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Sharing Copyright - The Wrong Skill

An uncomfortable but regular question is the nature of the relationship between the software, the software house, and the customer who orders the software to be written. This is particularly so when the agreement will involve the development of new software, and some collaboration is inevitable.Who owns what interest in the software systems developed? Both parties come to feel that they have some proper interest in the software developed. This can be a major embarrassment for software houses.

Typically they will develop a package for one customer, and then want to sell it on recouping their costs with other sales. Frequently the costs of development cannot be reflected in the costs which can be charged to th efirst customer. If the product is very successful, the software house needs to be clear that it owns the software free of any interest of the original purchaser.

In practice nothing will replace good documentation, a good contract, from the start, but the case of Fylde Micro Systems Ltd. v Key Radio Systems Ltd (Times 18 Feb 1998) shows how the court might interpret such situations. Here, software was developed which was specific to a chip manufactured by the customer. The software was developed with substantial input from both parties. The software house later found that the chip manufacturer was obtaining supplies elsewhere, but using the software which had been developed. The 'customer' claimed that because of the substantial contribution they had made in the development of the software, they were joint authors of it, and consequently joint owners also, and able to licence others to produce software without contribution from the software house.

This contention was rejected by the judge, Mr Justice Laddie (I like Laddie), who clarified that the law, saying that, although the contribution of the customer might be substantial, one had to look at the nature of the contribution they made. What skills did they bring to the party?

In this case it was felt that the software house were the real authors of the software, and the customers were, in effect, mere testers, or the equivalent of proof readers, of the software. They made some contributions beyond that level of contribution, but these were not sufficient to justify characterising them as joint authors of the software itself, and so they had no share in the copyright, and no right to grant a licence to others to use it..

The client company also sought to argue that there was imported into the agreement, an implied licence to them to reproduce the software as they wished and without payment. The judge rejected this argument on the basis that there was no commercial necessity requiring this as an implied term. This element is significant when considering usage on the WWW.

The decision may do something to simplify the many disputes which arise between computer companies and their clients. Only time will tell. It remains clear however that reliance upon such decisions will always be risky, and that properly drawn contracts setting out the rewards, contributions, and rights of each party, should be used from the start.

Important: Please note that our law-bytes are retained for archival purposes only. The law changes, and these notes are often, now, out of date. You must take direct advice on your own personal situation and the law as it currently stands.
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Copyright and Database Rights: David Swarbrick 2012
18 October 2013 71 18 October 2013