Legal Alert – Negotiating Software and Technology Contracts



Software and technology are fast-moving areas, including the legal aspects and associated issues.  Establishing copyright ownership of software is a strong starting point, but other legal protections are often essential.  These commonly include the following:

  • trade secret agreements;
  • software collaboration agreements;
  • software development contracts;
  • software licensing agreements; and
  • employment contracts which, include sufficient protections.

Copyright in Software and Technology Development

The asset in technology is the software.  Software is protected under Law No. 28 of 2014 on Copyright (“Copyright Law”).  However, the Copyright Law only protects the ideas expressed by coding.  The Copyright Law does not protect the ideas themselves.  Ideas can only usually be protected by trade secret and or confidentiality agreements.

Registering your ownership of copyright in your software in Indonesia on a public register is impossible.  Public registers for copyright tend not to be operated elsewhere in the world.  The lack of public registers means that the creation and ownership of the copyright in software has to be written down.  Creators should mark their software with a copyright notice. This notice is the copyright symbol (©) followed by their name and the year.

The best practice is to keep the draft documents you used during the development of your software to reach the final product.  This documentation helps the creator should a dispute arise to claim copyright by virtue of creation.

Software Development Methods

There are generally two types of methods for developing software.  The Copyright Law will extend to protect the ideas created under either method, namely:

  • Waterfall method – the software development process begins with a detailed specification, and progresses through design, coding, and testing.
  • Agile method – detailed demand for the end product is typically not specified at the outset. But, overall project scope and goals are agreed between parties.

Owner of the IP in Software Development

There will be an assumption that a contractor owns software unless you can prove otherwise.  Good evidence is a written contract detailing your ownership, bearing in mind any verbal variations.  In our experience, when there is a sale of copyright, the issue becomes acute.  An inability to establish ownership does impact the value of the asset.

Often, sales are held up while negotiations take place.  The fallout is that cash settlements are usually paid to the creators for them to assign the copyright and other intellectual property.  A buyer will not proceed without such an assignment.

Software and Technology Contract Problem Areas

There is a growing demand for customizing software to fit specific business requirements.  Often, this will involve the customizing and merging an existing software package or the addition of functionality and the variation of the existing base technology.

With software development projects, it is highly advisable for clarity and protection to ensure you have a suitable software development contract.

Major problems, additional costs, delays or disputes arise when the agreed services, IP ownership, deliverables, and timing are not clearly set out in a software development agreement.

Key Areas in Software and Technology Contracts

The areas to keep a watch on when negotiating software or technology contracts include the following:

  • detail about services;
  • timetable for the project;
  • ownership of the intellectual property rights;
  • acceptance testing;
  • payment terms; and
  • method for changes to the specification and services.


You will need to impose some restrictions to protect your assets and the revenue stream.  Depending upon the project, typical restrictions to consider include the following:

  • stopping reverse engineering;
  • using your software by incorporation into other program – what is your share of the revenue;
  • prohibiting copies of the developed software; and
  • rules on access to source code and object code.

If you need experienced, practical and cost-effective lawyers to draft, review or update software contracts, and advise you on legal issues related to technology matters, please get in touch with Ricky Firman at [email protected] or if you have inquiries about our services, don’t hesitate to get in touch with [email protected] or visit us at

Related Posts