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Development Consignment and Right

For example, two people made something with their own materials.  Something was so good that they claimed the ownership of each other.  Court judges who has right according to civil act, and typical acts are article 243, and article 246.

Article 243 is, roughly speaking, “material A and material B combine and becomes C, and if material A is main element of C, then C’s ownership should be material A’s owner”.  And article 246 is, “C can be made by processing A, and if the increased value of C through processing is more than the value of A, then C’s ownership should be the processing person’s”.

On judicial precedent

Now, look at a related judicial precedent, but the detail is truncated.

Company B undertook to build A’s house, and X worked as a subcontractor with the materials of their payment. However, B had payed nothing to X even material cost, then building process stopped. A canceled the contract with B under B’s agreement, and A made new contract with company Y, and the house was  built. Then, X claimed the house was their own, because the major materials of the house was paid by X.  X’s claim looks legitimacy according to article 246 of civil law, and it is natural that X want to collect paid cost by acknowledging their assertion. 

Now, the judge was; because the value of built house was more than the materials paid by X, and referred to the article 246, item 2, the ownership of the house was recognized to Y’s, and rejected X’s claim.

Please be careful, the court judged the house’s ownership was Y’s, not A’s naturally. It means the ownership of the artifact made under development consignment is not order’s, anytime.

On the case of software development consignment

When your company orders the development of the software to company A, the ownership of the produced software is not always your’s.  And what you can receive from A is depending on the contract. It is big point of note.

Please watch your contract carefully.

On the software development, please watch the development contract carefully what the product you can receive, whether you will receive the executables, or you want to receive the source code of the software, and please describe the details of artifacts to be received. A may use their own library on the development, and refuse to open the source code of that part, and that causes the problem on the maintenance of the software in future. Such concern should be clear thought contract, and the issue should be discussed with your contractors.

And also, please be clear on the intellectual property right such as copyright whether these right should be transferred to you, or be remained on the developers.