Copyright gives the owner the exclusive right to use and authorise use of the relevant work. Therefore, who owns what in relation to the work that attracts copyright is important. The general rule under the Copyright Act 1994 is that the author is the first owner of the copyright in the work which is created.
However, if the author of a work in which there is copyright is an employee acting in the course of employment, the employer is the first owner of the copyright in the work which is created. This rule applies in the absence of an agreement to the contrary, and that agreement does not need to be in writing. It is therefore important for an employer to ensure that there are no “understandings” that may have been arrived at between the employee and his immediate superior, which could compromise the employer’s ownership.
It is also important to define exactly what is meant by “course of employment.” While this may seem obvious, a number of modern practices can undermine the employer’s claims of ownership of copyright. For example staff often work remotely, outside normal working hours, use a home office or a home PC from which to carry out work for the employer. Staff move from one employer to another and may well bring some of their programs with them, routines that make programming easier or tools that they have developed for a former employer or in their own time, which could be of use to the new employer.
It is therefore important to ensure that:
- the terms of employment include provisions that clearly state that “course of employment” includes work undertaken for the employer whether that work is conducted on or off the employer’s premises and whether during or outside normal working hours;
- any arrangements to the contrary are clearly documented, so that, if payment is to be made to the employee, the amount and circumstances are clear
- the employee is asked to declare any code, programs or other materials brought with him from a previous employer and to warrant that the employee has the right to bring those materials, the materials do not infringe another party’s rights and that the employee will not make a claim of ownership to the extent that the imported materials are used or embedded in software written for the new employer.
Without covering off these issues, an IT company can run into problems when a third party investor or buyer does due diligence on the company. If IP ownership cannot be tied down, the third party may walk away or make the transaction conditional on the company obtaining releases of claim or assignments of copyright from the employee. As you can appreciate, this sort of condition could enable an employee to put his hand out for an additional payment before signing the release or assignment.
Being absolutely certain that the company has unequivocal ownership of its IP will also make it that much easier when having to give warranties and indemnities to customers, distributors, suppliers and other third parties.