We paid for IT, so we own IT (or maybe not)

So you had software or a website developed by an external contractor. You didn’t bother with paperwork, but paid a small fortune and it performs great. Therefore. you must own the copyright in it, right? Wrong!

tony-catterallBy Tony Catterall, senior partner and head of intellectual property, Taylors.
This is a common trap found even by the very large businesses. In fact, a recent survey found only 23% of businesses understood that copyright in IT programs that had been developed by external contractors remains with the contractor unless otherwise agreed. It is therefore the opposite position from when an employee develops a program as part of their job.
So what if you later realise the issue was overlooked? Well, to make matters worse, the courts have been repeatedly unwilling to imply terms transferring copyright to the paying party. If any rights are implied, they are likely to be minimal at best.

To give an example, Taylors acted for a developer of an IT program in the first reported case in this area of law regarding software development. The customer tried to claim ownership of copyright in unique coding which our client had developed for their internal use, because the customer had spotted an opportunity to sell on the program.

However, the contract did not contain any provision for transferring copyright or exclusivity in the coding. The court (persuaded by Taylors’ IP team) sided with our developer client, refusing to transfer ownership to or even provide the customer with exclusive rights to use the program.

Now take a moment to consider the value of your IT infrastructure. In terms of its day-to-day use you hope it will add value on a future sale of the business. Then bear in mind that copyright can last for up to 70 years from the year in which the person who created it dies.

Against this backdrop, it is certainly worth making sure at the outset you have a written contract and it provides for you to get full intellectual property rights in what you pay for when having programming undertaken externally (don’t just accept the developer’s standard terms of business which will undoubtedly give them ownership).

Likewise, don’t forget to make sure any ‘snagging’ work is also covered. If you don’t also own rights for any patch supplied to rectify a critical fault with your sparkly new software, you could be in the same sticky situation.