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Intellectual property
Published August 2007
Safeguard your rights
Businesses which have been involved in developing software, a process or other commercially valuable resources, or go into business with someone who has, need to be sure they know exactly who owns the legal rights in it.
Care must be taken to safeguard your rights, and keep your business on firm foundations.
Legal rights in software belong to the developer (or, if he is employed, his employer). If a business wants exclusive use of the software, or to license it to others, the developer must assign rights in the software to the business - and do so in writing - or grant it an exclusive, perpetual and irrevocable licence to do so. It can be complex if the rights are to be jointly owned and/or exploited by several businesses, or several different developers have been involved.
A common scenario is for the business to commission software from a developer, without a written agreement to assign ownership to the business, or a licence agreement giving it the right to use and/or sell the software.
Another situation can occur when a developer sets up a business with third party investors and management, to exploit software he has already developed. There is no written assignment or licence in favour of the new business. The new business licenses customers to use the software and/or appoints resellers on the assumption it owns all rights in the software. The developer then falls out with his colleagues and leaves, claiming that he retained ownership of those rights all along.
The developer may have signed a document saying he gives up his rights in the software, or recognises that the business owns it - but, legally, that may not amount to an assignment or a licence. Assignments and licences should be drafted by a specialist solicitor to avoid these pitfalls.
In exceptional circumstances, the court may decide that an oral statement, or the developer's conduct, is effective to assign rights in the software, even though there is nothing in writing. But the court will only imply an assignment if it is 'necessary to give business efficacy' to the relationship, and this is a difficult test. For example, it may be more likely to decide there was an assignment if:
The developer has been paid a sum equivalent to the value of an assignment.
It was clear that the business intended to license the software to customers as part of its trade.
The software is to automate a function specific to the business, so that it cannot be reused by the developer for other clients.
On the other hand, if the business knows the developer may re-use the code in the software, it's unlikely he intended to assign his rights, or grant an exclusive, perpetual, irrevocable licence.
Steps to take
Make sure there is a clear, written agreement with the developer that records that he has assigned his rights in software, or granted an appropriate licence.
Do not just assume people will be as good as their word - get an agreement in writing. Circumstances change, memories play tricks, and the goodwill which was present in the early days of a relationship can dissipate.
If different parts of the software were written by different developers, make sure all of them assign or license their rights to you.
Particularly, check that anyone from whom a developer sub-contracted work has also assigned or licensed their rights to you, and not to the developer.
If the software is to be owned, or exploited, by more than one business, make sure that the rights of each are clear.
In all cases, ensure that the agreements are in writing, drawn up correctly.
If you would like to find out more about the services that we provide, please e-mail or contact us to arrange a meeting.
