now, I'm mostly ok with this, as I don't have the time to be their full time support person, they have a guy that can probably do day to day tweaks, and they would just call me in when a major change is needed.

What I'm wondering about is this all normal (such as a work for hire), and is there a way to ask for a royalty if by some chance they sell the software to Google for a billion dollars or something crazy?

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3 Answers

up vote 5 down vote accepted

In our line of work we sell two things:

  1. Our work (outright) and the rights to copyright it, OR
  2. The right to use the work (a license), and retain the copyright.

We use the first approach when it's unlikely that we can market the same work to other interested parties because of its uniqueness. We hand it off. The client can use it, or flush it down the toilet. We've been paid in a 1:1 ratio for our time vs the work product, and the client owns it. We assume no risk other than not being paid for our time.

We use the second approach when it's a lot more likely that we can market the same work to other interested parties. (Think of Itunes, or app stores, or even the 'old' music business). We are betting on spreading our production cost out over lots and lots of purchasers. If we can earn more than our production cost, that's great -- but just to break even is a great achievement. Often with this approach, we assume all the risk (in other words, work for free) and earn money only through licensing.

I don't think any client will be willing to pay you for full development cost AND licensing that you're going to offer to other parties as well (namely, the client's competitors).

You'll have to decide on whether this opportunity is your Sure Thing before you even think about a licensing approach, because you may end up losing your shirt in the process.

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What would happen for products of type 1 if the client doesn't pay? Do you retain copyright until full payment? –  feklee Mar 27 at 8:59
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Implicitly, it works no different than if the client were to visit a store, pick up a $20 item and leave $19 with the cashier - the ownership for the item doesn't change! But this can also be stated explicitly in your contract just for sake of clarity. –  codenoire Mar 27 at 13:45
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Welcome to the world of freelancing :).

To reply: Yes that is normal what they ask and we face that every day.

Now, what can you do about it? Options are:

  1. Give them full copyright to the code or give them ownership of the code. Most of us do that.

  2. Refuse to give code since it's you intellectual property. Some guys do that as well and this is especially present in game development where you protect your code from being used as a template for other games.

Now, we can start a long discussion on pro and cons of this approach, but it will end up on the sum-ups I stated above. You can probably give the rights on some simple things, and negotiate different terms when you get a more complex project. I would do that.

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Unfortunately it is normal. I usually push back on such things, but sometimes we can achieve an arrangement. For example, when I wrote some whitepapers for Microsoft (which were then published) they gave me back a license under the Microsoft Permissive License, which was good enough for me.

I usually charge a premium for handing over copyright unless I get a permissive license that provides for my own ownership of further developments on it back. I can do that because of the work I am in. I am not sure everyone can.

I am happy to accept a license back which does not allow me to sell licenses for the work as I initially wrote it, but would allow me to sell licenses to any further modifications I make. But what I usually don't want to see is what happens if I write something that looks superficially similar and then there's a copyright infringement lawsuit. The customer has some legitimate needs too, and those can be addressed.

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