Remember to consider source code when procuring ICT products

A customer’s right to access and use the source code in licensed or developed software is frequently a contentious issue in contracts.

The term ‘source code’ typically refers to the expression of licensed or developed software in human-readable language. The source code may be required by customers in order to understand, maintain, modify, correct and enhance software.

In the case of Task Technology Pty Ltd v Commissioner of Taxation [2014] FCAFC 113, the Full Federal Court held that, under a standard form software distribution agreement, the supply of licensed software does not necessarily constitute the supply of the source code for that licensed software.

In accordance with Information Standard 13 – Procurement and disposal of ICT products and services, agencies are required to procure ICT products and services in accordance with the Cabinet mandated Government Information Technology Contracting (GITC) Framework.

Under GITC, Part 2 (Customer Contract Provisions), where the customer does not own the intellectual property rights in licensed or developed software, the customer may require the source code in such software to be held in escrow by specifying this requirement in Schedule 1 – General Order of the GITC Customer Contract.

In addition to specifying its requirement for an escrow agreement up front, the customer also has the right to require the parties to enter into an escrow agreement with an escrow agent during the operation of a GITC Customer Contract for the purpose of enabling the customer to support, modify or correct licensed or developed software.

The template Escrow Agreement in GITC, Part 4 (Customer Contract Schedules) provides that the source code that is held in escrow may be released to the customer in limited circumstances, including where the contractor has become subject to any form of insolvency administration or where the contractor has ceased to maintain or support the licensed or developed software.

If the customer does own the intellectual property rights in newly developed software, then the template IP Model 1 obliges the contractor to “promptly provide to the Customer all source code relating to the [newly developed software] in a format and on a medium which is suitable for compilation and use” in the customer’s environment upon the completion of the GITC Customer Contract.

Before entering into a GITC Customer Contract for licensed or developed software where the customer will not own the intellectual property rights in the software, agencies should carefully consider their requirements to access and use the source code for the software.

Although the terms of GITC Part 2 permit customers to require a contractor to enter into an escrow agreement during the operation of a GITC Customer Contract, a customer’s ability to access the source code under any escrow agreement will be limited. Therefore, if an agency requires the right to access and use the source code for any reason beyond those circumstances contemplated by an escrow agreement, then an additional provision that obliges the contractor to provide the customer with a copy of the source code should be included in the GITC Customer Contract.

Agencies also have limited rights under Division 4A, Part III of the Copyright Act 1968 (Cth) to reproduce or adapt ‘computer programs’ for narrowly defined purposes, including for the purpose of making interoperable products, correcting errors and conducting security testing.

However, agencies should obtain legal advice prior to reverse engineering licensed or developed software in purported reliance upon their rights under the Copyright Act.

^{The information in this publication is provided for general purposes only. It is not to be relied on as a substitute for legal advice. Crown Law and the Department of Justice and Attorney-General accept no liability for losses caused by reliance on the material in this publication. Formal legal advice should be obtained for particular matters.}