When developing software (“software development”) and using it commercially, some legal aspects have to be considered in order to avoid possible legal problems.
In the last few years of my work, the same issues have emerged time and again, some of which are underestimated and others ignored by software developers. The local IT startup industry suffers from something that is rarely observed in this blatant form abroad: the complete refusal of legal assistance. The idea of budgeting a fixed portion for ongoing legal costs overwhelms many – and ultimately leads to unnecessary additional costs.
Legal aspects of software development
Already in the development process of software there are legal aspects that have to be considered. By taking these aspects into account, software developers can minimize legal problems on the one hand and ensure successful commercial exploitation of their software on the other. On the other hand, unnecessary additional costs are avoided that arise when problems are only identified after completion and the development process has to be restarted.
It is therefore advisable to seek the support of legal experts, especially specialist attorneys for IT law, when developing and marketing software. These can assist in drafting contracts, complying with data protection regulations, reviewing open source licenses and implementing confidentiality measures. By working with such experts, developers can ensure that they take all relevant legal aspects into account when developing and marketing their software and thus avoid potential legal consequences.
When developing software that processes personal data, the applicable data protection laws and regulations, such as the General Data Protection Regulation (GDPR) in the EU, must be complied with. This includes the implementation of data protection principles such as data economy, purpose limitation and transparency.
Copyright in joint developments
When software is developed jointly by different programmers, it is important to reach clear agreements on copyrights, intellectual property rights and rights of use to the developed software. This can be regulated by contracts such as work or development partnership agreements.
When using open source software components, the corresponding licenses and their conditions must be observed. Some open source licenses may impose restrictions on commercial use or require disclosure of the source code of the developed software.
When exploiting software commercially, one should be aware of the possible liability risks that may arise from errors, security vulnerabilities, or violations of legal regulations. To minimize the liability risk, developers should include appropriate liability clauses in their license and distribution agreements.
In many jurisdictions, software developers are required to provide a specific warranty for the software they develop. To meet these warranty obligations and defend against potential claims, developers should make clear agreements about the scope of services, bug fixing, and updating of the software.
When developing software, protecting trade secrets and confidential information is critical. Developers should take appropriate protective measures, such as using non-disclosure agreements (NDAs) and implementing source code access controls.
Security of developed software is an important aspect of building customer trust and minimizing liability risks. Developers should follow cybersecurity best practices, proactively identify and fix security vulnerabilities, and regularly audit the software for security risks.
Coming too late…
The consequences too late consultation …
That is why it is advisable to seek legal support already during the development phase of the software and not only at the end, when the software is ready for the market. Unfortunately, this is exactly the standard scenario when developers turn to us: The software is ready, you want to finally bring it to market, and now all you have to do is sign off on it. You notice this quickly when someone contacts you and already emphasizes in the request that a maximum of one hour of consulting time will probably be enough.
Overall, early legal support during software development can help to avoid potential legal problems and make the development process as a whole more efficient and secure. This, in turn, can contribute to a successful market launch of the software and a lower legal risk in the long term. There are several concrete reasons why early legal guidance during software development is beneficial and money well spent – even if you would prefer to develop only software from the start. Mirroring the above aspects are these:
- Legal risks are identified early: Early legal advice allows potential legal problems to be identified and addressed in the development phase before they lead to costly delays or adjustments.
- Compliance with data protection regulations: Data protection is an essential aspect of software development, especially when personal data is processed. An attorney can help understand the requirements of applicable data protection laws and implement appropriate data protection measures during the development process.
- Open Source Licenses and Copyright: Early legal advice can help ensure that the use of open source components and collaboration with other developers is in compliance with applicable licensing and copyright laws.
- Secrecy Protection: Legal experts can help implement measures to protect trade secrets and confidential information, such as the use of non-disclosure agreements (NDAs) and access controls.
- Contract drafting: During the development phase, lawyers can help draft cooperation agreements with developers, partners or customers. This ensures that all legal aspects such as copyrights, liability and warranty are correctly regulated from the outset.
- Avoiding liability risks: Early legal guidance can help minimize liability risks by ensuring that cybersecurity and software quality best practices are followed.
Young companies in software development claim to do everything differently – but when it comes to legal advice, they are often like everyone else, shaped by the local culture, which only increases errors instead of avoiding them. Legal advice is seen as a must-do program that has to be completed quickly – and this only makes things worse.
Software development: additional costs due to late legal advice
Although it is difficult to provide exact numbers or percentages for the additional costs that may be incurred when the development process of an already completed piece of software must be restarted to address significant privacy or cybersecurity bugs or issues, it is clear that it will definitely be more expensive.
The actual additional costs depend on many factors, such as the complexity of the software, the scope of the required changes, the size of the development team, and the contractual terms with external partners. It is generally accepted that the cost of fixing problems at a later stage of the development process or after launch is much higher than at an earlier stage. Some estimates suggest that the cost of fixing bugs after launch can be many times higher than during the development phase (depending on the nature of the bug and the software).
One reason for this is that fixing bugs in finished software is often more time-consuming and requires more resources, since fixing bugs can require profound changes to the code base and system architecture. In addition, bug fixes can lead to further bugs or incompatibilities that also need to be fixed.
In the area of data privacy and cybersecurity, the cost of fixing problems after launch can be particularly high, as they can lead to fines, liability claims, and a loss of customer trust. It is therefore advisable to invest in data privacy and security compliance from the outset to avoid these potentially costly issues.
And the lawyer himself also becomes more expensive: While early and consistent involvement results in a continuous but manageable effort, everything must be worked out “in one go” and reworked later if the lawyer is involved as late as possible. In combination with the aforementioned aspects, it becomes clear that saving money on a specialist attorney for IT law at an early stage is ultimately a milkmaid’s calculation.
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