CommTech Newsletter - September 2008
Assignment of copyright must be in writing
The Court of Appeal has recently held that assignment of the copyright in software from a developer to a customer cannot be implied.
Facts
In the case of Meridian International Services Limited v Richardson and Others [2008] EWCA Civ 609, Meridian International Services Limited (Meridian) were commissioned to provide a bespoke software system for Consumer Healthcare UK (CHUK), a division of GlaxoSmithKline (GSK). Meridian instructed IP Enterprises (IPE) to develop the software, which became known as StratX. The agreement between Meridian and IPE had been oral, and did not include any express terms regarding the ownership of the copyright in StratX. Meridian claimed that it was an implied term of the contract that it should own the copyright in StratX.
The law
Copyright in software is owned by the author of the software. In the present case, the owner of the copyright in StratX was Mr Aldersley (co-owner of IPE). Where a customer has paid for a software developer to develop software, ownership of the copyright will be retained by the developer unless there is an express or implied term to the contrary. Where there is no express term, a term can be implied if it is necessary to give the contract business efficacy, or where it would be so obvious to the parties that such a term should be included that it goes without saying.
Meridian offered several reasons why copyright should be assigned to them. These included the fact that the software contained Meridian’s confidential information, and their need to prevent IPE from reselling the software. Meridian also argued that, for the same reasons, it was obvious to both parties that such a term would be included.
The Court of Appeal held that Meridian’s arguments regarding necessity failed to take into account matters from IPE’s perspective. For instance, while it would have been in Meridian’s interests to prevent IPE from reselling the software, it was not necessary to provide business efficacy to the contract. Likewise, Meridian’s claim in respect to confidential information was dismissed on the basis that confidential information is protected by the law of confidence.
The Court also held that while it may have been obvious to Meridian that copyright should be assigned, it could not be said that it was obvious to IPE. Copyright developers typically seek to retain copyright to re-use the code in subsequent contracts. Given that this is the case, if IPE had been asked at the time whether a term assigning copyright ownership was intended, they would not have answered “yes of course”.
Practical implications
It is clear from the Court of Appeal’s ruling that in order to imply a term into a contract, it must be necessary and/or it must give effect to the ‘obvious and common intentions’ of the parties.
The problem with an assignment of copyright in relation to software development is that it will be difficult for the customer to show that assignment of copyright was necessary for the contract to work. Likewise, the competing commercial interests of customer and developer may make it very hard to show that copyright assignment was an obvious and common intention of both parties.
Companies entering into such an arrangement should agree Intellectual Property rights early on, and ensure that any agreements are clearly set out in writing. If the commissioning company is accepting a licence in lieu of copyright assignment, it should ensure all its requirements are covered by the terms of the licence.
Computer companies crack down on on-line file sharing
Two recent cases highlight the steps that computer companies are willing to take to tackle illegal file-sharing and downloading by consumers.
Topware Interactive, a computer games manufacturer, successfully sued a woman who illegally shared an online pinball game with other users on a computer network. Topware won £6,086 in damages and £10,000 in costs in a judgement made by the Patents County Court in London last month.
In a similar vein, computer game companies are planning to send 25,000 letters demanding £300 to people who have downloaded recent game releases without paying. The companies are expecting to take court action against the first 500 people who do not respond to the letters, and are to apply to the High Court for an order forcing service providers to provide the names and addresses of those they suspect are illegally downloading computer games.
These cases demonstrate the increasingly assertive approach taken by companies in order to protect their intellectual property rights. However, many believe the only way to eradicate illegal file sharing is to change consumer thinking. These cases may well be the catalyst to such a change.
iPhone inaccuracies
The Advertising Standards Agency (ASA) has recently held that an iPhone ad was in breach of the Advertising Standards Code for misleading advertising.
The TV ad showed a close up picture of an iPhone surfing the internet, with an accompanying slogan stating: “Which is why all the parts of the internet are on the iPhone”. It was claimed the advert was misleading on the basis that the iPhone did not support Flash or Java, both integral to many web pages.
Apple argued that the browser on the iPhone was built to open internet standards, and it was clear that the reference in the ad to ‘all parts of the internet’ referred to internet site availability. This was not misleading because Java and Flash relate to the functionality of internet sites.
The ASA held that the ad implied users would be able to access websites and see them in their entirety.
This case illustrates the importance of ensuring that adverts are not only accurate, but that claims made in advertising are capable of being supported.
Fishy business - demand for promotional offers must be assessed
In another ASA case, Bauer Active Limited, trading as Practical Fish Keeping Magazine, has been criticised for failing to adequately assess the demand for a promotional offer. The offer invited recipients to subscribe to the magazine in return for a free Tetratec filter worth £79.99.
A recipient complained to the ASA as he was told the filter was no longer available, despite responding to the email the same day it was received.
Bauer based its stock of filters on the level of demand for previous promotions. However, demand for the promotion had exceeded its expectations.
The ASA held that Bauer had not taken adequate steps to estimate demand as the previous offers on which stocks were based were for items of a considerably lower value than the filter. Although the email stated that the offer was limited, Bauer was under an obligation to take all reasonable steps to avoid disappointment to respondents.
Companies making promotional offers should therefore ensure they make a realistic assessment of potential demand. This will involve taking into account the value of the offer, and the response to previous promotions of similar value.