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Say you get hired to build a company some software. The company wants the source code, but it is OK with you reusing the source code in your other projects. What kind of terms should be included in the contract to cover this?

Client hereby grants Developer a non-exclusive perpetual license to use and modify Source Code.

Is "use and modify" enough, or should the scope be broader, such as translate, copy, interpret, and compile?

Out of curiosity, does things like this ever actually happen? I heard about this proposal through a friend of a friend, because the company wanted complete ownership, but it didn't mind source code being reused.

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This very much depends what you mean by "hired". If you did this as an employee (which I assume you did not) then you should work out a real license which clearly states what you could and could not do with the code.

If you did the work as a freelancer take a look at How to combine the general advantages of "work for hire" and retain my right for reuse the code?. I guess your situation is somewhat similar and you should actually have the intellectual property rights. Which in turn means that you should give your client a license.

If your question is really only about the wording of that one sentence and you are giving up code ownership to the client you should be doing fine with just "use and modify". You may want to include something about ownership of derivative work in this case since you clearly don't want your client to own all code you derive from the current work, right?

I also recommend to read some of the popular licenses like e.g. the Apache 2.0 license.

  • Thanks for the answer. "Which in turn means that you should give your client a license" apparently the client really wanted to own everything, so it would be easy for them to sell it without having exceptions to ownership. Are there any potential problems to transferring all ownership to them but having them agree to give you a perpetual license? To me it seems having a broad perpetual license is the same thing as being the owner. – JamesJay Jun 3 at 23:17
  • With software this is a bit tricky. Since you can make virtually unlimited copies the concept of ownership does not really apply - enter IP. In Germany we have the concept of the "Urheberrecht" which translates to "Creator's Rights" and which cannot be transfered. Here I would grant the other party a non-revokable license with all rights of usage whatsoever. If the license is non-exclusive you can do the same. If you transfer the IP to the customer (depending on your local law) you in turn need the license. The result is the same if you exclude derivative work from the client's ownership. – Christoph Grimmer-Dietrich Jun 4 at 5:17
  • I don't think I follow what you're saying about derivative works. Are you saying that even if you have a license to use the source code, anything made from it could (arguably) belong to the person who granted the license? For example Person X licenses source code to Person Y, person Y uses part of the source code in a new project, person X would own that new project? This seems absurd to me... – JamesJay Jun 4 at 9:36
  • When you license work under the GPL and someone uses that code they are required to release the derived work under the same or a compatible license. Usually libraries have a more lenient license. You can basically have anything in the license including a paragraph which gives you the IP of all works using your code. I guess nobody will be happy to use it, then. Look up Netscape to learn more about this 😊 – Christoph Grimmer-Dietrich Jun 4 at 10:02
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It would look like a bad deal. You're basically saying that your friend believes the code has great value but that he's not being paid what it's really worth so even tho he's selling the code outright he needs some of it back to try and milk it for what it's really worth later on. That doesn't make sense. He should either ask for the right price or only license something narrow like "unique business logic" (just for example) to the client. Exactly what he licences would be determined when feeling out the client, educating them on what's industry norms & possible and offering some pricing options. But you have to push back if the client wants the moon and is only paying for sandwiches.

Licensing deals I've made with clients cover some/all of a.) their ability to transfer the software when they sell their company, b.) their ability to re-sell the software to multiple clients, c.) requirements for identifying me as the author, d.) ability to copy/modify code.

Out of curiosity, does things like this ever actually happen? I heard about this proposal through a friend of a friend, because the company wanted complete ownership, but it didn't mind source code being reused.

Yes. Clients can ask for anything and some developers give them whatever they want. Interestingly, in my experience, the more money a client is paying the less paranoid they act (perhaps because larger outfits have their own software management & developers who understand this stuff better).

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