Commissioned Works

If the author of the copyright work is “commissioned” by a customer to create the work, the current default position under the Copyright Act is that the commissioner will become the first owner of the copyright. Section 21(3) states:

“Where—

1. A person commissions, and pays or agrees to pay for, the taking of a photograph or the making of a computer program, painting, drawing, diagram, map, chart, plan, engraving, model, sculpture, film, or sound recording; and
2. The work is made in pursuance of that commission,—

that person is the first owner of any copyright in the work”.

It is important to note the elements of a commissioned work:

1. It must be commissioned; i.e. the customer must have clearly asked the developer to create the work for him;
2. The customer must have agreed to pay for the work;
3. The commissioning must be antecedent to the work; i.e. it must have been arrived at before the work is made;
4. The work must have been carried out in pursuance of the commission;
5. The list of what can constitute a “commissioned work” is very specific and, while it includes computer programs, it does not include the written word;
6. Payment relating to the commission is a quid pro quo for the copyright, i.e. the making of the copyright work, not the physical embodiment of the work itself.

With regard to the written word, this can have an odd result. For example, in the absence of an agreement to the contrary, where a developer writes software and a user manual or other documentation for the commissioner, the commissioner will own the copyright in the computer program while the developer will be the first owner of the copyright in the user manual.

In most instances involving software development, a developer will use code or “building blocks”, much as lawyers will use precedents to create contracts for our clients. If those building blocks existed before the commission started, the developer will continue to own them. This therefore can create a problem when the ownership argument arises, especially after completion of the work.

Under the Copyright Act default rule the commissioner will therefore own only what has been developed subsequent to the “commission” and will only have an implied licence to use the pre-existing code that has been incorporated into the commissioned components for internal business purposes. If the commissioner wants to do more than that, he will be well advised to negotiate either the terms of a licence or an assignment from the developer to be able to use that pre-existing code.

An interesting examination of the law on commissioned work appears in the Court of Appeal decision in Pacific Software Technology Limited v Perry Group Limited. Perry Group Limited, the customer was found to be the first owner of the copyright in that program. But that ownership did not displace the underlying ownership of Pacific Software in the library code used to create the software program.

However, to give the commission business efficacy, it was found necessary and appropriate to imply an irrevocable (i.e. not a “bare”) licence for the Perry Group to utilise the pre-existing library code embedded in the source code; and further, a term that such a licence would also endure for the benefit of any successor or assignee of the Perry Group.

What the case did not resolve was the extent of the Perry Group’s right to use the library code. Therefore it is arguable that the word “use” must be given a narrow meaning so as to restrict the customer’s right to use the licensed code for customer’s internal business purposes. It probably does not extend to allow the customer to resell the code.

The Pacific Software case came about because of the parties’ failure (whether deliberate or not) to have a written agreement regarding the copyright ownership issues. Developers would be well advised to protect themselves by agreement, since otherwise the onus will, in practice, be on them to demonstrate the existence and extent of alleged prior rights and the limits of any implied licence.

Proposed changes to the commissioning rule

Associate Commerce Minister, Judith Tizard, has recently introduced the Copyright (Commissioning Rule) Bill to the House of Representatives which, if enacted, will repeal the current commissioning rule and bring New Zealand into line with many of its major trading partners.

Repeal of the commissioning rule is intended to provide a consistent rule for copyright ownership of all types of work, providing greater clarity for creators and commissioners as well as assisting creators to retain copyright in their works, so as to expand their ability to create future works.

The commissioning rule, as it stands, is subject to any agreement to the contrary and this contracting out clause will be retained. The creator and the commissioner are free to negotiate out of the default rule and, if the Bill is passed, the commissioner will need to do so in order to obtain copyright in a commissioned work.

The Bill does not affect section 105 of the Copyright Act relating to photograph or film commissions for private or domestic purposes. In these circumstances, where the copyright is owned by someone other than the commissioner, the copyright holder requires permission from the commissioner to use the work.