Software law – current legal situation

Software law – Software law is a branch of information technology law (IT law) that deals with the creation/development, use and licensing of software.

Topics in our legal advice

Table of contents

1. Software law – the regulations on software legal protection
2. Contracts on the licensing of software
3. Terms and conditions of the contract
4. Software law and copyright
5. Legal advice on software law

Software law – the regulations on legal protection for software

Where can I get legal protection for my software? All types of computer programs are protected by copyright, from the initial idea to the final product.

This can be a single programme or a series of programmes, design documents such as data flow/programme flow diagrams, or even parts of a larger programme or individual programme modules themselves.

Manuals, operating instructions and specifications can be protected as scientific and technical representations or as linguistic works.

Software law – What is not protected by law?

Algorithms, programming languages, procedures for solving tasks and their descriptions (the purpose of the software), development and programming methods, interface requirements and graphic screen interfaces are not protected as computer programs.

The basic concept of the software is also not protected against infringement. For this reason, a third party may develop the same software solution or a competing product with the same or comparable features in parallel.

The source code of a software may not be copied. The invention can be protected by signing a non-disclosure agreement with potential business partners.

Software licensing contracts

Software law: German law regulates the classification and evaluation of all software licensing contracts according to their primary orientation to a contract type regulated by law (e.g. the contract of sale), whereby the German law of obligations is used to assess the individual contracts.

The type of contract selected has a significant influence on the obligations to perform and the compensation for damages in the event of default. However, the selection of a certain contract type cannot be made explicitly, but only by choosing the content of the contract.

Rights of use and contractual regulation of software

Software licences for third parties can be granted by the original author (so-called licence). The third party can then use the programme according to the terms of the licence. “Licence agreements”, as they are commonly called, are no different from normal contracts under the German Civil Code (BGB), which governs all contracts.

Licence agreements can take the form of a purchase agreement, a rental agreement, a contract for work and services or a combination of these agreements.

The main obligations of the licence agreement are decisive. All types of people can use the same software. As long as the programme is offered for a one-time fee, it is a purchase (regardless of whether the software is provided permanently as a download or on a data carrier).

It is a rental agreement if the software is provided on a short-term basis in return for regular payments, as in the case of application software, for example. If a one-off software solution is developed, it is a contract for work and services.

A contract for work and services can also be defined as a contract for the functional adaptation of standard software for the customer (customising). An important component in determining the type of contract is the prologue, which gives indications of what the contract is to provide.

Software law – scope of rights of use

It is important to specify in the contract to what extent the programme can be used. This ensures that there is no ambiguity about what rights have been granted.

The following rights are particularly relevant:

• Software that can be downloaded via the Internet.
• The functionality of the programme as well as upgrades and maintenance updates.
• The translation of a programme into another programming language and the translation of the source code into an object and vice versa also fall under this service (“compilation”).
• The act of recreating or reproducing a computer program in any form. When a computer program is loaded into main memory for a short time, it is copied.
• Distribution of the original application or copies on the market, for example through data carriers (CD-Rom).

Is it better to conclude a purchase contract or a lease contract?

Standard software is often transferred through a purchase or leasing contract. When renting software, the following is common:

• Entitlement to payment
• Throughout the leasing period, the transferor is responsible for ensuring use.
• Flexibility in pricing and restrictions on use (e.g. a prohibition on resale) are possible, provided they are clearly and reasonably worded.
• Ongoing costs

The most common features of software purchases in software law include the following:

• B2B transactions are exempt from the usual two-year warranty. The urgent obligation to inspect and give notice of defects according to § 377 HGB (German Commercial Code) still applies.
• Transfer for an indefinite period
• The GTCs prohibit the resale of the programme.

Do I have limited or unlimited rights of use?

It is most favourable for the user if he or she is allowed to use the programme worldwide for an indefinite period of time. The user’s permission to use a work can be restricted in terms of both quantity and content if desired.

Without a contract, the user is entitled to the rights that are at least necessary for the use of the programme in accordance with the contract. As a rule, this includes loading, displaying, executing and saving the programme in the working memory and, theoretically, also making a backup copy.

Changes to the programme code are not protected. Bug fixing is legal as long as it fulfils the purpose of the software.

An exclusive or simple right of use can be stipulated in the contract. It is common practice to grant a limited right of use for standard software marketed to a large audience.

The user can use the programme according to the terms of the contract, but the author and others can also use it. In the case of customised software, an exclusive right is granted.

This protects the user from competition and allows him to prevent others, including the licensor, from using the programme. It is up to the licensor to secure his rights of use contractually.

Software law – ownership of the code and access rights

The contract should also contain provisions on the possible surrender of the source code, which may be necessary for debugging or software updates.

Software users can usually only demand access to the source code if this is expressly agreed in the contract.

A lawyer or a trustee service provider can also be engaged to keep the source code (so-called trustee contract). Under certain circumstances (e.g. if the software developer goes bankrupt), the user can access the source code to modify or further develop the application.

Terms and conditions of the contract

Theoretically, however, the scope of the rights of use can be mutually agreed upon by the provider and the user. For standard software, it is common practice to use GTCs (general terms and conditions).

Some legal hurdles in GTCs cannot be circumvented. Examples of invalid terms include provisions that prohibit or restrict the resale of a paid copy of a programme (even if it is downloaded).

The concept of exhaustion in copyright law explains this. When software is lawfully sold in the European Union, the right to use that copy (EU) expires.

As a result, the copy of the application that the original customer purchased is freely marketable and may be sold again. He must destroy his own copy of the application if he wishes to resell it.

It is possible to exclude the transfer of the software to third parties in special contracts.

Software law and copyright

Without registration, application or other formalities, copyright in software arises automatically when the work is produced, i.e. when the software is programmed.

In addition, the software developer has the right to be named as the author of the code. This privilege can be waived in contracts.

The developer of a software is called the author. Each programmer is a co-author of the software if there is more than one.

In the case of legal entities (such as a GmbH or AG), there are no authors. The rights to commercially exploit software created within the framework of a service or employment relationship legally belong to the employer.

This does not apply to freelancers. Here, the conclusion of a contractual agreement is required. Only those rights that are at least necessary for use are legally transferred without a contract. As a rule, a simple right of use is sufficient.

Trademarks, competition and the law of computer programs

It is possible to protect software under trade mark and competition law. The work title of an app or application is protected under trade mark law. Competition law protects against the practice of copying and imitation.

Software cannot generally be protected by patents. As a rule, patents can only be applied for on objects with a “technical character”. The extent to which software can be patented must therefore be examined on a case-by-case basis.

Software patent law

Programs for data processing systems are generally not patentable under the Patent Act. According to case law, a computer program is patentable if it advances the state of the art in its entirety. Therefore, the individual patent and trade mark offices should be consulted to determine the scope of software patent protection.

Limitations of liability in software law

General terms and conditions often contain clauses on limitations of liability. It is not uncommon to try to exclude liability for things like material defects and unclear ownership rights.

However, liability for slightly negligent breaches of duty which undermine the purpose of the contract and on which the contractual partner may rely may not be limited or excluded in general terms and conditions. Furthermore, the product must be free of defects.

As far as ordinary contractual risks are concerned, limitations of the maximum amount of damages are permissible. In most cases, an abstract determination of liability for contract-typical, foreseeable damages is appropriate, as maximum amounts for fault in individual cases are difficult to determine and may therefore be unacceptable in individual cases.

A limitation of liability is likely to be permissible if the customer caused the damage by unauthorised modification of the programme or if the damage was caused by use contrary to the contract.

If a provision limits liability too much, it has the opposite effect, because then legally unlimited liability comes into play. It is therefore advisable to discuss the liability issues individually.

Legal advice on software law

We are able to provide excellent IT legal advice because we have extensive industry experience, in-depth legal knowledge and closely follow new changes in the law.

We advise software developers, programmers, web designers and end users across the country. Software rights and restrictions should be clearly defined to avoid ambiguity and legal ambiguity.

If you have invested in or made payments to one of the companies on this list, our lawyers will be at your disposal at short notice.