Intellectual Property Protection and Software Licensing for Tech Companies

JUDr. Jakub Dohnal, Ph.D., LL.M.
JUDr. Jakub Dohnal, Ph.D., LL.M.
22.5.2026 | ARROWS law firm

Technology companies today build their success on robust intellectual property protection and effective software licensing structures. Copyright in software, know-how, and trade secrets are key assets, and mismanaging them can block an investment or trigger substantial claims. This text explains why technology companies seek cooperation with ARROWS advokátní kancelář to systematically protect their intellectual property, optimize their licensing policy, and minimize risks throughout the entire product life cycle.

The photo shows a lawyer discussing the topic of intellectual property protection.

Key takeaways

  • Technology companies are persuaded to work with ARROWS, a Prague-based law firm, primarily because the lawyers combine detailed knowledge of IT law, copyright law and licensing with a practical business perspective on product scaling, investments and international expansion.
  • Another driver is risk minimisation: poorly set up licences, unclear ownership of code, or inappropriate use of open-source components can lead to litigation, ruinous damages, or a blocked transaction during due diligence.
  • A third factor is continuity and reputation – ARROWS, a Prague-based law firm, is insured for damages up to CZK 400,000,000 and, thanks to the ARROWS International network, can also handle cross-border licensing and IP matters, which is essential for fast-growing technology companies and investors.
  • A fourth reason is the ability to translate legal complexity into clear contracts, internal policies and processes that management, product teams and developers can actually use—without legal solutions slowing down innovation.

Why IP and licensing protection is essential for technology companies

Technology companies differ from traditional businesses in the structure of their assets. The company’s value lies far less in buildings or machinery and far more in intangible assets: code, databases, algorithms, brand, data and the team’s know-how. These assets are legally protected primarily through copyright, industrial property rights, trade secrets and contracts, with a key role played by how individual relationships and licences are set up. If intellectual property is weakly secured, it immediately affects the company’s value and its negotiating position vis-à-vis investors and partners.

Another specific feature is the speed of change. Software is developed in short iterations, code is continuously refactored, components are replaced, and extensive open-source libraries are often used. Virtually every modern application today contains a very high proportion of third-party code—typically open source—and as a result the company is, in effect, a party to dozens to hundreds of licence arrangements that it is obliged to comply with. Non-compliance with the licence terms of a single module constitutes copyright infringement, with the risk of damages, an obligation to modify the product, or even to make your own source code available if so-called copyleft licences such as the GPL are involved.

For statutory bodies of technology companies, licence compliance is therefore not only a matter of cost-efficiency, but also of personal liability. Unauthorised use of software—whether in the form of pirated software, exceeding the number of licences, or breaching licence terms—can lead to a combination of civil claims, administrative fines and, in extreme cases, criminal liability if the infringement is on a larger scale or brings significant benefit.

From the perspective of investors and buyers, IP protection and licensing policy are increasingly among the first items in any due diligence. Specialised IP audits map whether the company actually holds the rights to what it sells, whether key parts of the code are in the hands of external contractors without an assignment of rights, and whether the use of open-source components aligns with the chosen licensing strategy. Once it becomes apparent that the chain of title to intellectual property is broken or that open-source licence terms require disclosure of source code, this can lead to a reduced purchase price, tough warranties in the share purchase agreement, or even a complete halt to the transaction.

ARROWS lawyers not only understand Czech and European copyright and licensing law, but can also read investors’ term sheets, understand how the SaaS business works, and know how to set licence terms so that the company can scale its product in the long term while minimising regulatory and litigation risks. This means clients receive not only “legal certainty”, but above all practical support for growth and monetisation of their technologies.

What types of intellectual property technology companies typically deal with

The foundation of a technical product is usually a computer program, which under the Czech Copyright Act (Act No. 121/2000 Coll., on Copyright, Rights Related to Copyright and on Amendments to Certain Acts) is considered a copyrighted work protected from the moment of its creation, without the need for registration. Protection applies to software regardless of the form of its expression—both source code and object code—and also includes preparatory materials if they meet the threshold of creative activity. International agreements, in particular TRIPS, expressly place computer programs on a par with literary works, meaning they enjoy full copyright protection under the Berne Convention.

For a technology company, it is important to understand that copyright protects the specific expression of a program (the code), not the idea or algorithm as such. In practice, this means two developers can independently create two different implementations of the same idea; each implementation will be protected separately if it is original and reflects the author’s individual creative activity. Copyright infringement occurs only when someone unlawfully copies or modifies another person’s code, not by drawing inspiration from a general function or business model.

Economic rights protect the economic component and include, in particular, the right to reproduce, distribute, rent, lend, or communicate the work to the public. These economic rights are transferable or licensable, and they are what is dealt with in software development agreements and licence agreements. A technology company must therefore have clearly set out who is entitled to exercise the economic rights and to what extent it grants them to customers or partners.

In practice, crucial differences arise depending on whether the software is created by an employee or an external contractor. In the case of so-called employee works, the employer exercises the economic rights to the work by operation of law, unless agreed otherwise. This means that if a developer creates software within an employment relationship, the company typically acquires the right to use, modify and further license the software without having to enter into a separate licence agreement with each employee. 

By contrast, for external developers (self-employed contractors, freelancers, or supplier companies), the economic rights remain with the author unless the contract expressly provides for an assignment of the exercise of these rights or the grant of a licence to the extent required. This nuance is a frequent source of disputes and even transaction blockages, because without properly assigned rights or a licence, a company often does not have full control over the code it is selling.

Industrial property rights: patents, utility models and trademarks

For many purely software startups, patenting remains in the background, whereas in areas such as cybersecurity, industrial control, IoT or biotechnology, a well-chosen patent strategy can significantly increase the company’s value and its negotiating leverage with investors. 

The attorneys at ARROWS, a Prague-based law firm, therefore often combine copyright and licensing set-ups with industrial property advice so that the client does not miss the opportunity for stronger protection where it is realistic and economically sensible. 

A patent provides an exclusive right to a technical solution that is new, involves an inventive step and is industrially applicable. Under Czech law and within the European patent system, patents for computer programs “as such” are excluded; however, technical solutions in which software plays a role can be patented if the invention delivers a technical effect beyond the mere running of a program on a computer. A patent granted in the Czech Republic typically lasts twenty years from the filing date, provided maintenance fees are paid, and its infringement gives rise to full civil and criminal liability.

Utility models provide a shorter (maximum 10 years) but faster form of protection for a technical solution, while trademarks protect the designation of a product or service, such as an app name or logo. For technology companies, trademark registration is often the first step in building a brand in the market, while patents and utility models are used primarily for technical innovations.

Trade secrets and know-how

A large part of a technology company’s value is not protected by registration, but falls into the category of trade secrets and know-how. The Czech Civil Code (Act No. 89/2012 Coll., the Civil Code) defines a trade secret as competitively significant, identifiable, valuable facts that are not normally available in the relevant business circles, that relate to an undertaking, and whose owner ensures their confidentiality as part of its business activities. 

This typically includes algorithms, internal technical procedures, system architecture, marketing strategies, client lists, as well as, for example, infrastructure configuration. Trade secret protection lasts as long as the conditions of confidentiality and security measures are met and the information is not disclosed or otherwise loses its non-public nature.

In practice, this means that merely marking a document as a “trade secret” is not enough. The company must demonstrate that it has actually implemented reasonable technical, organisational and legal measures, such as restricted access, data encryption, access rights, internal policies and, above all, non-disclosure agreements (NDAs) with employees, suppliers and partners. An NDA should precisely define which categories of information are protected—for example, source code, system architecture, know-how relating to the core business activity, the customer database or financial information—and impose an obligation not to disclose or misuse such information and to secure it adequately.

Technology companies often turn to the attorneys at ARROWS, a Prague-based law firm, precisely when know-how is being shared with investors, integrators or strategic partners. In these situations, it is crucial to set up NDAs and contractual mechanisms so that, on the one hand, they allow open and substantive communication, but on the other hand, they protect key know-how from misuse or unwanted transfer to future competitors.

Code ownership: employees, contractors and suppliers

One of the most common practical issues in technology companies is the question of who “actually holds the rights to the code”. As noted above, in the case of employees, the employer exercises the economic rights by operation of law unless the parties agree otherwise. With external suppliers, however, there is no automatic transfer; if the contract does not expressly provide for an assignment of the exercise of economic rights or the grant of a sufficiently broad licence, the author—not the company that commissioned the development—remains the holder of the economic rights.

This has a direct impact on the company’s ability to further develop the code, license it to third parties, or use it as collateral or sell it as part of an exit. Without a clear contractual assignment of rights or grant of a licence, the company may in reality be able to offer investors or a buyer only limited rights of use, rather than full control over a key asset. This issue is all the more sensitive because it often only comes to light during legal due diligence at the final stage of a transaction, when costs and expectations are already high on both sides. The attorneys at ARROWS, a Prague-based law firm, routinely help clients review historical contracts with founders, early developers and agencies to clean up the chain of title before an investor comes in.

In practice, multiple types of relationships are also often combined: in-house development teams, external freelancers, nearshoring or outsourcing parts of development, use of third-party libraries or white-label solutions. Each of these relationships has its own legal logic, and without systematic management it can happen that part of key functionality is under a licence that does not allow sublicensing, another part is owned by a supplier with whom the assignment of rights has not been resolved, and a third part relies on copyleft open-source that requires the code to be made available. 

This is where the added value of an experienced legal team is most evident—it is not only about a single contract, but about an overall strategy for legally “assembling” the code so that it remains commercially usable in the long term.

What a “software licence” actually means in legal practice

From a legal perspective, a software licence is a contractual authorisation to use a copyrighted work—i.e., software—in a certain way and under certain conditions. For the licensed party (the licensee), this is not a purchase of software in the traditional sense, but the acquisition of a right of use, which may be more or less broad, time-limited or territorially limited. A licence therefore represents a combination of authorisation to use the software, an offer to enter into a licence agreement, and the specific conditions under which use is lawful.

A typical example is a so-called “click-wrap” licence during software installation or registration, where the user agrees to the licence terms by clicking an “I agree” button. From a legal perspective, this is a standard way of concluding a contract, provided the terms are accessible and understandable. Similarly, in a B2B environment, a licence may be set out in a separate agreement, in terms and conditions, or in a system delivery and implementation agreement. However, it always applies that what is not expressly permitted by the licence is prohibited in relation to the copyrighted work, unless statutory exceptions apply, such as making a backup copy for one’s own use or other statutory reproductions.

From a business perspective, it is essential to distinguish whether a licence is exclusive or non-exclusive. An exclusive licence grants the licensee the right to use the software within the agreed scope to the exclusion of all other persons, including the author itself, unless the contract provides otherwise. A non-exclusive licence, by contrast, allows the author to grant licences to other parties in parallel; for suppliers, this is the typical model for off-the-shelf software or SaaS services. A licence may also be limited territorially (e.g., to the EEA), in time (e.g., an annual subscription) and in quantity (number of users, devices, instances, transactions).

Main types of software licences in the practice of technology companies

In practice, licensing models can be divided according to several criteria. The first is the openness of the source code. Proprietary licences are based on closed code, to which only the author or the licensing company has full access, and they grant the licensee a limited scope of use without the right to modify or further distribute the code. By contrast, open-source licences allow access to the source code and set out the conditions under which the software may be used, modified and distributed—most commonly requirements to preserve the licence, provide attribution, or publish changes.

Open-source licences are further divided into permissive and restrictive (so-called copyleft) licences. Permissive licences, such as MIT or Apache 2.0, allow relatively free use, modification and incorporation into proprietary software, often with the sole condition of retaining the copyright notice and the licence text. Restrictive licences, typically the GNU General Public License (GPL), operate on the “share-alike” principle: if you use a GPL component and create a derivative work that you then distribute, you must license it again under the GPL and make the source code available. 

For some licences (e.g., the Affero General Public License – AGPL), this obligation also applies to operating software as a service over a network, where distribution occurs in the form of remote access. A company that is not familiar with these licences may inadvertently “infect” its proprietary product with an obligation to open-source the code, which can have fundamental implications for investors and competitiveness.

The advantages include lower upfront investment, faster deployment and easier scaling; the disadvantages may include greater dependence on the supplier (vendor lock-in) and the need to address contractual issues of availability, data protection and termination with particular care. Another criterion is the method of software delivery: on-premise versus cloud (SaaS). 

In the on-premise model, the software is installed at the customer’s premises and the licence is often perpetual, possibly supplemented by annual maintenance. The customer has greater control over operations and often over the data as well, but must provide the hardware and administration. In the cloud model, the software is provided as a service, usually in the form of a time-limited licence (subscription) with regular payments and updates.

Transfer and resale of licences

Special attention should be paid to the possibility of further distribution of software licences. In case C-128/11 UsedSoft GmbH v Oracle International Corp., the Court of Justice of the European Union held that, for perpetual software licences, the distribution right is exhausted upon the first “sale”, even where the software was acquired by download. 

In practice, this means that the acquirer may, under certain conditions, resell the licence if it ceases using the software and transfers the licence as a whole, not in parts, if it was originally provided in blocks. This principle limits suppliers’ ability to impose an absolute ban on the resale of licences in their contractual terms.

For technology companies, this has two dimensions. As software providers, they must take the decision into account when setting up their business model and licensing terms to avoid invalid provisions and the risk of disputes. As users of third-party software, they can in turn use the option to optimise their licensing portfolio by purchasing “used” licences—albeit at the cost of placing greater emphasis on due diligence and contractual warranties that the licence was duly acquired and is transferable.

Taxes and licensing services

From a VAT perspective, the provision of software licences is typically regarded as a service rather than a supply of goods. This has an impact especially on cross-border transactions, where even the first receipt of a service from abroad may trigger an obligation to register for VAT in the Czech Republic, including for an entity that has not previously been a VAT payer. 

For technology companies that purchase licensing services or cloud solutions from foreign suppliers, it is therefore necessary to coordinate licensing and tax issues—in this area as well, it is often beneficial for management to have ARROWS advokátní kancelář’s Prague-based law firm team and tax advisers working together.

Most common questions about licensing models

In the practice of technology companies, similar questions about licensing models recur.

The first common question is whether it is possible to “simply” combine a company’s proprietary code with open-source libraries. The answer is yes, but subject to careful selection of licences and monitoring whether a derivative work is created that triggers a copyleft obligation, or whether it is an independent linkage where the proprietary nature of the whole can be preserved.

A second typical question is whether it is possible to grant a customer an “unlimited licence” without risks for the supplier. In practice, a licence can be set very broadly, but the decision should be based on the business model, the type of product and the parties’ bargaining power; an unlimited licence can significantly affect the ability to further monetise the product and the return on development investment.

A third frequently addressed question is the difference between a licence and an assignment of the exercise of economic rights. A licence grants the acquirer authorisation to use the work within a defined scope, whereas an assignment of the exercise of economic rights transfers the exercise of those rights to the acquirer, who may deal with the work similarly to the original author (subject to the author’s moral rights, which are non-transferable). For investors, the difference is crucial—on an acquisition, they typically insist on the broadest possible assignment of the exercise of economic rights to the core code, rather than merely a limited licence.

Risks of poorly set licences and intellectual property protection

Unauthorised use of software in companies takes many forms: from installing a single legally purchased program on multiple workstations, through exceeding the agreed number of users, to completely illegal downloading of software from pirated sources or breaching licence terms by unauthorised use for commercial purposes. 

The consequence is primarily an obligation to compensate for damage: under Section 40(4) of the Czech Copyright Act, the entitled person may claim damages in the amount of the remuneration that would ordinarily be payable for obtaining such a licence, in an amount of at least double that remuneration; criminal-law sanctions may also apply under Section 270 of Act No. 40/2009 Coll., the Czech Criminal Code, if it involves more extensive infringement or the obtaining of substantial benefit.

ARROWS advokátní kancelář assists clients in these situations in two ways. First, preventively—through an audit of the licensing portfolio, setting internal policies for software procurement, and training employees on how to handle licences. Second, reactively—by representation in licence audits, negotiating settlements of manufacturers’ claims, and defending against disproportionate penalties or lawsuits. Underestimating software licence management is not merely an administrative mistake—it is a business decision with potentially devastating financial, legal, operational and reputational consequences. 

Police seizure of servers, interruption of system operations, inability to enforce warranties for illegal software, and public association of a company’s brand with software piracy are risks that no serious management can afford to ignore. For statutory bodies, it is also important to demonstrate that licence compliance was not neglected, which a well-designed system of internal controls and documentation makes significantly easier.

Vendor lock-in and dependence on the supplier

Another major risk is so-called vendor lock-in, i.e., financial and technological dependence on a single supplier, which prevents a company from switching to another solution without disproportionate costs, delays, or the risk of downtime. Vendor lock-in may have a technical component (proprietary formats, non-standard APIs, incompatible configurations), but also a legal component—for example, licence terms that prevent the software from being modified by a third party, prohibit reverse engineering, exclude access to source code, and fail to address what happens in the event of termination of the contract, the supplier’s insolvency, or its acquisition by a competitor.

Well-known cases from the Czech environment show that absolute dependence on a single software supplier can lead to a public contracting authority or a larger enterprise being forced to pay for system modifications and development at prices that would not be typical in a competitive environment, or being unable to develop the system according to its own needs because the supplier will not provide the source code. From the perspective of a technology company selling software, vendor lock-in is a double-edged sword. On the one hand, it can strengthen the negotiating position in the short term; on the other hand, it can deter sophisticated customers who understand the risks and insist on more balanced contractual terms, including the option to switch to another supplier.

In practice, ARROWS, a Prague-based law firm, often combines contractual arrangements for licensing, support services, and escrow so that dependence on the supplier is reasonable and predictable, rather than absolute. Legal solutions to vendor lock-in often combine negotiating a right to receive the source code under certain conditions (e.g., the supplier’s insolvency, material breach of contract, failure to perform support obligations) with an agreement on so-called software escrow, i.e., depositing the source code with an independent third party that will release it to the customer if defined trigger events occur. In some cases, the right to obtain the source code can also be inferred from the very purpose of the contract, especially for custom-developed software, if failure to hand over the code would make its maintenance and further development impossible or unreasonably difficult.

Source code, escrow, and the right to make modifications

The question of whether the customer is entitled to receive the source code is one of the most sensitive areas of software law. If the contract expressly provides that the licence is granted only to the object code and the source code remains the supplier’s trade secret, then the customer generally has no automatic right to its release. On the other hand, if the software is created on a custom basis and there is no support agreement, or the supplier is unable to perform its obligations, German case law and part of the professional literature accept that an obligation of the supplier to hand over the source code may be inferred so that defects can be remedied and the software can be further developed.

A compromise solution is precisely software escrow, where the source code, documentation, and other materials are deposited with an independent escrow agent and released to the customer if the supplier goes bankrupt, stops providing support, or otherwise materially breaches the contract. The escrow agreement precisely defines the conditions under which the materials will be released and how the customer may use the source code—typically only for maintenance and development for its own internal needs, not for further commercial distribution.

Our attorneys in Prague help clients set up these mechanisms so that they are technically feasible (including the supplier’s obligation to regularly update the deposited versions of the code and documentation) and legally enforceable. In cross-border projects, the choice of jurisdiction and procedural rules for resolving disputes over the release of escrow materials is also important.

Open-source software and “hidden” licensing risks

The use of open-source software is now practically inevitable. It brings a rapid increase in productivity, access to proven libraries and community support, but also significant legal risks if it is not properly managed. The main risks include lack of knowledge of the exact licence terms, combining incompatible licences in a single product, failure to comply with attribution obligations, disclosure of source code, or licensing a derivative work under the same licence.

From a legal perspective, the key concept is a “derivative work”. In copyright law, this is a work created by adapting an original work, for example by modifying it, translating it, or combining it with another work. In software, however, the boundary between a “derivative work” and independent integration (for example via an API) is often technically and legally unclear. With copyleft licences, especially the GPL, it is precisely the creation of a derivative work that triggers the obligation to license the result under the same licence and make the source code available. A flawed application architecture during development can therefore have fundamental legal consequences at the moment the company begins to distribute the product commercially or when an investor comes on board.

In practice, the attorneys at ARROWS, a Prague-based law firm, recommend that companies implement an internal OSS policy defining which types of open-source licences are permissible in the core product, how used components are recorded, who approves the addition of new libraries, and how obligations such as publishing the licence text or providing the source code for certain parts of the system are fulfilled. This is typically complemented by a regular technical-legal audit (IP audit, OSS scan), combining tools for detecting open-source components in the code with a legal analysis of the implications of specific licences.

Risks in M&A and investments

When acquiring a technology company or when an investor enters, the quality of intellectual property protection and the set-up of licences play a key role in IP due diligence. The buyer needs to verify whether the company truly holds the rights to the software it sells, whether it has any licensing disputes, whether it infringes third-party rights, and whether the use of open-source components jeopardises the product’s monetisation strategy.

An IP audit typically includes identifying all IP assets, reviewing contracts with employees and external suppliers, analysing licence agreements with customers and suppliers, mapping open-source components, and assessing “freedom to operate”, i.e., the risk that key technologies do not infringe third-party patents. Findings in IP due diligence may lead to an adjustment of the purchase price, the inclusion of specific warranties and indemnities in the agreement, or a requirement to remedy identified deficiencies (for example, additional assignment of rights, changes to licensing terms vis-à-vis customers, removal of a problematic OSS component) before the transaction is closed.

In this context, ARROWS, a Prague-based law firm, acts both for technology companies preparing for an investment or sale and for investors and buyers who need a detailed and clear picture of the target company’s IP status. The combination of legal expertise in IT law, M&A, and tax matters enables ARROWS attorneys to propose transaction structures so that IP risks are reflected contractually and taken into account financially.

Potential issues

How ARROWS helps (office@arws.cz)

Unclear code ownership: historically poorly set up contracts with founders, developers, and agencies

IP audit and contract review: we identify gaps in the chain of title, prepare amendments and assignments of the exercise of rights so that the company truly holds the rights to key software and can safely license and sell it.

Risk of copyleft licences and OSS in the product: the threat of having to disclose source code or change the monetisation model

OSS compliance and licensing strategy: we analyse the components used, set internal OSS rules, and propose changes to the architecture or licensing terms so that the product remains commercially viable.

Vendor lock-in and dependence on a single supplier: inability to switch without high costs or downtime

Negotiating contractual safeguards: we prepare licence and support agreements that include clear termination terms, the right to transition to another supplier, source code escrow, and a balanced arrangement of rights to source code.

Licence audits and the risk of penalties: disorder in licensing records, “extra” installations, non-compliance with terms

Licence portfolio audit and representation during inspections: we map actual software usage, prepare internal policies, and in the event of an audit we represent you, negotiate settlement of claims, and minimise financial impact.

Investment or sale of the company blocked due to IP risks: issues identified in due diligence

Pre-transaction preparation: we review the status of IP and licences with you in good time, propose remediation of weak points, and prepare documentation for investors so that IP risks do not prevent the transaction or reduce the price.
Related questions on licensing and IP risks

1. How often does it make sense to carry out an internal licence audit?
For fast-growing technology companies that frequently deploy new software or change infrastructure, it is sensible to perform a basic check at least once a year and a more detailed audit when significant changes occur, such as a cloud migration, a major ERP upgrade, or the acquisition of another company.

2. Does it make sense to address vendor lock-in when we are a “small” customer of a large supplier?
Yes—especially in such cases it is important to negotiate at least basic termination terms, data export, handover of configurations, and, where appropriate, an escrow solution so that your company does not end up trapped without a realistic option to move to another solution.

3. When does it make sense to consider software escrow?
Typically for critical software underpinning key business processes, and for solutions that are significantly customised where, without the source code, third-party maintenance would be difficult or impossible—escrow then becomes an effective tool for managing supplier risk.

How ARROWS attorneys in Prague set up IP protection and licensing in practice

The technology market is not homogeneous—an early-stage startup has different needs than a scale-up ahead of an investment round, and different again from an established software company expanding abroad. ARROWS, a Prague-based law firm, tailors IP and licensing strategy to the type of client, the business model, and the planned horizon (organic growth, investor entry, sale of the company).

For early-stage startups, the biggest risk is often “neglected contractual hygiene”. Founders and the first developers write code without formal contracts, use OSS libraries without records, make “handshake” arrangements with freelancers and first customers. 

At this stage, ARROWS, a Prague-based law firm, helps put in place the basic building blocks: founders’ agreements, employment and contractor agreements for developers, a framework OSS policy, and the first licence agreements with customers or partners. The goal is not to burden the client with bureaucracy, but to create a minimum viable framework that allows the company to grow safely and does not block future investment.

For scale-ups and companies just before an investment round or an exit transaction, the typical assignment is a comprehensive IP audit and “cleaning up” the past. This includes reviewing contracts with employees and external developers (including foreign ones), additional assignments of rights, setting a new licensing policy for the key product, amending customer contracts to ensure they are compatible with a future M&A scenario, and, where appropriate, registering trade marks or filing patent applications. This often also includes preparing IP sections in investment agreements and sellers’ warranties so that IP risks are allocated between the parties in a predictable way.

Established software-house companies and corporations often turn to ARROWS, a Prague-based law firm, with a request for long-term external legal support. This includes ongoing drafting and review of licence agreements, updates to general terms and conditions, support in tenders, negotiations with major customers and suppliers, representation in licence audits, and training for internal teams (HR, IT, procurement, legal, business development).

Software development agreements and assignment of the exercise of rights

A software development agreement is the legal basis for creating a bespoke software solution. It must define not only technical parameters and milestones, but also clearly address intellectual property: who will exercise the proprietary rights, to what extent rights will be assigned or licensed, how the supplier’s pre-existing know-how will be handled, and what limitations apply to further use of the code.

A well-structured software development agreement contains a detailed specification of requirements and project scope, including functional and technical specifications, integration requirements, performance parameters, and security standards. From a legal perspective, it is crucial to include provisions on the assignment of the exercise of proprietary copyright or the granting of a licence in favour of the customer. 

In practice, different models are used: assignment of the exercise of all proprietary rights to the resulting code, a licence with the right to intervene in the source code and to sublicense, or a combined model where the supplier retains the exercise of rights to its general components used across multiple projects, while the customer acquires rights to the bespoke part.

ARROWS attorneys in Prague help clients strike a balance between these interests. On the customer side, they typically seek the broadest possible assignment of the exercise of rights to the core of the product that constitutes the company’s competitive advantage, and contractual ability to modify the code, combine it with other works, and license it onward. 

On the supplier side, by contrast, there is a need to protect reusable components, libraries, and know-how so that they are not “sold off” in a single project and do not block further business. An experienced legal team can structure the agreement so that both parties obtain what they truly need: the client’s control over its solution and the supplier’s ability to further develop its portfolio.

Setting up licence agreements with customers and partners

A customer licence agreement is a document that determines the legal and commercial framework for using the product. For a technology company, it is a tool for managing how its software will be used, how it will be billed, how incidents will be handled, what liability limits apply, and how termination of the agreement or a dispute will be addressed.

A typical B2B licence agreement should include a clear definition of the scope of the licence (exclusive vs. non-exclusive, territorial and time limitations, number of users, devices, instances), rules for installation and use, a prohibition on interfering with the code without the provider’s consent, as well as rules for any customisations, integrations and extensions. It is important to regulate liability, including any warranties for functionality or availability (SLA), limitation of damages and exclusion of liability for indirect damages, loss of data or lost profit, where permitted by the Czech legal system.

In practice, ARROWS advokátní kancelář, a Prague-based law firm, ensures that the licence, the maintenance agreement and any addenda form a coherent and clear set of documents that is understandable even for the client’s commercial and IT teams. Modern licence agreements should also reflect the fact that software changes—updates, upgrades, changes in functionality, security patches. It is therefore advisable to set out maintenance and support terms, including response and resolution times for different types of incidents, rights to updates and any fees for new versions.

Internal policies, NDAs and training

The legal framework does not exist only in external contracts. Equally important are internal processes and policies that determine who can approve the use of new software, how licence records are managed, how open-source components are handled, how documentation is created and reviewed, and how trade secrets are protected.

ARROWS advokátní kancelář often prepares internal licensing and IP policies for technology companies, explaining to developers, product managers and procurement teams what rules apply when purchasing software, incorporating OSS, sharing source code, using cloud services or sharing know-how with external partners. This typically also includes an NDA system for employees, contractors and external collaborators that is practical, enforceable and proportionate to the reality of day-to-day work.

ARROWS advokátní kancelář’s attorneys in Prague also provide specialised training for management and technical teams—from the basics of copyright and licensing law under Czech legislation, through OSS governance, to specific procedures for licence audits or due diligence on the seller’s or buyer’s side. Companies thus gain not only contracts, but also understanding that enables them to manage risks between individual projects.

Final summary

Protection of intellectual property and robust software licensing are not a theoretical topic for technology companies, but an everyday reality with a direct impact on the company’s value, its growth and the personal liability of management. Copyright in software, trade secrets, any patents and trademarks form the backbone of the technology business, while licence agreements determine how the product will be monetised, what risks the company assumes and how flexibly it can respond to changes in the market, regulation or ownership structure.

As practical examples and case law show, seemingly minor mistakes—missing assignment of rights from a freelancer, an inappropriately used copyleft open-source component, insufficiently addressed vendor lock-in, or an underestimated licence audit—can have fundamental consequences at a later stage. From claims for damages (at least in the amount of twice the usual licence fee) and criminal liability for software piracy, through the need to open-source the code of a key product, to an investment or acquisition being blocked due to identified IP risks.

ARROWS advokátní kancelář’s attorneys combine deep knowledge of Czech and European intellectual property law, software law and IT law with hands-on experience from technology projects, M&A transactions and licensing disputes. As a result, they can propose solutions for clients that are not only legally sound but also commercially reasonable—from setting up core agreements in a start-up, through a comprehensive IP audit before an investment, to negotiating complex licensing and escrow structures in international projects.

If you do not want to risk mistakes, damages, delays, penalties or the devaluation of a key software asset, it is safer to entrust the protection of intellectual property and the setup of software licences to the experienced attorneys of ARROWS advokátní kancelář. For a non-binding consultation regarding your specific situation, you can contact us at any time at office@arws.cz.

Frequently asked questions

1. At what stage of growth does it make sense to address intellectual property protection and licensing with ARROWS advokátní kancelář?
Practical experience shows that the earlier you address the risks, the cheaper and more effectively they can be managed. For start-ups, it makes sense to set up core agreements and an IP strategy as soon as the product is created; for scale-ups, an IP audit before an investment or expansion abroad is typically on the agenda; and for established companies, it is about long-term management of licences, OSS and vendor relationships. If you are not sure where to start, send a brief description of your situation to office@arws.cz and ARROWS advokátní kancelář’s attorneys in Prague will propose an appropriate approach with you.

2. What does ARROWS advokátní kancelář usually do as a first step for a new technology company?
Typically, a short “screening” takes place—an interview with management, mapping the product, the business model and the core contracts, including the use of OSS and critical suppliers. Based on this, the attorneys will propose priority steps, such as revising developer agreements, setting up customer licence agreements or adopting a basic OSS policy. This approach can be adapted to the company’s size and budget. If you would like to undergo such a screening, arrange a date via office@arws.cz.

3. How can ARROWS, a Prague-based law firm, help if we already have licensing negotiations underway with a major customer?
In such a situation, attorneys typically quickly review the submitted draft agreement, identify risky provisions (for example, disproportionate liability, problematic IP terms, vendor lock-in, SLA) and propose alternative wording. They can also participate directly in the commercial negotiations or a “redline call” and explain the legal arguments in a way that respects the transaction’s commercial objective. If you are currently dealing with such negotiations, send the draft agreement to office@arws.cz and the ARROWS team will get back to you with the next steps.

4. Can ARROWS, a Prague-based law firm, also handle licensing and IP matters with an international element?
Yes. Thanks to its involvement in the ARROWS International network, ARROWS attorneys cooperate with partners across a number of jurisdictions and can coordinate IP and licensing structures for projects involving, for example, US or UK investors, trademark registrations in the EU and beyond, or the provision of SaaS services to multiple countries. In addition, the domestic team understands the Czech regulatory landscape, so the client receives a practically usable output that takes into account both Czech and foreign requirements. If you have a cross-border project, you can safely consult it via office@arws.cz with ARROWS, a Prague-based law firm.

5. How does ARROWS, a Prague-based law firm, proceed if a problem has already arisen – for example, a licensing audit or a dispute over source code?
In crisis situations, a rapid analysis of the facts and documents is key. ARROWS attorneys first map the contractual framework, licensing documentation and technical circumstances, then propose a representation strategy—whether it involves negotiations with the software vendor during an audit, filing a claim or defending against one, or a motion for a preliminary injunction. In parallel, a longer-term solution is usually sought to prevent a similar situation from recurring. If you are already dealing with an issue, it is worth getting in touch as soon as possible at office@arws.cz so that ARROWS, a Prague-based law firm, can intervene in time.

Disclaimer: The information contained in this article is for general informational purposes only and serves as a basic guide to the issue as of 2026. Although we strive for maximum accuracy, laws and their interpretation evolve over time. We are ARROWS Law Firm, a member of the Czech Bar Association (our supervisory authority), and for the maximum security of our clients, we are insured for professional liability with a limit of CZK 400,000,000. To verify the current wording of the regulations and their application to your specific situation, it is necessary to contact ARROWS Law Firm directly (office@arws.cz). We are not liable for any damages arising from the independent use of the information in this article without prior individual legal consultation.

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