How to Protect IP When Outsourcing Software Development

There are many different ways to protect intellectual property when outsourcing software development. This article discusses some of the most common methods and how they can be applied in a business setting.

Outsourcing software development can be a great way to save money. However, it is important to protect your intellectual property when outsourcing. There are many ways to do this, but the most important one is having a contract in place.

intellectual property and contracts

Technology has infiltrated every area of our life in recent years. Strangers dictate our hospitality experiences, and human interaction occurs online as often, if not more frequently, than it does in person, thanks to Amazon and app-based services.

Our current economy is ripe for disruption, and if you’re starting a company right now, you’re certainly thinking about how to simplify or disrupt a sector that has been static for decades.

Finding software development talent is essential for many non-technical founders—that is, entrepreneurs with a company concept but no technical experience. However, in many places, it seems that the strong demand for tech expertise outnumbers the quantity of competent tech and software engineers available for employment.

As a consequence, many entrepreneurs are resorting to global outsourcing. While this may be a creative answer to your urgent tech skill requirements, you’ve undoubtedly considered how to safeguard your intellectual property while outsourcing software development.

The last thing you want is for your concept and intellectual property to be given over to a prospective rival. It’s a legitimate worry. The greatest thing you can do is develop an IP protection strategy and record it in a company plan, so it’s part of your overall strategy.

If you’re just getting started with your tech-based or SaaS company, it’s a good idea to think about IP (intellectual property) protection as an important element of your strategy. If you ever have to deal with infringers, the advantages of getting protection will be far-reaching. It’s a method to lower your company’s risk.

When your company’s ethos is unique and one-of-a-kind, and you want to safeguard against copycats, IP protection is particularly essential. It’s also useful for monetization and licensing possibilities.

So, if you outsource software development labor, how can you safeguard your intellectual property? Begin by drafting a contract.

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Protect your intellectual property with a well-crafted contract.

In the end, it’s up to you to make sure you’ve covered all of your risk management bases. Starting with properly written contracts is one of the finest methods to do so straight away.

Even if you’re simply employing a one-time software development freelancer for a project, you’ll need a watertight and properly written contract, particularly if you opt to hire abroad.

“The first major step is to make sure that your contract with the software hire will be enforceable in all nations involved,” explains JD Houvener, CEO and creator of Bold Patents. To execute this properly, you need engage an attorney from the individual you will be working with’s home country, as well as any other nations you feel are essential to include, to ensure that it will be enforceable there if it is breached.”

Non-disclosure agreements should be used.

Confidentiality is essential, as is clarity about what you want to keep private. A non-disclosure agreement (NDA) is essential when outsourcing to recruit an overseas employee.

Your NDA should be wide enough to include everything that falls within the purview of the outsourced talent’s job, but precise enough to spell out what the employee cannot discuss, circulate, or keep. It’s OK to use the same standard-form NDA for each hiring as long as the agreement is adaptable enough to allow changes as required.

It’s critical to reiterate what the NDA covers after you’ve parted ways with your contractor when it’s time to call it quits. Conduct a departure interview and remind them of their obligations to keep information private.

Include these important provisions in your employment contracts.

The significance of a well-written employment contract when hiring an employee, particularly an overseas independent contractor, cannot be overstated. The provisions listed below should be included in every employment contract.

Assignment of Intellectual Property Clause

This defines how the company entity conducting the outsourcing/hiring will hold any intellectual property produced by the nature of the job.

Clause of work for hire

This explains how any work done by the talent while working for the employing business would be deemed “Work Made for Hire” as defined by US copyright rules. This implies that any work done by the independent contractor belongs to and is done for the advantage of the employing business, thus the employer is regarded the author even though the work was produced by the outsourced employee.

The contract should state that this provision applies to any software development. While the software code itself is a trade secret, any software that is published, shared, leased, or sold is similar to copyright and should be protected in the same way that a book is. Source code, for example, will almost certainly be retained as a trade secret, but software functionality and user experience will be safeguarded.


Consideration is required for a contract to be legally binding. This is the result of a “quid pro quo” or a “bargained-for” value exchange.

This implies that the talent must be adequately compensated for their efforts, for as via equity or a fee, in order for the partnership to be mutually beneficial. Make it clear how, when, and what kinds of remuneration will be included in your working relationship.

Governing legislation and dispute-resolution forum

These provisions specify which set of laws the contracting parties will follow in the event of a violation, as well as which country’s courts will be utilized to resolve the issue.

Overall, although these rules are a fantastic place to start when it comes to safeguarding your intellectual property, it’s a good idea to consult with your attorney as well as an attorney from the nation where the person you’ll be working with is located.

Keep in mind that software talent is in great demand, and your talent pool is probably aware of this. As a result, your contract should be fair and advantageous to both parties so that your talent is ready to agree to your stringent IP protection requirements. Furthermore, your desire to negotiate a fair and honest agreement may make you a more attractive employer, as well as provide you an advantage in the future if you decide to keep working with your contractor for a longer period of time.

When outsourcing software development, it is important to protect the IP. There are many different ways to do this. One way is through an agreement that outlines what will happen with the IP. Reference: ip law.

Frequently Asked Questions

What happens to intellectual property when outsourcing?

When a company outsources, they are giving the work to another company. This means that the intellectual property rights of the product will be given over to the recipient company.

How do I protect my software IP?

You should ensure that your software is not available to the public. If you are selling your software, it should be under a license that allows you to do so.

How do I protect my IP from investors?

IP protection is a complicated issue and there are many different ways to do it. Its best to consult with an attorney who can give you more information about this.

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