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we should not impose too much obligation on the on the developer welcome to the contract teardown show from law insider where legal experts tear down contracts from some of the most well-known companies and high-profile executives around the world in this episode slovenian attorney and legal technology founder marcel hyde tears down his own contract for software development this is an unusual episode as we see marcel both as attorney and as client he walks through his thinking on liability and priorities and what he knows as client needs to be an agile agreement so let's tear it down hey everybody welcome back to law insider's contract tear down show i'm mike whalen the purpose in the show is exactly what it sounds like we take contracts and we beat them up sometimes we're nice but most of the time we're not if we're being honest i am here with my buddy marcel hyde marcel how are you today i'm doing fine awesome i appreciate you joining us we're doing sort of a sort of a weird twist on what we normally do because we're talking to you as both a lawyer and as buyer as contractor so it's a real interesting thing guys what we're talking about is this document here this is a custom software development agreement uh it's an agreement for services for software services uh marcel tell me about this document why are we talking about this specific document so if we we got a step a step earlier i am basically a lawyer by the profession of a fully qualified slovenian lawyer and i'm also legal technologist i am founder of lex razio which is basically a legal research and consulting institute and we are mainly supporting startups in slovenia to enter the the legal tech market so this is also the reason why i decided to disagreement and currently we are working on a project we are building uh sharing economy economy a platform for legal services to increase access to general legal services this is reason why i found this contract very interesting yeah and that might answer the second question which is why you i mean you you've got this interesting background of both being an attorney who's looking through this as an attorney but as i said also as a buyer which is really interesting so what we're going to do marcel is we're going to go through and look at some of these points and take it a bit as your consideration both as the lawyer thinking through an agreement like this but also as somebody who's having to hire somebody to do these things like what are what are you focusing on so so let's go through it point by point we're going to start with number two uh it talks about the the preparation of a development plan in section two talk to him uh about what a development plan is uh this sounds somewhat similar to what we talked to john grant about earlier with an agile uh software development plan but but tell me about this section what are you thinking about here so basically development plan is first and very important stage before starting any real real software development activities and well-written and prepared software development plan may avoid potential arguments and disputes in the future so for example our software development plan is is at the very beginning of the of the contract and here there is not much much to say it is well structured clear and there is also what is important that uh if uh you are also considering to start any sort of startup it is advisable to have at least a i.t friend or someone who is able to to assist you when when preparing the technical details related to the development plan so as mentioned uh here are only main points uh which are going to be discussed later on yeah it's an intro again we talked about this with john grant which is why i love having this conversation uh you know when you're doing these sort of software development plans you have to have a weird balance of flexibility and boundaries right if you're talking about a contract the whole thing is to identify the boundaries but when you're doing software you've got to have a lot of flexibility so we'll talk through practically what that looks like for you i like how this section starts with like these are the big things that we super duper care about you better make sure your development plan has that in there if we look at section three it talks about the acceptance of the development plan so the developer is going to come up with okay this is what we're after this is how we're going to do it talk to me about section 3 and how you're thinking about this acceptance process of the plan once it's created so section 3 which deals with acceptance of development plan is basically chronological consequence of preparation so once the development plan is prepared and ready customer sure should have exactly a great number of days to review it and to make some comments with here with this agreement i would like to add the second paragraph was initially not included uh in the contract so we added and tailored it to for the particular particular uh case so the second paragraph deals mainly with with the procedure and uh give the customer additional safeguards uh how to proceed in case the development development plan is on set with a satisfactory so the last as a last resort there is also a possibility to terminate the entire agreement and what i didn't like about about the the second paragraph is that uh that the customer should pay all sums for the preparation of development ban i think this should be excluded at all costs since uh we cannot there is no fault in the customer signed for unsatisfactory preparation of development hey everybody i'm mike whalen i hope you're enjoying this episode of the contract tear down show real quick i want to ask you to do me slash you really a quick favor look down below you'll see a discount code to join the law insider premium subscription when you do that you get access to more content like this you'll see webinars daily tips on contract drafting not to mention access to the world's largest database of sample contracts and clauses it will help you write better contracts faster if you want to do it right now there's a code below so get there also if you're part of a larger team if you're in house or in a law firm just email us we're at sales law insider.com we'll make sure you get a deal as well come join us in the community the code is below let's get back to the show yeah and and it gives you um you know even though you were the one drafting this it sort of also gives you some duties to list out what was it that you didn't like about it uh which i like you're being mindful of both parties which i think is smart um you know there's a bunch in here in the next sections about the stuff that you know really is the basic what are we paying when are we paying how are we paying kind of thing but if we jump down to uh there's a bit about changes in scope and delays uh which is you know sort of common with these sort of agile development uh methods but if we go down to 11 section 11 you talk about the acceptance a testing of the software so tell me how this is working they've they've gone out they've built something they bring it back to you is that what this section is talking about exactly this is and this is basically the third stage somehow once the the software is is developed and installed on the on the hardware of uh of the customer here here is also necessary that the customer had for example a certain amount of time to test the entire software and that he can he can object and uh suggest how to repair certain processes and things so by this this uh uh section it was also necessary similar to previous sections section three if i'm if i remember correctly to add additional safeguards on the side of the of the customer that he can object if certain things are not are not done properly so this is mainly mainly it so it is really really important that we have all these three stages hmm yeah i i we're gonna skip past it but i just as an aside i thought it was interesting uh looking at number 12 uh on the training section since i deal with this a lot and what my company does the onboarding piece right trying to make sure that people can adopt it and know what they're doing i like that you were explicit in here about how that's going to work who's dealing with that cost and and who's going to be part of that if we jump down to 18 this you know always comes up when you're paying for the development of software talk to me about section 18 which is the ownership of software how are you thinking about that so this section 18 is basically uh built out of four options and the the second and third options are more related to the license agreement but the first option is is basically what is the essence of of every every software development agreement and if i may just briefly read developer assigns to customer its entire rights titles and interest in anything created or developed by developer or customer under disagreement so including patents and or other uh intellectual property rights here i would like to add that also trade trademarks should not be overlooked and also included not only patents and trade secrets and so on and copyrights and as as mentioned sometimes i also notice that this paragraph starts the developer shall assign to customer we should avoid the wording shall assign since this incineroad somehow that the the the entire transfer is moved on on certain point in the future so this make a potential risk for uh for the customer so there are also the the second and uh and third and third paragraph within within this ownership clause and i would like to add that somehow we should include certain type of um of uh back license clause or something like that in in case everything anything goes wrong so in case the the entire software is not transfer customer need to have some certain safeguards that he can use in its entirety the whole software which was basically prepared and tailored to his needs so this is this is in brief about the the ownership uh customer ownership class and in as a fourth option there is an interesting clause which is basically dealing with joint ownership so what does joint ownership mean that may be somehow economically more attractive for uh for for the customer since uh the developer is more personally involved in the entire project and uh basically it is important that the parties divide shares on the on the particular software but as we know that startups are at very beginning of the business they are struggling financially so this is somehow uh an option to to to get on board a software developer and to not to not invest some money in the so much money in the first stages of the business yeah i was going to ask like as you're doing this i mean you've got ores in here meaning you're going to pick which one is appropriate for the context of the particular project that you have but how are you thinking through that as a buyer like how do you in what scenarios are you deciding okay this should be i own everything this should be they own and they license to us which scenario should it be jointly owned where are you prioritizing like thinking about the project that you're working on now are you leaning a direction what's driving that i we we will probably decide for the for the first option so that we will get the the the entire uh the entire software since it is unique software and it is basically it it will be tailored to our needs so basically any other option is not acceptable especially license agreements and to some extent if if we could not uh evaluate financially the cost there is also an option that we will we will onboard the the software developer at least in some small percentage got it yeah yeah i was thinking about you know obviously if somebody's got an almost completed software and they're adapting it to you obviously they should own the majority of that so they can use it in the future but if you're paying for full development from scratch right that's going to take a lot of money and and that should that should come out so there are some sections in here that i'm looking at the source code access which we've talked about in previous episodes some of these warranties we've talked about in previous episodes but if we jump down to 22 section 22 in the intellectual property infringement claims you've got some edits in here tell me how you're thinking about this section so uh id contract often includes ip indemnity clauses so the reason is the fact that by just buying the developer's product customer may risk ip litigation since this is merely an ip infringement clause it would be also advisable to extend it in some format for example if if a glitch in software resulting in personal injury or or any other any other consequence here here for the moment we have only like uh ip infringement plus uh so uh in the following uh text of the first paragraph this section what firstly came to my mind is term knowingly i would try to to avoid this term because it's to walk and to walk and leave uh quite open door for the interpretation so and what is again missing as we already discussed earlier uh is our trademarks trademarks are also very important intellectual property rights and should be included and cover under uh ip well that's awesome and as i'm again as i mentioned before we we've talked about software agreements and in development agreements in different ways i i'm thinking about in general principles as we wrap up you as the buyer you're in sort of a different position than what we've talked about as the lawyer you know obviously is the lawyer you're trying to represent the interests of the buyer but you are truly trying to change the technology landscape in the legal space in an area that is underserved and so you know you want this development to work you want this to be functional you're not just thinking of this in terms of me as the buyer getting what i want you're thinking about the ecosystem you're thinking about the quality of the output of this software so tell me in a document like this i think this is about 12 pages 13 pages how are you using this contract to maintain the flexibility that the developer needs to create something good but also to protect your interest and what is a fairly new development product in in the area that you're in in the region that you're in so basically what was what was the main principle to to to be followed when drafting and preparing this contract is to to balance somehow all the rights and obligations on on the each side so as as mentioned the the the ownership clause is is the the most important clause and should be uh very well drafted but as discussed other other terms should be should be somehow in in balance we should not impose too much obligation on the on the developer and on the other hand as as a customer we we should have additional and necessary safeguards how to how to object and if anything goes wrong in the preparation stage testing confirmation stage and and and also once the uh we started to use to use the the software and if there is any any necessary maintenance needed yeah it's interesting because i could see a developer bris bristling at this very you know broad ownership clause but that it's interesting because that gives you the comfort to say to the developer actually go do your thing man like go make whatever you're making i know that i'm protected in the background by this very broad ownership clause but that actually gives you dear developer the ability to go make what needs to be made i think this is really interesting the approach that you've taken here i'm excited to see what you're creating uh like we talked about in that in a you know legal technology is underdeveloped in every market that's a side conversation but uh specifically where you are so it's exciting to see what you're doing if people want to reach out to you to learn about what you're doing as an attorney but also as a legal technology founder what's the best way to connect with you marcel i would suggest to connect through through linkedin or or twitter but i am mainly present on on all social social media so if you want to reach out and have any meaningful conversation with me with me about legal tech law or or anything related feel free feel free to reach out very cool and we'll have links to marcel's information to this document uh to related clauses that you can find inside law insider over at law insider.com resources and if you want to be on the contract tear down show to talk about what you're working on as an attorney or otherwise just reach out to us we're at community law insider dot com marcel again thank you for coming on with us we will see you guys at the next contract tear down show have a good one [Music] [Applause] [Music] [Applause] [Music]