Protecting Intellectual Property in an Offshore Development Setting


Are you considering Offshoring, but your Intellectual property worries keep you up at night?

Are worst-case scenarios, like someone stealing your ideas or infringing on your patents, running rampant in your mind? Well, it’s an understandable nerve-wracking experience – but the good news is you don’t have to go it alone! In this blog post, we will provide strategies on how to protect your intellectual property while working in a global environment. We promise that after reading this piece, all those late-night worries will be a thing of the past – allowing you to get back to doing what business owners do best: Making deals and money!

Table of Contents

What is Intellectual Property in Software Development?

Intellectual property (IP) is a legal concept that refers to “creations of the mind” for which exclusive rights are recognized and protected. In software development, intellectual property can be generated by a long list of “creations” such as the development of source code, scripts, design documents, graphical assets and user interfaces. IP is intended to give the creators of intellectual material the right to control its use and enjoy the economic benefits associated with it.

The World Intellectual Property Organization (WIPO) reported that trademark applications for computer-related goods and services increased by an average of 20.6% annually between 2000 and 2022. This indicates the growing importance of intellectual property in the software industry.

Software intellectual property specifically refers to…you guessed it…any intellectual work associated with software development,. This includes source code, algorithms, user interfaces, and other creative elements in a software product. Tools to protect intellectual property commonly found in software development include some important (but dull) legal tools such as copyright, trademarks, trade secrets, and patents.

ip rights

Here’s a cliff notes description of each:

Copyright is the legal protection given to original works of authorship, including:

  • literary works such as books and articles
  • musical works such as songs and compositions
  • dramatic works such as plays and movies
  • artistic works such as graphics and paintings

In software development specifically, copyright protects the source code from being copied or distributed without permission from the author.

Trademarks are symbols used in trade to identify a particular product or service produced by a particular company. In software development this includes logos or other visual representations used for marketing purposes for an application or website.

Trade secrets refer to confidential information that gives a business an advantage over competitors who do not have access to it. This can include proprietary processes for developing new products or services or valuable customer lists that give insight into potential leads and their preferences. In most cases, trade secrets are not protected by law but rather through internal security measures companies take to ensure secrecy around their valuable information.

Patents provide exclusive rights to inventions for a limited time period, typically 20 years after filing for the patent. Patents can be applied for inventions related to computer hardware components or manufacturing processes used in software production; however, they cannot be applied for concepts only, such as system architectures or algorithms used in coding an application.

When engaging with an offshore development team, it’s essential to protect intellectual property in order to maintain an advantage and ownership of any creative work coming out of the project. Establishing clear intellectual property rights at the beginning of a project can help prevent misunderstandings or disagreements when it comes time for software delivery. It is also important to implement processes and procedures that protect intellectual property during the development process, including time-stamping code commits and performing regular security scans. With the right strategy in place, intellectual property can be successfully protected while leveraging all the advantages of working with an offshore development team.

Signing non-disclosure agreements (NDA’s) with employees and contractors working on projects involving intellectual content is a must in order to prevent them from disclosing any confidential information. It is also important for companies engaged in offshore software development to audit their intellectual property regularly in order to detect any potential infringements early on before costly legal action has to be taken against them. Ultimately, protecting intellectual property in an offshore development setting requires a combination of legal, technical and organizational measures that should be tailored to the unique intellectual content of the particular project at hand.

Intellectual Property When Offshoring vs. In-House Software Development

It would be great if this comparison was as simple as 1-2-3…but instead, we have to lay the foundation and take a quick trip down memory lane to understand where it all started.

Originally, software development intellectual property rights in the United States were governed by the Copyright Act of 1976, which protects various intellectual property, including computer software. Under this law, software developers have exclusive rights to their intellectual property, including their source code. This means that it is illegal for another person or company to reproduce, distribute, modify or publicly display the intellectual property without obtaining explicit permission from the creator. Additionally, software developers also have moral rights under copyright law and copyright protection in other countries through international treaties such as TRIPS and WIPO.

However, the Digital Millennium Copyright Act (DMCA) of 1998 adds additional intellectual property protections to software development. The act protects digital works, including software applications and websites. This law grants copyright holders an exclusive right to control how their intellectual property is used or distributed. Plus, it makes it illegal for anyone to circumvent technological measures used to protect intellectual property and prohibits companies from manufacturing devices that are intended to circumvent these technological measures.

Finally, we need to add in patent laws,  which offers intellectual protection specifically tailored to software development. A patent covers new technological inventions related to technology and may be granted to inventors who develop unique solutions in the form of products or processes in any field of science or technology. Patents provide exclusive rights within a specific geographical area allowing their owners to prevent others from making, using or selling the invention within this area for a period of time – typically 20 years after filing the patent application with the relevant authority. In addition, patents grant creators recognition and financial reward for their work while protecting intellectual investments made into research and development projects by providing legal recourse should someone attempt to directly copy that investment without permission from the patent holder.

When intellectual property is discussed in the context of offshore software development, “Intellectual activities” are protected.  Intellectual activities refers to intellectual property rights that are held by a company when they outsource the development of their software projects outside of their country. This type of intellectual property is often related to activities such as coding, design, creation, engineering and research. In contrast, intellectual property in an in-house setting is held by a company within its own country and involves intellectual activities such as invention and product design among others.

The main difference between intellectual property in an offshore vs in-house setting is the level of control over intellectual assets. In-house settings offer more control over intellectual assets because they can be managed directly by the company itself. However, this comes with greater costs due to overhead expenses such as salaries, benefits, and office space. Offshore settings on the other hand provide less control unless you are working with a knowledgeable Offshore provider.  Even with the Offshoring services factored in, this options is still generally cheaper due to the reduced overhead costs associated with working with remote teams. Other advantages like access to specialized talent pools or lower labor costs also motivate companies to develop intellectual property offshores.

If Dealing With IP Rights Sounds Like too Much Hassle, Give TurnKey a Call. We Specialize in Hiring The Best Developers While Care Your IP.

Risks Associated With Intellectual Property in Software Development

Intellectual property is an important component of any software development project and in cases of offshore development, there are a number of potential risks that need to be taken into consideration. Here are the top concerns our clients often engage with our legal department over:

risks of ip

Loss of intellectual property

Depending on the country where the offshore development takes place, the intellectual property rights for the software may stay with the original developer or company and not transfer to you. This would result in the loss of intellectual property if adequate protection was not established before the project began.    

Poor documentation

Documentation plays an important role in protecting intellectual property, as it helps to ensure that only authorized individuals have access to sensitive information and intellectual property assets. Without adequate documentation of intellectual property assets, there is a greater risk of intellectual property loss or misuse by unauthorized parties.

Regulation compliance

Different countries have different regulations, and creating software while operating remotely may lead to noncompliance with local labor laws and regulations regarding intellectual property and copyrights. This can result in severe legal penalties and fines for all parties involved. Check out our recent blog about regulation compliance regarding IP rights in Colombia, to learn more.

Data security

When working with remote teams, there is always a risk of data breaches due to poor data security practices or intentional theft by malicious actors. Therefore, strong security protocols must be implemented throughout the entire development process.  Key focus areas should include ongoing maintenance and management of servers, storage systems, applications and networks used for offshore development projects.

By understanding the intellectual property risks involved in offshore development, companies can take action to ensure the security and protection of intellectual property throughout the entire software development process. Insist on best practices, including proper documentation management, data security protocols and compliance with local laws and regulations. These precautions will help protect against intellectual property loss or misuse during offshore development projects.

Time-Tested Practices Used to Protect Software Intellectual Property by TurnKey

best practices ip

Here are the top 7 time-tested practices used to protect software intellectual property:

Copyrighting the software

Copyright is one of the most basic forms of protection a software developer can use to protect their intellectual property rights. The developer can get a copyright for their software, which means only they have the right to use, copy, and modify it.

Implementing digital rights management (DRM)

DRM is a technical measure that can be used to control access to copyrighted content. DRM prevents unauthorized users from accessing, copying, or modifying the software.

Using licensing agreements

Licensing agreements can be used to define the terms of use, distribution, and ownership of the software. Licensing agreements can be used to safeguard your software by controlling who can use it and under what circumstances.

Employing obfuscation techniques

Obfuscation is the practice of making code difficult to read, understand, and modify. Obfuscation techniques can be used to make reverse engineering of the software more difficult.

Controlling access to the source code

Controlling access to the source code can prevent unauthorized users from altering and distributing the software. Limiting access to the source code only to authorized personnel can ensure that the software is better protected from theft or misuse.

Encrypting the software

Encryption is a technique that can be employed to protect software by rendering it unreadable to unauthorized users. Encryption techniques can be used to ensure that only authorized users can access and use the software.

Monitoring the software

Monitoring the software can be used to detect any unauthorized use, misuse, or theft of the software. A comprehensive monitoring system can help identify unauthorized users and their activities, enabling the software owner to take legal action if necessary.

Enforce strong penalties

Stiff penalties outlined in a written agreement before the work begins may dissuade offshore developers from misusing intellectual property rights.   These are enforceable if any violations occur during the development process or post-development period.   This approach demonstrates to potential violators that any breach will not be tolerated and discourage attempts at gain through intellectual theft or deception practices on intellectual properties created by others.

Innovate Your IP

Intellectual property in software development

This great quote from Bill Gates implies that the value of intellectual property, such as patented technology or copyrighted works, diminishes rapidly over time.

In essence, he is suggesting that companies and individuals must constantly innovate and develop new intellectual property in order to stay competitive and maintain their value in the marketplace. Otherwise, their intellectual property will become outdated and undesirable, losing value rapidly. It highlights the importance of continuous innovation and development in the tech industry, and the need for companies and individuals to adapt and evolve with the changing market conditions.

Consequences of Poorly Managing Intellectual Property Rights

As the consequences of IP software code theft can be severe and include legal, financial, and reputational damage, let’s dive into each situation a bit deeper. 

  • Legal consequences: A company or employee that is found to have stolen intellectual property may face legal action, such as a lawsuit, injunction, or criminal charges. The party that suffered the intellectual property theft may be entitled to damages, meaning that the offending company could be required to pay a significant sum of money.
  • Financial consequences: A company that has to defend itself in intellectual property theft will be required to spend significant amounts of money defending itself in court, conducting investigations to determine the extent of the theft, and beefing up security measures to prevent future thefts.
  • Reputational consequences: Intellectual property theft can damage a company's reputation and erode consumer trust. Companies that are known to engage in intellectual property theft may lose customers, face negative press coverage, and have difficulty attracting and retaining top talent.
  • Lost competitive advantage: By poorly protecting intellectual property, a company may lose its competitive advantage over its rivals and face difficulties competing in the market.
  • Damage to innovation and creativity: Intellectual property theft can inhibit innovation and creativity in the tech industry. When companies know that their intellectual property is at risk of being stolen, they may be less likely to invest in new products or research and development, which can ultimately harm the industry as a whole.

Overall, intellectual property theft can have far-reaching consequences that may take years to resolve fully. Companies should take necessary steps to secure intellectual property to mitigate the risks of theft, implement strong security measures, and take legal action if necessary to protect their intellectual property rights.

Big League Intellectual Property Disputes

In case you were thinking, “Ya, but when does that ever really happen?”, here are a few epic examples of software code theft and the consequences:

Waymo vs. Uber

In 2017, Waymo, a subsidiary of Google, sued Uber, accusing a former Waymo engineer of stealing trade secrets, which the engineer allegedly used to help Uber develop its autonomous vehicles. The case was eventually settled, with Uber agreeing to pay Waymo $245 million.

Cisco vs. Huawei

In 2003, Cisco sued Huawei for allegedly stealing source code and copying documentation in order to create a rival networking equipment business. The case was eventually settled, with Huawei agreeing to change certain products and to allow Cisco to inspect Huawei’s source code in the future.

Microsoft vs. i4i

In 2009, Microsoft was found guilty of infringing on i4i’s patent related to “custom XML” technology used in Microsoft Word software. Microsoft was ordered to pay i4i $290 million in damages.

Google vs. Oracle

In 2012 and 2016, Oracle sued Google for what it believed to be copyright infringement of its Java software in the development of Google’s Android mobile operating system. The case was eventually settled, with Google agreeing to pay a reported $30 million to Oracle.

As you can see, theft of software code and intellectual property can have significant consequences. Companies and individuals found guilty of stealing intellectual property can face significant penalties and damage to their reputations. All of this could be avoided by implementing strong security measures, such as access controls and employee monitoring, as well as having proper contracts and agreements in place to protect their intellectual property.

How We Can Help You Protect Your IP When Offshoring Software Development

Since we have extensive experience in hiring offshore developers from lots of different countries, we know all the nuances of complying with local laws and regulations.  Thanks to our experience, TurnKey’s legal department can help you protect your intellectual property in a number of ways when offshoring employees

Recently, we helped one of our clients protect their IP rights when working with Brazilian developers since their lawyer knew nothing about Brazilian IP laws. Our team prepared a legal conclusion on how intellectual property rights are transferred to the developers and what obligations come with that.

irina's quote

Intellectual property rights are divided into material (the right to sell, transfer, enforce) and non-material (the right to be called the author of the work). In some countries non-material rights cannot be enforced, i.e., transferred. In other countries it is possible but only according to special protocol. 

In the United States, many companies’ IP rights are protected thanks to the “work made for hire” law, in which the individual who created the work is not considered the author.  Instead, the company that hires them is considered both the author and owns the work’s copyright.  But in many other countries, this principle does not apply so it’s important to study the specifics of each country carefully.

Here are some examples of how TurnKey can assist you legally:

  • Drafting and reviewing contracts: TurnKey's legal team can review contracts and agreements to ensure that they include specific provisions that address intellectual property protection. This might include clauses that prohibit the misuse of confidential information, restrict the use of trade secrets or other proprietary information, or outline specific ownership rights around intellectual property.
  • Providing guidance on data protection: Offshoring employees or working with outsourcing partners entails sharing sensitive data and intellectual property across borders. TurnKey's legal team can help you navigate these data protection laws, which may include understanding data transfer agreements or adherence to cross-border data protection regulations.
  • Conducting risk assessments: TurnKey's legal team can help you conduct an assessment of the intellectual property risks related to offshoring employees or working with outsourcing partners. They can perform due diligence on the companies with whom you may be considering working, ensuring that proper data security protocols and intellectual property protections are in place.
  • Enforcing intellectual property rights: In the case that your intellectual property may be compromised or stolen, TurnKey's legal team can assist you in enforcing your legal rights. This may include taking legal action against the offending company, pursuing settlement negotiations, or taking other legal measures to protect your intellectual property and manage damages and legal costs.

In short, TurnKey’s legal department can play a vital role in helping you protect your intellectual property when offshoring employees. By providing legal expertise, guidance, and support, TurnKey can help you manage risks, prevent unnecessary legal disputes, and effectively protect your intellectual property assets.

We are Experts Who Can Remove All The Legal Hassle of Outstaffed Software Development, While Protecting Your IP Rights.

Why We Care

Essentially, when our clients trust us with their projects, they are also entrusting us with their most valuable ideas and proprietary information. We are legally obligated to protect this information and ensure it is not shared or misused.

At TurnKey Labs, we understand that our clients’ intellectual property makes their businesses unique and gives them a competitive edge in the market. By safeguarding their intellectual property, we are helping our clients maintain their competitive advantage and increase their chances of successfully scaling.

We take this responsibility to heart and work hard to implement rigorous security measures, including confidentiality agreements and data protection protocols, to ensure our clients’ intellectual property is kept safe and secure. By doing so, we are not only fulfilling our legal and ethical obligations but also contributing to the long-term success of our clients because we believe that their success is our success!

What is IP and why is it important to protect it in an offshore development setting?

Intellectual property (IP) refers to creations of the mind, such as inventions, literary and artistic works, designs, symbols, names, and images used in commerce. In an offshore development setting, IP can be at risk of being stolen or misused due to differences in legal systems, cultural norms, and the potential for fraud. It's important to protect IP as it can be a valuable business asset, giving a competitive advantage and enabling continued growth and innovation.

What are some steps companies can take to protect their IP?

There are several steps companies can take to protect their IP in an offshore development setting:


  1. Conduct rigorous due diligence on the vendor or partner, including reviewing previous work and checking references.
  2. Establish clear contractual agreements that define ownership of IP, confidentiality, and nondisclosure.
  3. Conduct regular audits and secure data with encryption and authentication mechanisms.
  4. Provide clear guidelines and training on IP protection to mitigate the risk of accidental disclosure or loss.
  5. Consider registering patents, trademarks, and copyrights in the countries where work will be done to establish legal protections.

May 2, 2023

TurnKey Staffing provides information for general guidance only and does not offer legal, tax, or accounting advice. We encourage you to consult with professional advisors before making any decision or taking any action that may affect your business or legal rights.

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