Developing software can be an exercise in losing the forest for the trees. The longer you write code, the more difficult it is to see errors with the code and overall product design. This is an accepted problem in the software industry. The solution is to put the software through a beta testing period where third parties us the software and report back with any issues they run into while using the product. It is critical you use beta testing end-user license agreements to avoid a host of legal issues down the line when you incorporate the feedback into software improvements.
Beta Testing Software
Using third parties to test software makes sense on a number of fronts. Independent parties can:
- Point out errors and “links to nowhere” within the product,
- Provide insight as to what your target audience likes and does not like about the product,
- Provide insight into useless features as well as features that should be added, and
- Give the developer an overall sense of how the product functions and is received.
This type of information is invaluable. Intuit, for example, recently radically changed the software for its online Quickbooks program. The company asked users to view a beta version and tell the company what features the users thought should be added, moved around in the interface or deleted entirely. The software was much more user-friendly within a week, which evidences the incredible value of such feedback. Unfortunately, the beta test process also creates a number of legal conundrums you must deal with in a legal license.
The single most important issue addressed in a beta test user license agreement is the ownership of intellectual property rights. A traditional software license will include language noting the software company retains all ownership of the code. The buyer is given only the right to run the software, not fiddle with it.
A beta test presents a different scenario. The individuals testing the software are going to make suggestions you will incorporate into the software in the form of alterations to the code. This process raises a few questions:
- Are the testers entitled to any compensation for suggesting the changes?
- Can the testers claim ownership to the changes and seek royalties over time?
As a software developer, your goal should be to secure the ownership rights to any changes made to the product based on user suggestions. You obtain ownership by including copyright, patent and trademark transfer clauses in the beta test license. Intellectual property transfers are delicate documents, so the language needs to be put together carefully.
A business agrees to test your new accounting software. The software crashes and fatally corrupts their primary office software. The tester loses three months of data and there is no backup. Can the business sue you for damages?
The fact a piece of software is being tested in beta does not automatically waive any warranty or liability claims associated with the product. These legal rights are only waived by the tester if the waiver is in writing. The written waiver clauses should detail the fact the software is a beta version and likely to have defects. Language should then also be created to address the warranties and guarantees automatically associated with products sold to consumers. A written waiver will go a long way to limiting your potential legal exposure. This is one area, however, where taking an additional common-sense step can make a huge difference.
What common sense step are we talking about? Warn your testers of the possible problems with the product. Provide your testers with minimum hardware and processing requirements. Clearly indicated to them the software may have glitches, and they should move to protect their current systems as well as back up all critical data. If problems subsequently arise, the testing parties will find it difficult to prevail in court against your company.
Including a confidentiality clause in beta testing end-user license agreements is an absolute must. There are reasons Apple and other companies fight so hard to keep prospective products under wraps. The last thing you want to happen is for a tester to reveal they are trying out your new product…and it is defective.
All software is defective when first beta tested. Indeed, beta testing is undertaken to discover these problems! Still, bad buzz can be a death knell for a product. A confidentiality clause prevents any unwanted disclosures. I often require testers to initial the clause in question just to emphasize the importance of not disclosing any information during the test period.
Software development companies love to insert non-compete clauses into legal documents.
Signing up for the company softball team? Please initial the non-compete clause.
Signing up for the holiday gift exchange? We are going to need your initials again.
In truth, the idea of including language that prevents a person testing your product from running off and competing with you is an attractive one. The problem is such clauses can often torpedo your entire license agreement.
Non-compete clauses are difficult to enforce. Most state governments view non-compete agreements as an inequitable restriction on the “right to work” for individuals. In California, for example, this position is expressed in Section 16600 of the Business and Professions Code:
“Except as provided in this chapter, every contract by which anyone is restrained from engaging in a lawful profession, trade, or business of any kind is to that extent void.”
There are exceptions to this rule as noted in the above quote. These exceptions, however, all deal with the sale of a business that has goodwill attached to it. Since this scenario is not applicable to the beta testing of software, the exceptions do not apply and neither will any non-compete clause added to your license. In fact, the inclusion of such a clause may be grounds for the termination of the entire license.
If you develop software, beta testing end-user license agreements should be a pivotal part of your legal arsenal. These licenses are often challenged, so it is critical that each one be customized to the software in question as any vague or inaccurate language could end up torpedoing the entire agreement. Put another way, make sure you spend the money to have the proper license in place instead of risking the loss of control of your software product.
Developing a software product? Contact me today to learn more about protecting it during beta testing.
Richard A. Chapo, Esq.
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