For software developers and digital agencies, source code is the stock in trade; it’s what you do for a living and what you’re paid for. But who owns the code once it has been written?
Ownership of copyright determines developers are able to re-use their projects on later projects without having to develop code which does the same thing. Entire libraries delivered as part of a solution may end up being owned by the customer.
So who owns it?
Olivia Herbert and Leigh Ellis of Drukker Solicitors discuss when and how ownership of source code is decided and the relevant events which lead to deciding who owns it.
Software is more often than not a literary work for the purposes of copyright law. It can generate graphic works and other artistic works.
Often, software is able to be protected by patent rights, but even with the frequency of patented software these days it is the exception rather than the rule as is the case in other industries.
Copyright is a property right which arises automatically on the creation of original work in a tangible form, so when it is written copyright protects it automatically. Legal protection given by the Copyright, Designs and Patents Act 1988.
In order to show that a developer owns copyright, he must show that on the balance of probabilities copyright exists in the work and he owns it.
When a work is commissioned to a contractor on a freelance basis, who owns it? Without a written agreement that expressly states who obtains the legal right, the author of the code or their employer is usually considered the first legal owner of copyright. However, implied terms may exist at the time of the contract which case this default position.
Copyright – Default Position
Commercial contracts dealing with software development these days usually expressly specify the contracting party that will own the copyright. Unless otherwise stated in writing, the default position of ownership is for the author or their employer is the first owner of copyright.
The author in relation to a work is the person or organisation who creates it. In the case of literary or artistic work which is computer-generated, the author is the person who makes all the arrangements necessary for the creation of the work.
Joint authorship is work produced by the collaboration of two or more authors, where the contribution of each is not distinct from the others – notably this issue is not resolved by using tools which compare the code developed by one person or another.
First Owner of Copyright
In the case of written or artistic works, the author or creator of the work is the first owner of any copyright in it.
An exception to this rule is where the work is done by an employee in the course of their employment.
In this case, the employer is the first owner, subject to any agreement to the contrary between the employer and employee.
In the case of disputed ownership, courts decide whether the employee was working under a contract of service (employment contract) or a contract for services (freelance agreement/independent contractor).
Works created under a contract for service is considered commissioned work, where the contractor owns the work.
This first question which needs to be decided is important to freelancers because if they are independent contractors, they are considered the owner of copyright in the software, unless there is an implied term which upset this position.
Commissioned Work – Who Owns It?
The fact that a contractor has been asked to developer source does not mean that he owns it in all circumstances. The company commissioning its development may be the owner of copyright.
Where a customer presents a software development contract, odds on it provide that the customer will own it. If it does not specify who owns it, in order to displace the default rule above, ownership will be decided by terms implied into the contract, assuming it can be displaced at all. This is where things can get tricky.
No written contract or no express terms – Implied Licences
Where a freelancer is engaged to develop software with an express purpose and the development is paid for, the law will ordinarily imply a term entitling the paying party to use the software as part of the engagement.
The scope of the licence (or entitlement to use the code) will that necessary to give “business efficacy” to the arrangement – that is, its commercial purpose.
Put another way, the customer will be entitled to use the software for the purposes contemplated between the parties at the time they were engaged – not at some time after the engagement commenced.
The amount the customer pays the freelancer will play a role – for instance, if the developer has accepted a lower price to do the work, the licence is likely to be narrower (and uses more limited) than it would be if the customer paid a full commercial rate.
Where the work is supplied knowing that it will be used for a particular purpose, the licence may be limited to that purpose.
Assignments of Copyright
An assignment of copyright is an agreement between two parties, where one party transfers their ownership, right and title to a certain copyright to the other.
Circumstances may exist when the necessity for an assignment of copyright may be established by an implied term. If the contractor is to be deprived of the copyright (in the absence of an express agreement to that effect) it must be because of an implied term in the relationship.
This is likely to arise if the commissioner needs in addition to the right to use the copyright works, the right to exclude the contractor from using the work and the ability to enforce the copyright against third parties and an exclusive licence in favour of the customer will not suffice for that purpose.
Examples in Context
a. Robin Ray v Classic FM (1998) is a landmark case that summarised the general principles governing the respective rights of the contractor and client in a work commissioned by a client. Robin Ray had an encyclopaedic knowledge of classical music and was commissioned to build a music catalogue on a consultancy basis for Classic FM. When Classic FM tried to exploit the catalogues outside the UK, Mr Ray objected and commenced proceedings on the intended use was beyond the terms of the intended use at the time of his engagement. His service was for an express purpose, overseas exploitation was not in the contemplation of the parties at the time of engagement. To exploit the work outside the UK, Classic FM required an additional licence on terms which were satisfactory to Mr Ray – i.e. for a price.
b. In Stovin-Bradford v Volpoint Properties Ltd (1971), the Client agreed to pay only a nominal fee to his architect for the preparation of plans. He was held to have a licence to use the plans for no purpose beyond the anticipated application for planning permission as the amount paid represented the extent of the licence contemplated by the parties at the time of engagement.
c. In R Griggs Group Limited v Evans (2005) material was produced for an advertising agency by a freelance designer. Mr Evans drew a combined logo for a footwear manufacturer of Dr Martens. He was the author and first legal owner of the copyright. In 2002, Mr Evans assigned his copyright to an Australian footwear company. It was held that although the question of copyright was discussed at the time it was obvious, and would have been so to an officious bystander, that the right to use the logo and to exclude others from using it, was to belong to the client and not the designer.
As software is the stock in trade for developers, it important to get it right when being engaged. Leaving matters until later is not an ideal situation, because the events that are taken into account to decide who owns copyright is have already taken place.
- Read the contract!
- Look for references to intellectual property and copyright.
- Whatever the contract says, in most cases, you can assume that the contract means what it says.
- If the contract is clear in what it says, and it is not in your favour, it will be a rare case that one can successfully argue that the contract meant something else.
- If the contract does not deal with intellectual property rights or ownership and you are a freelancer, the starting point is that you own it. This, however, is not the end of the story.
- Consider the background between the contractor and the client as at the date of the contract. Is there some kind of expectation that the developer should not own the IP rights? For instance, is the application so specialised that a reasonable person might expect that the customer would have exclusive use of it? If so, and you expect to be able to re-use the code, trouble looms.
Olivia Herbert is a paralegal at Drukker Solicitors assisting solicitor Leigh Ellis on the preparation of software licences, non-disclosure agreements and management of contractual rights for digital media agencies and software developers.