Drafting a chat-bot development agreement

Today, we are increasingly observing the digital transformation of business, where the use of chat-bots is becoming a standard practice for automating customer communications, processing requests, and improving operational efficiency.

However, the creation of such a software product is associated not only with technical but also with significant legal risks. A chat-bot, as a computer program, is an object of intellectual property, initially generating a set of exclusive rights for its developer.

Consequently, an incorrectly drafted development agreement can lead to a situation where the client, who paid for the bot’s creation, cannot use it to its full extent or faces claims from third parties. A reliable foundation for successful cooperation between the client and the contractor is a thoroughly drafted agreement that not only regulates the creation process but also clearly allocates rights to the result of intellectual activity.

In this article, our lawyers will provide a detailed analysis of the essential terms of a chat-bot development agreement, drawing attention to the legal nuances that allow for the protection of the client’s interests and the minimization of potential disputes.

How to choose the correct contractual structure

As our lawyers note, various contractual models can serve as the legal basis for relationships concerning the creation of a chat-bot.
Depending on the specifics of the project and the status of the contractor, the parties can conclude:

• a contract for work: here the emphasis is on transferring the finished result to the client, i.e., the chat-bot itself, which meets the agreed requirements

• a contract for paid services: the focus here is on the very process of the contractor’s development activities

• an author’s commission contract: this is used when the contractor is an individual (including a self-employed IT specialist) and regulates the relationship for the creation of a specific work

• a mixed contract: this can combine elements of several contracts, which is especially relevant for complex projects that include not only creation but also subsequent support of the bot

A key section of any of the listed agreements is the condition regarding the subject matter. Its formulation must be as clear as possible and exclude double interpretation.

The subject matter of the contract should record the macro-obligations of the contractor, such as: creating the chat-bot from scratch, launching it on a specific platform, maintaining its functionality, training, or updating. The client’s obligation, in turn, is to accept the results of the work and pay for them.

To detail the subject matter, it is extremely important to use a technical specification (TS), which is formalized as an integral annex to the contract. The contract text itself must contain a direct reference to the TS, stating that the chat-bot must fully comply with it. This will avoid disputes about what specific product the client expected to receive.

How to competently draft the technical specification

The Technical Specification is a legally significant annex to your contract, which outlines the client’s requirements regarding the functional features of the chat-bot. Its structure should be as detailed as possible.

It is necessary to separate the functions that the bot will perform for end users (information, sales, receiving applications) and for the client itself (mailing lists, collecting analytics, data processing).

You also need to specify requirements for quality and interface: for example, uninterrupted operation, politeness of communication, the presence of a button to switch to a live operator, color and sound design, multilingual support.

Since chat-bots often work with personal data and advertising, the TS should explicitly state the need to comply with the requirements of data protection laws, advertising regulations, as well as the rules of specific platforms.

A key point of the Technical Specification includes the stages and timelines of development, i.e., breaking down the project into logical stages (e.g., scenario programming, integration, testing, launch) with indicated deadlines for each of them.

How to formalize intellectual property rights for the chat-bot

The issue of distributing rights to the created chat-bot is the most critical for the client.

By default, according to general legal principles, the exclusive right to a computer program arises with the individual developer.

For these rights to belong to the contractor – a legal entity or an individual entrepreneur – the chat-bot must be recognized as an official work, i.e., created within the scope of an employee’s job responsibilities.

In this regard, the client needs to include in the contract a warranty from the contractor that the chat-bot is an official work and all exclusive rights to it initially arise with the contractor. Substantial financial liability (a penalty) should be provided for the breach of this warranty.

Next, the parties must determine the future fate of the exclusive rights. You can choose the method of alienation of the exclusive right.

In this case, the contractor transfers the exclusive right to the chat-bot to the client in full.

The corresponding condition is included in the agreement: “The Contractor undertakes to transfer the exclusive right to the chat-bot in full to the Client”.

After such a transfer, the client becomes the full-fledged rights holder and can use the bot in any way not prohibited by law, as well as dispose of it at their own discretion. It is important to remember that if the program was registered with the patent office, the transfer of rights is subject to state registration.

The second method is granting the right of use under a license. In this case, the contractor remains the rights holder, and the client is granted the right to use the chat-bot within the limits established by the contract.

The license can be exclusive (the client receives the right of use, and the contractor cannot grant licenses to other persons) or non-exclusive (the contractor retains the right to issue licenses to anyone).

By default, a license is considered non-exclusive, therefore, if exclusivity is important to the client, this condition must be explicitly stated in the contract.

The choice between alienation and license directly affects the cost of the contract: a full buyout of rights is significantly more expensive.

How to establish mutual obligations of the parties

The client’s obligations are often underestimated; however, their non-performance can lead to project delays.

The contract should enshrine:

1. The obligation to provide the documents and information necessary for development upon the contractor’s request. It is advisable to establish the form (written), communication channel (e.g., email), and timeframe for such provision, indicating that its violation entails an extension of the overall work deadlines.

2. In the case of a licensing model – the obligation to provide the contractor with reports on the use of the bot, if provided for by the contract. This obligation can be excluded by a direct indication in the text.

3. The obligation to ensure the legality of the content generated by the client for the chat-bot. This includes compliance with advertising legislation, data protection, copyright, and cybersecurity laws.

The contractor’s obligations should be formulated to minimize the client’s risks. First of all, establish a clear obligation to complete the work by the agreed deadline.

A guarantee that only those materials and components for which the contractor has the rights are used in creating the bot is important. This protects the client from claims by third parties regarding the infringement of their intellectual property rights.

If the contract includes technical support, it is necessary to regulate its conditions in detail: availability time (e.g., chat with a manager from 9:00 to 18:00 local time), response times to requests, communication channels.

Our lawyers recommend providing for the establishment of a warranty period, during which the contractor undertakes to eliminate defects and restore the chat-bot’s functionality free of charge.

How to regulate the work acceptance procedure

Remember, detailed regulation of acceptance is the key to avoiding disputes about the quality and volume of work performed.

The document confirming the acceptance of the chat-bot is the work acceptance certificate, signed by both parties. We recommend providing for the situation of the client evading acceptance by stipulating that a unilaterally signed certificate by the contractor is evidence of work completion, provided the client has been duly notified.

The work is considered properly performed if the chat-bot complies with the Technical Specification, the terms of the contract, the requirements of the hosting platform, and has successfully passed the agreed tests.

Since a chat-bot is an intangible object, it is necessary to clearly define the communication channels for notifying about readiness and sending acceptance documentation (email, messenger, CRM system). Sending documents by other means may be deemed improper.

In addition to the certificate, the contractor may be obliged to provide an invoice, a report on the results of intellectual activity, and an operating manual.

It is important to provide for the client’s right to send the contractor a motivated refusal to sign the certificate with a detailed list of identified comments within the period established by the contract (e.g., within 5 business days).

Other essential terms of the contract

In addition to a penalty for breaching intellectual property warranties, a penalty for delay in performing work should be provided, and for the client – for delay in payment.

If, during the development process, the parties exchange trade secrets or other confidential information, it is advisable to include a corresponding provision in the contract or formalize a separate non-disclosure agreement.

Regarding force majeure, in addition to standard circumstances of irresistible force, the IT sphere is characterized by specific risks: large-scale power and internet outages, hacker attacks, platform blockages at the state level, failures of the hosting provider. These can also be taken into account in this section.

What we can offer

The process of drafting a chat-bot development agreement is not just a formality, but a complex and multifaceted process that requires careful attention to all details. Every clause in this document can be decisive for the successful implementation of the project and the protection of your interests.

Our lawyers possess the necessary knowledge and experience to help you draft an agreement that complies with all legal requirements. We understand that every detail matters: from defining the chat-bot’s functionality to the terms of its operation and the protection of intellectual property. A correctly drafted agreement not only minimizes risks but also provides a reliable legal foundation for your business.

We are ready to provide support at any stage, from concept development to the final signing of the document. Our team has repeatedly defended clients’ interests in IT disputes, which allows us to anticipate potential problems and draw attention to key points in advance. We know which nuances can cause disputes in the future and how to avoid them!