If my startup buys software code, is the seller or buyer responsible for copyright infringments?
The reason I'm asking is this: I currently run a sole proprietorship. I plan to establish a Limited company in 6 months time. The Limited company will take ownership of all software I produce in the meantime. If I write code NOW that infringes on copyrights or violate patents, and the Limited company gets sued for it in 12 months from now, who is responsible? Who takes the hit?
PS: I do of course not intend to infringe on patents, I just want to pinpoint my risks .
PPS: Norwegian law applies, but I guess they will mirror US or UK laws in this case.
2 Answers
I will answer the question from the perspective of law in the U.S.
The appropriate practice is for a founder to assign assets, including intellectual property rights therein, to his corporation pursuant to a written agreement. That agreement should state which party is responsible for any claims alleging infringement of intellectual property rights. In my experience, most founders would want corporate, rather than personal, responsibility - after all, that is a major reason why the corporation was formed.
Accordingly, the answer to your question is: It depends on what the assignment agreement says.
Disclaimer: This information does not constitute legal advice and does not establish an attorney-client relationship.
If I understood correctly, you are worried about your personal risk. And you shouldn't be. From legal point of view the subject that is being sued takes potential hit. In this case it can only be company as company will be he one that makes profits from potentialy patent infringing software.
But in software industry, generally you shouldn't be too worried about patent infringing, especialy if you are a start-up. There are noumerous of reasons why patent owners (usualy large corporations) don't sue small start-ups.
I suggest you to read this essay on software patents which I found very well and reasonable written. It's about reasons why examples when one big corporation sues smaller company are rather rare and in general provides realistic view on software patents related issues.
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There are a number of patent trolls out there that sue **everyone** they can find. Google LODSYS and see what they have been up to. Here's just a small sampling: http://www.fosspatents.com/2011/05/lodsys-sues-7-app-developers-in-eastern.html – Gary E 12 years ago
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From essay previously linked: "But evil as patent trolls are, I don't think they hamper innovation much. They don't sue till a startup has made money, and by that point the innovation that generated it has already happened. I can't think of a startup that avoided working on some problem because of patent trolls." As there is nothing much you can do about patent trolls (except of not doing something), the original question still remains who will take a hit if sued. So I don't know why to rate my answer negatively. – Matej Zlodej 12 years ago
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As I pointed out, patent trolls are busy suing everyone they can find. I know **several** developers who have never made more than $20,000 a year who are in the Lodsys suit pipeline. If you write code (and are not incorporated or organized as an LLC) that infringes on their "patents" they will happily sue **you**, because you have assests, like your house, car, personal possessions, etc. Since you can not afford to defend yourself in court, you are forced to settle with them. They will also happily sue your corporation or LLC, but there the personal risk is minimal. – Gary E 12 years ago
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Sorry I must have had read original question badly. I understood he wanted to know who will have to take responsibility if COMPANY is being sued. Thanks for correcting me! – Matej Zlodej 12 years ago
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Well that was kindof my question, but I guess they cannot sue ME if the COMPANY has taken ownership and responsibility of the software. – Nilzor 12 years ago
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Great article you linked to, by the way. Paul Graham is a great writer. – Nilzor 12 years ago
