According to a recent survey conducted by the Patent Office almost three quarters of businesses in Britain are in danger of losing intellectual property rights when dealing with other businesses.  The survey comes as part of a campaign by the Patent Office to heighten awareness of intellectual property in business.

It seems that the main thrust of the Patent Office's survey results suggests that many businesses simply do not know enough about intellectual property rights to make contractual provision for them in their business dealings.  For example, the Patent Office's survey reveals that 40% of businesses assume that if they engage a sub-contractor to develop bespoke software for their business then they automatically own the copyright in that software.  A further 30% admitted that they simply did not know who would own the copyright in such circumstances.

Under the Copyright, Designs and Patents Act 1977 (CDPA) a computer program qualifies as a literary work and is therefore protected by copyright.  The CDPA specifically states that the owner of a copyright work is its creator.  This applies except where the author is an employee who creates the copyright work in the course of his/her employment, in which case the owner of any copyright will be the employer.  When a contractor or other third party is engaged by a business to carry out a piece of work, such as writing software, then, as a general rule the contractor would retain ownership of the intellectual property rights in the work unless the contract between the business and the contractor specifically addresses the question of ownership of the intellectual property rights in the work.

This often comes as a shock to many businesses and can cause considerable problems.  So what rights does the business that commissioned the software have in such circumstances?  Where a contract commissioning a contractor to write bespoke software is silent as to the ownership of intellectual property rights, these will usually belong to the contractor but there will often be implied into that contract an unwritten licence to enable the commissioner to use the software for the purposes that were agreed.  The scope of an implied licence is never clear, but it might be restricted to internal business purposes only and not allow the commissioner to sell or license that software to third parties.  Depending on the reasons for which the software was commissioned, these limitations could have quite a serious impact on the commissioning business.

This ambiguity and uncertainty can easily be avoided by ensuring that the contract between the commissioner and the contractor contains appropriate provisions dealing with intellectual property rights.

While the focus of this article is on software, it is important to note that the issues raised here are not limited to ownership of intellectual property rights in software but extend to all commissioned works, including graphic designs, logos, websites (the list could go on and on).  The treatment of intellectual property rights in any business dealing is therefore something that every business should think about and address in their contracts to avoid unpleasant surprises. 

Head of Marketing at the Patent Office, Lawrence Smith-Higgins, summed it up succinctly when he said,

"All businesses need to be aware of how to handle intellectual property because they all own some and should value it.  When you sell a business or have it valued, it is often assets such as trade marks, copyright, patents and design registration which command a great deal of the value.  You can not afford to let these assets slip through your fingers from lack of knowledge."

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