The 7 Main Clauses of a Developer Agreement

Developer agreements are important contracts that not only guide the relationship between a healthcare or medical technology company (or any other company interested in developing software), it may also impact future software licensing. Because drafting a developer agreement that meets the needs of both your business and the developer, you should have a basic understanding of some of the most important clauses that belong in a developer agreement.

Related: Misuse of Software License: Understanding Your Cause of Action

However, before we delve into this information, we’d first like to state that this piece is just to educate you on some basic terminology. It shouldn’t be used as a guide to creating a developer agreement. Why not? While it’s always great to understand basic information, there’s no way that we could create a how-to guide that could be used by every business in every situation requiring this type of agreement. Sure, boilerplate agreements exist, but they may not be in the best interest of your business or the developer. At Larsen Law, we strive to help businesses create long-term win-win scenarios. This is done in a variety of ways (depending on the needs of the business), including drafting, reviewing, and negotiating a developer agreement. After reading this article and educating yourself on some of the basic clauses, call Larsen Law at 303-520-6030 to discuss the needs of your business and how those may be addressed in your contracts and agreements.

Scope of Services

The scope of any agreement, including a developer agreement, explains the project and what is required of the parties involved. This section should be detailed because vague explanations give room for misunderstandings of the agreement. This section should address the software development process used, whether the development will a singular stage or phased stages, when the final deliverable shall be made, the length of the developer agreement, and whether the agreement covers further development. Sometimes, further development is covered in a future agreement.

The scope should also include a clear timeline that provides specific timing for certain milestones (or deliverables). A list of consequences related to missing the deadline should be included. Additionally, if there are ancillary items (including infrastructure) required for the development, the responsibilities of each party should be explained.

Remember, clarity is key when drafting (or even reviewing) the scope of services. The clearer this portion is written, the easier it can be to navigate the relationship and ensure that deadlines are met.

Technical Requirements

This clause may be known as “Specifications.” Much like the scope, it should be written in a way that is clear and easy to understand. This helps your business lessen the risk associated with the project. Some of the information in this clause includes whether the developers will have their code reviewed against a certain standard, when payment will occur, detailed software specifications, specific language about how risk will be mitigated, and the costs and risks of the project.

When the technical requirements or specifications aren’t clear, software development could end up costing your business more than you thought it would. You could also end up with software that you’re not happy with because you didn’t clearly explain your expectations.

Software Performance and Acceptance Testing Measures

This clause explains the acceptance testing measure for the software that will occur at certain key stages of the development process. This clause should line up with the payment schedule as well as explain that payment occurs when the key stages of the development process are fulfilled and accepted. Additionally, it is helpful to include a timeframe for the performance and acceptance testing measures that explains how long it will take your company to get through this process at those stages.

Non-performance

This clause explains what happens if the developer does not meet the standards listed in the scope, fulfill deadlines, or otherwise present code (or pieces of code) that do not meet the requirements of the project as explained. Non-performance addresses terms that explain how your company will move the project from the current developer to another developer. It may also address the resources, processes, and the responsibility involved in moving the project to another developer as well as who will pay the associated costs. Ownership of the intellectual property and other crucial items are also addressed.

Intellectual Property

Software is considered intellectual property. A developer agreement should include clear language about the intellectual property rights involved. This includes, and isn’t limited to, who owns the intellectual property (including who will own any copyrighted material), the steps that will be taken to ensure that your business is assigned (or owns) the relevant intellectual property related to the software, if escrow is involved in holding copies of the intellectual property (such as code or data) until a triggering event occurs, and any warranties or indemnities.

Licensing

If your business will own the software after it is created, you may need to include a licensing clause that addresses whether the developer is allowed to have a license to use the software after your business has obtained all applicable intellectual property rights as well as whether they are allowed to continue to develop the software. A list of events that would result in the license being terminated should also be included.

Related: Licensing Agreements in a Changing Software World

Fees and Payments

You probably noticed that we mentioned payment several times throughout this article. Both fees and payments should be addressed. For example, will your company pay reasonable upfront fees? Whether there a specific way your business will calculate the costs (including fees) for future work on the project, and whether the developer is allowed to stop working if a fee dispute or payment delay occurs, should be clearly addressed in the agreement.

Consultations for Developer Agreements Available

If you’re in need of having a developer agreement drafted, reviewed, or negotiated for use by your business, Larsen Law is here to help. With more than 30 years of experience, two Masters, and a JD, Denver, Colorado based Larsen Law Offices, LLC wants to help you get an agreement that creates a win-win situation for you and the developer. To learn more or to schedule your consultation, call us today at 303-520-6030!