Software development outsourcing is very common these days as it has some benefits for the customer – lower costs, access to professional brain power regardless of their location, shorter development time because of getting a full team immediately.
When outsourcing your project development, you will reveal your thoughts and innovations to your partner. Normally, you might be worried about their protection. There are various things you can do to strengthen the security of your property rights. However, the most important thing is choosing the right partner. Do consistently check the reputation of the development company you are intending to contract. Read the reviews, browse the portfolio, take a look at the projects the company has completed. This research can help you to choose whether the company deserves your trust.
At the same time, even with a good faith partner, there are still a few measures you should take to protect IP when outsourcing work to an application development company. We have put together a short checklist that you can use when planning the strategy of protecting your intellectual property. Before that let us see what is IP right for software?
What is an IP right for Software?
IP (Intellectual Property) rights ensure that creative work, which is treated as an asset is legally owned or protected by a company. IP right for software is software or code protected by law under a software patent, copyright, trademark or trade secret. If IP protection is at your highest priority, here are some best practices to avoid negative repercussions from external risks.
Weigh the Intellectual Property Risks-
Enterprises share some IP related to processes, technologies, and applications with their service partners. The sharing of sensitive data raises some security concerns. These concerns can be reduced with strong planning, however nothing helps more than anticipating prematurely what the potential risks are:
Risk 1: Misuse of Sensitive data-
The employees who access your sensitive data may unveil the data. This secrecy rupture may result in stealing source code, credit card fraud, Refund Fraud, Selling of the client’s database to competitors, and identify theft.
Risk 2: Idea or Source Code leaks-
The partnering company may have your competitors as its clients. Developing a part of code or creative idea for your product sometimes discovers its way into the competitor’s product as well.
Risk 3: Improper Proprietary Information Handling-
You can’t expect that everybody should treat your IP rights, data security, and confidentiality as a top priority like you do.
Risk 4: Ownership of Source Code IP-
The most significant resource that everyone considers is the source code, created or improved during the contract. Nobody wants to lose source code IP ownership in their preexisting works due to their partner made some enhancements. The service provider will most likely claim the ownership of the source code or technology enhancements and will demand ownership of any portion of existing work, related with those improvements.
But don’t worry, we have several ways to protect your source code IP leaks ad business.
How to Manage your Source Code IP Leaks Concern?
1. Choose the Right Partner-
You can secure your IP before the first line of your code is written. Choose your service Partner cautiously and work just with a reputable organization that operates under a reliable legal framework. You should give priority to countries like US, Germany, India and Japan, where the security practices are ensured with the developed legal system. India has different laws covering the whole areas of IP. It is a participant to a few international treaties in intellectual property rights.
You can decide to work with based on their portfolio, testimonials and past clients’ references. Reputable vendors will have no issue providing you all the details you request. Working with experts built on integrity will fundamentally reduce the chance of fake dealing and the source code IP theft.
2. Vendor Security Audit-
This shows the care that your partners took in safeguarding your IP assets. Knowing more about your vendor’s work can give you an insight into their safety and security practices.
- Their workstations are protected by Firewall and UTM systems
- No removable media is allowed in & out of the premises
- Unauthorized access to workstation and PCs is prohibited
- A Backup & recovery Policy is in place
Your risk-benefit analysis can show how well the legal infrastructure of the country will protect your IP rights. The employees of the organization are bound by an agreement with clauses to protect Data security, IP rights, Non-Solicitation, Confidentiality, and Non-Disclosure.
3. Sign an NDA-
NDAs, or Non-Disclosure Agreements, are generally signed at whatever new partners come into the relationship where intellectual property is concerned. If you are working with outsourcing providers, sign an NDA with each of them.
Generally, an NDA should define the following points:
The parties that agree to non-disclosure of confidential information-
The agreement must obviously refer to both your organization and the outsourcing service provider. Also, NDAs can be mutual or unilateral. With mutual NDAs, the both parties hope to disclose confidential information to each other, while with unilateral ones just one party (typically the customer) discloses the data that is considered to be confidential.
The information that is classified as confidential-
Both parties signing the agreement must realize what data isn’t to be disclosed. In this manner, whenever any conflict emerges, the agreement will serve as the basis for its resolution.
The scope of obligations-
A non-disclosure agreement should explicitly state what actions it forbids – copying, duplicating, reverse engineering, distribution, etc. By including all possible means of information disclosure, you will ensure strong protection.
The exclusions from the obligations-
Most NDAs contain a clause saying that the two parties will be released from the liability if they unveil the private data if it was received from other public sources or before the agreement was signed.
The duration of the agreement and the obligations-
Generally, NDAs are valid for some years (including the complete time of the project development plus more). Regardless, ensure that when the agreement term expires — you will just drop the non-disclosure obligations while your IP rights remain.
Most IT development companies sign individual NDAs with each of their employees having access to the project data. This is an excellent practice, as it strengthens the security of your IP. Ask your partners whether they have such a policy within their organization before starting the project together.
4. Use Non-competence Agreement-
Together with the NDA, the Non-competence Agreement (NCA) with the service providers can prevent the revealing of your IP assets to the competitors. The idea is to keep the employees from revealing your prized formulas to your potential competitors. Basically, you get dedicated employees dealing with your project restricting them from working on other projects. In any case, NCA typically has a reasonable time frame as it can limit the company from taking future projects even after it has completed your projects.
5. Share Information Selectively-
Another simple approach to secure the source code and your idea is to be particular with what you are sharing. Clarifying the entire thought will be imperative in specific situations while outsourcing your development, but you don’t have to go in detail than necessary. Confine your specifications to the limit of the project requirements.
6. IP Protection with Carefully Crafted Contract-
When you employ a service provider, particularly outside of your country, the significance of a well-crafted contract can’t be understood. The contract can come in numerous names like Invention Assignment Agreement, Proprietary Rights Agreement and Patents and Inventions Agreement yet its essence is the same – who owns the IP assets. The contract deals with ownership issues, ensuring all the IP created for you during the agreement is considered as “Work for Hire.” That implies the IP over code/technology is moved to the employer. You can also have an attorney audit before signing the agreement. If the source code IP is made or compiled explicitly for your business, at that point you can own it. In case the IP is generic to the service provider or significant for them to offer services to others, at that point they will generally retain its ownership.
The above practices can help establish trust with your service provider. This decreases the fear that your source code IP can easily be leaked to your opponents. Considering all the potential IP risks, it is recommended to work with a reputable organization you trust, get appropriate agreements in place and move forward with having ethical and reliable business partnerships!
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