Selling own software

[WBH1138]

Hi

I have a few questions.

Having been asked by a neighbour to write a program for the company he works for, in my spare time, I am thinking that other companies may be able to make use of this software. It's a simple call log for engineers, etc.

My question is, what's the best way of going about selling this?
Are there websites where developers can put trial versions of their software?
What legal implications do I need to think about?

I am currently employed by an IT company so not self employed or VAT registered.

Kind regards in advance
Wayne

 

[dgillz]

A legal implication: Selling software is like selling a shirt or a book. If the sale is within your state or another state where you have established a nexus, you have to charge sales tax, collect it and remit it to the state.

Nexus is very ambiguous term from state to state, and generally means "physical presence". However many states consider you to have nexus if you have salespeople or even commissioned reps in their state, or even if you travel in that state on business purposes.

You need a sales tax expert from your CPA firm to walk you through this one.

Software Sales, Training, Implementation and Support for Macola, eSynergy, and Crystal Reports

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"If the phone doesn't ring, it's me".....Jimmy Buffet

 

[WBH1138]

Sorry, should have said I'm based in the UK.

Wayne

 

[LNBruno]

May have some legal ramifications depending on your working arrangements with your employer...that's sometimes an issue state-side.

I remember a book a few years back about "sell your own software;" I'm sure there are plenty out there. Might try Googling it, looking at Amazon, Barnes & Nobles, etc.

< M!ke >
Your right to an opinion does not obligate me to take you seriously.
- Winston Churchill

 

[rcpis1]

A book that might be worth checking out is "The Software Developer's Guide, Third Edition" from Hentzenwerke.

I believe you can still order the book from

http://www.hentzenwerke.com

Chris

rcpis1

 

[kmcferrin]

A couple of issues that you should look into:

1. What are you neighbor's expectations for this software? If he's asking you to write it for him, and (presumably) paying you to write it for him, he may expect that he or his company would own the software and all rights to it. That may or may not have been explicitly stated originally, and you may or may not have a written agreement that covers the program, but in any case if there is ambiguity you could run into problems from him later on if you start making money from "his program."

2. Are they paying you for your development time, or for a software license? Generally speaking, if I write a program and sell someone a license to use it for $500, then I can also sell other people licenses as well. But if I'm custom developing a program for a company, and they're paying me either on a time and materials or fixed cost basis for development/programming services, then usually the company is the owner of the software and you wouldn't be able to sell it.

3. Many companies that employ programmers or engineers will have an Intellectual Property agreement as part of the employment contract. Usually it says one of three things:

a. Everything that you design and code during work hours belongs to the employer, everything that you design and code during off hours belongs to you.

b. Everything that you design and code during work or off hours belongs to the employer.

c. Everything that you design and code during work hours belongs to the employer, everything that you design and code during off hours that is related to work, knowledge or expertise from the employer also belongs to the employer, and everything else that you design and code that is unrelated to the employer or their business belongs to you.

Because when and how things are programmed can be hard to prove in court, most employers go with option b. So you could be running the risk that your regular employer may believe that they have some legal right to the software that you wrote for your neighbor's company as well.

How's that for a confusing mess? Now the usual guidance applies, this is not legal advice, even if certain things are spelled out in your contract they may not be legally binding and enforceable, and all of that varies from state to state and country to country. But these are some possible complications that you really should investigate so that you can avoid any misunderstandings down the road (or at worst, spending time developing and selling software only to lose the software and revenue from it to someone else).

 

[WBH1138]

Thanks for that kmcferrin.

In response,

1) software is for neighbour's boss. I don't know what they've said but neighbour has said he'd be OK with me selling software on. The chances are my time at even mimimum contract rates will be more than his boss is prepared to pay. In a way we've made a verbal deal in regards keeping the cost to a minimum and me covering bug fixes and minor updates for free. In a way it's a favour for my neighbour.

2) see above - It is being written to their spec but if I was to write it again from scratch is it theirs or mine? How would they prove I didn't write it again if I change a few comments?
I am offering them the source code in case anything happens to me or they want to get someone else to update it, however neighbour has suggested I don't do that to protect myself.

3) I have heard of this before. The company I work for would have no need of this software. We work for a specific market.
Interesting though that even if my contract says they own everything I code whether in hours or not - how would that stand up in court?
If I was a mechanic/electricial/builder could an employer state that any work I did in my own time they should be paid for/get a cut of?

Hoping I'm not going off on a tangent here but it's fascinating me now )

 

[kmcferrin]

On #2, you would have to talk to a lawyer. I don't know how it's done in the UK, but in the US you are generally allowed to reverse engineer many products (including many types of software) provided that it's done in a "clean room" environment. By "clean room" I don't mean a literal clean room like they build microchips in, but an environment that is free from "idea contamination," i.e., no people who have worked on the product that is being reverse engineered.

On #3, you'd really have to ask a lawyer. I have heard of this quite a bit in the US, and it's gone both ways when it got to the courts. The problem tends to be that in most cases the workers in question were salaried, not hourly, so the expectation is that they could be working even if they weren't clocked in at work. It's not uncommon for people to have "Eureka! moments" at home (I tend to come up with quite a few good ideas while showering in the mornings myself) that help them solve problems at work.

So the question becomes, if you are salaried and you came up with an idea at home, who owns it? If you came up with an idea at work but developed it home, then who owns it? That's why I prefer option "c" above, and I suspect that most reasonable people would agree that it seems fair.

The example of an electrician/builder/etc is a bit of a stretch, because in development we're talking about ideas and code which can be replicated almost instantly and no cost. Building a shed takes time to replicate and costs money. So at a point I think that it comes down to competition and protection of ideas, especially business secrets. If you're a builder who works for a shed-building company, you might be able to build using the same techniques, but your ability to compete is limited by materials cost, time to build, etc. If you're a programmer who works for a software company, it would be possible to compete using the exact same code (or if not code, then processes) that your employer/former employer does. And if you were being paid to develop those processes (or learn them from co-workers), then that's double the problem.

 

[harebrain]

1) software is for neighbour's boss.

So you have verbal agreements with third parties. You couldn't have stepped into a worse legal tar-pit if you tried.

Deal only with first parties, and get things in writing.

 

[gbaughma]

Putting sales taxes and so forth aside....

Handle it this way (IMHO):

1) charge as a consultant. Then there's not a sales tax for sales of goods involved. You can do this on a "one time fee" basis. Then you will only owe income taxes on the income.

2) Develop the software, but keep all intellectual rights, as well as the right to re-sell the item to other interested parties. Get that in writing.

3) His company then becomes the "beta tester" for you, which can be great, because:
a) You get employee feedback for improving the product
b) You get bug reports and so forth
c) Other entities who see the software in use at that comapany may wish to buy it, so it's a good form of advertising.

4) Have clear expectations of what's a "reasonable upgrade". If it's broken, then fix it, certainly. But if they want additions or whatever, don't allow that to fall under the same contract; have a clear outline (in writing) of what you will provide as the service, as well as a clause for "requested changes" by the company.



Just my 2¢
-Cole's Law: Shredded cabbage

--Greg

http://parallel.tzo.com

 

[jeffwest1]

Many companies, including those in the UK, have written into contracts, and I know I have, that anything that is written using any company materials, i.e laptop, desktop, palm, is by rights that companies. It has no bearing if this is done as part of your normal working day, or within your own time.

'Intellectual property' of said software is still retained by you, but any 'selling' rights you have, or even copyright to that product is the companies, if you have nothing like that included in yours, then you may be ok, but companies can enforce it retrospectivly, if they can prove the above.