Legal Journal

Freelance Copyright Agreements in Software Startup Projects

As of 2008, we met a new business model with the startup concept which has arisen from Silicon Valley. Before this new concept, there were other definitive terms used such as “venture capital”, but startup had its own features. It was based on “development” and meant the projects with a high potential of growing. Although it was particularly used for technology projects with small capital but high added value at the beginning, in time it started to be used for all other types of projects.

In this article, we will review and demonstrate an important copyright subject for software startup project over a specific example.

Let’s consider a startup project about a game which is interactively played on hardware. Two young designers would start a project with the contribution of an investor which needs minimum amount of investment but has potential to high level of development and producing high income. Let’s think about the developing processes of this game in order. First, documentation will be drafted with regards to scope of the game and its developing phases. Secondly, game flowcharts and menu designs will be created in compliance with the documentation. Finally, code of the game will be written. In all these phases, there will be a need for technical team including graphical designers and software developers. It should be emphasized that all the outcomes of this technical personnel’s work will be considered as “Work” under article 2 of Law on Intellectual and Artistic Works.

These Works will constitute the biggest asset of the startup company so it is vital to determine the authors of these Works.

If these deliverables have been created by one of the permanent employees or executives of the startup company, “authorship of the Work” is uncontroversial; the startup company will directly own financial rights and copyright of the deliverables according to article 18 of Law on Intellectual and Artistic Works. However, if the startup company outsources these to freelance people, there may be some important problems to focus on.

First of all, it is a “must” to make extensive agreements on financial rights and copyrights of the project in cases where design and coding processes have been developed by a freelancer. If financial rights and copyrights of the designs and software are not transferred to the startup by duly executed agreements, all investment might easily go down the drain. As an example, freelancer may sell or transfer the designs and codes of the game to a third party apart from the startup company or he may allege that he has the commercial license for designs and codes of the game since “the financial rights were not expressly and duly granted to startup company under the relevant agreement”.

Another which difficulty which may rise is the freelancer living in another country. The distance between parties, absence of written agreement or improperly drafted agreement might cause the investment’s failure. Especially on software business, three months delay of a project or introducing same or similar software (for example a game) to the market at the same time by another company may be destroying for the startup project. Therefore, any disclosure even only the idea or flowcharts of the game is extremely important. Signing non-disclosure agreements and agreements for transfer of copyrights and financial rights is highly recommended to minimize the risks.

In this context, as a precondition to protect the investment, companies, which intend to make investments to startup projects, should follow up activities and agreements of the startup particularly concerning copyright and support these small establishments from legal and business perspective when necessary.

Av. Haluk İnanıcı