Your business may have commissioned software and paid for it in full, but this does not necessarily mean that you own all rights in it. Recent computer software copyright cases have highlighted the need to ensure that parties who are developing software in the course of business should carefully document the software ownership rights in a written contract at the outset to avoid copyright infringement and possibly royalty payments. 

A computer program is protected by copyright as a literary work under The Copyright, Designs and Patents Act 1988 ("CDPA"). The CDPA clearly states that the author of a work is the first owner of any copyright in it, although this ownership may be qualified by the factual circumstances in which the work was authored.  Where the author is commissioned by a contractor to create a computer program, ownership of the copyright will vest in the author unless the author is an employee of the commissioner or there is an express agreement to the contrary.  An assignment of copyright is not effective unless it is in writing and signed by or on behalf of the assignor.  Therefore if an independent contractor has been engaged to write and supply software for your business, unless the contract is in writing, the copyright cannot be assigned and the independent contractor maintains copyright ownership.  Although the court may sometimes hold that the commissioner owns a beneficial interest in the work, recent caselaw shows the restricted approach applied by the court where ownership of computer software is disputed. 

Laurence John Wrenn (1) and Integrated Multi-Media Solutions Ltd (2) v Stephen Landamore [2007]

This was a dispute between Mr Wrenn who ran a company selling interface software and Mr Landamore, a freelancer who wrote software for the company.  Both parties claimed ownership of the software source code and Landamore also claimed he was owed royalties.  Wrenn claimed that there should be an implied transfer of copyright by virtue of his hiring Landamore.  Landamore said that only an implied exclusive licence had been granted and he was entitled to royalty payments.

The judge held that where an agreement on copyright had not been made, courts should err towards the lightest remedy and assume that commissioning implies a licence to use the commissioned material, but not automatic ownership of all the rights.  He found on the facts that it was necessary to imply a term in favour of Wrenn.  He held that an exclusive license was sufficient and he was not prepared to assign full ownership of the software.

In addition the parties also disagreed over royalty payments.   Landamore claimed that he had been promised a royalty payment for every unit sold by Wrenn which used his software.  Wrenn admitted that he had promised Landamore a results-based payment but that this was not a royalty.  The judge held that Landamore was a more reliable witness, partly on the basis of Wrenn’s short tempered behaviour, and awarded Landamore £45,324.24 plus interest in royalties.

Although in the case of Wrenn the judge found it necessary to imply an exclusive licence, he did refer to another recent decision about software development (Clearsprings Management Ltd v Businesslinx Ltd [2006]) where only a non-exclusive licence was implied.  This should serve as a reminder that where it is necessary to imply an assignment of copyright to make the arrangement commercially workable either an exclusive or non-exclusive licence could be implied and the Court will only imply the bare minimum needed depending on the facts of the case.

Looking back, it is easy to see that these parties should have put the appropriate contract and wording in place at the outset as the court will only imply what is necessary to make the relationship commercially workable.  An assignment of outright ownership of IP by the courts is unlikely and therefore IT customers need to carefully construct licensing and source code access arrangements to ensure that they know what they are entitled to.  Where a customer has commissioned bespoke software, they should try to ensure that it cannot be sold or made available to its competitors.  Likewise, independent contractors risk the possibility that their software may be subject to an exclusive licence if they do not make the arrangements clear from the outset.

This case is a further reminder of the importance of expressly dealing with intellectual property ownership when entering commercial relationships.  We recommend that you review any arrangements your business has with freelancers who produce work for you.  Check that you have a written agreement covering all the important aspects of any commissioned work and ensure that copyright use, ownership and any other intellectual property rights are fully dealt with.

If you have any questions or concerns arising from this article or you would like us to review or draft any contracts on your behalf please get in contact with Alison Patten-Hall on 01865 262662.