Software companies and consultants are in high demand with the growing online economyu. While these advancements are being displayed in a cyber global arena, there are many legal and business related issues that programmers and consultants must consider. The global software market exceeded $265 billion in 2010 and is projected to increase 6% every year until 2015. While profits are growing, so should measures to protect personal and professional liability online. 

Of course we know that most businesses buy liability insurance, but why would a startup software company need to look into purchasing this? There have been many breaches in security in the news lately, so consider if one of your programs gets hacked. How many customers could have their private records exposed? What legal fees could accumulate if one of your programmers violated copyright laws when building a website? What if your server crashes and costs your client tens of thousands of dollars in sales while it is down?

As a programmer or consultant, you may not realize what you are accountable for concerning your online product. A web designer can be responsible for everything on the webpage from the written content (including libel and slander) to advertising liability, media liability, and security issues (which can involve misuse of email addresses to stealing credit card numbers).

Since technology is always evolving, just a slight addition or change of your task may or may not be covered by your liability insurance. One such example is if a software consultant is hired by a client to create a database application. Regardless if the program is for simple mailing list management or if it is for a sophisticated inventory control program, the liability of the consultant for a non-performing application is protected by a standard EDP consultant’s professional liability policy. If the consultant is also hired to build a webpage for the clients and adds the page to his own URL address as an additional management service, this option raises several new hazards not yet fully covered by the insurance industry.

While software and the Internet change faster than Apple can introduce a new iPhone, it’s unfortunate that the law cannot keep up nearly as fast. When you establish your startup, it is in your best interest to find a reputable startup lawyer familiar in Internet law or online business law. They can help you to protect your intellectual property, find liability insurance, and guide you in the best efforts to protect you and your company on and offline.

About the author


Christina Morales

Christina helps provide useful business and legal tips on UpCounsel for our customers and visitors. Having over a decade of writing experience in a variety of industries, she has also been very close to the legal space from a young age with family members who continue to practice business and tax law.

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