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I have the opportunity to develop a niche solution with the prospect of making some recurring subscription revenue.

The prospect sent me an RFP which states that one of my provisions is the solution's source code and a non-compete agreement within 100 miles of his base city.

While I will be using a hardware key (dongle) to copy and usage protect the application making it unusable without the hardware key, I wonder what can I do to protect/enforce/prevent/maintain source code copy rights? Having the source code they can redesign the solution and reproduce it without my consent.

Should I charge a substantial amount for the source code while discounting the monthly subscription fee in hopes to get the proposal approved?

Are there any other creative ways to close this sale with a win/win proposal?

I appreciate your opinion.

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3 Answers

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Depending on your situation here it might not matter for you. If you are contracting for someone as part of an RFP to build a custom solution that work is most likely considered "Work for hire" under US law.

This means that the actual copyright holder on the created solution is actually the customer and NOT you.

Personally, custom solutions where you try to retain rights, is NOT something that most people want to get into. It is a sticky legal situation and my legal advisers have typically frowned upon it.

Additionally, if you are signing a non-complete agreement as well, that is going to limit you on both re-distribution IF you are able to retain rights, but also for creating a similar application, even if no code is duplicated.

I would highly recommend talking to a legal advisor.

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In the US... Code copyright ownership really depends upon on the contract with the customer. Without a contract stating such, the software is not a "Work For Hire" at all; the original creator owns all copyright. But +1 talking to a legal advisor to find out specifics. – Reboog711 Jan 2 at 20:29
I'm a bit confused about copyrights but will seek legal counsel. Thanks for the clarification. – vladsanchez Jan 3 at 15:50
@reboog711 - Very interesting, my lawyer stated that unless the contract said otherwise, the default would be a work-for-hire situation. That I had to explicitly state it in my contracts if it was not to be. – Mitchel Sellers Jan 13 at 21:24
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Dear Mitchel,

Thanks for your diligent and sound advice. I appreciate it mostly because I dont have legal counseling resources available right now.

You're the second person that advised me against the NCA. "Work For Hire" is exactly what I want to avoid at all cost since they have rights to everything and anything I produce for them.

Another friend suggested about proposing an exclusive distribution agreement around a radius of the prospect's business area instead of the NCA.

Do you think a beta testing program where prospects volunteer the essentials needed to develop the product in exchange of limited-time discounted licensing would work better?

I'm researching about creative marketing strategies and any additional resource would be welcomed.

Thanks again for your generous advice.

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If revenues are your concern, there may be another way to protect your revenue.

If your software is sufficiently complex, license it liberally to the organization and for a low (e.g. $0) price. Then make your money on support, evolution, proprietary test suites, consulting etc.

If the organization is not in the business of software distribution, they would be foolish to get into the game of redistributing your software because then they would have to set up support, evolution, consulting, indemnification, etc. It's just cheaper to hire you.

If they're smart enough to reverse engineer and improve upon your solution, and do it cheaper than if they hired you for support, evolution, test suites, and consulting then you are screwed. However, it is surprisingly expensive to reproduce a working application cheaper than just hiring the original brains behind it.

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Good points Jay! Thanks for your contribution. – vladsanchez Jan 16 at 16:13

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