Talking to ITProPortal, intellectual property (IP) lawyer Shireen Smith of IP-specialist law firm Azrights said, “If an IT Director commissions a website or a piece of software without being entirely sure that their business will own the finished project, they are taking a huge risk.
“If a business has software or a website created for it by a third party and does not discuss ownership rights prior to signing a contract, the completed product will belong to the creator rather than the commissioner of the work.
“One possible consequence of this is that the business could lose the rights to sell on any commissioned software, making it an expensive investment that will not bring in any revenue.”
Using the example of ClearSprings Management Limited, a provider of outsourced IT, housing and support services, Shireen Smith explains: “In 2005, ClearSprings Management Limited (CML) came up with a great software idea and hired a Businesslinx Limited to develop it with a view to selling it once completed. There was only one problem. Even though the software was built for CML, ownership of the software remained with the developers and CML had nothing to sell. They merely had a right to use it internally.
“CML had made a classic error which seems to be repeated time and time again. There was a legal agreement in place, but it failed to address copyright. By entering into an agreement without proper understanding of copyright law meant that the company signed up to an agreement that failed to address the vital issue of copyright ownership.
“The court implied a licence in favour of CML to use the software. However, as ownership of the software lay with the developers, CML did not own any rights in the idea. The practical consequence is that it had nothing to sell, it could only use the software it had commissioned.”
Shireen continues: “Make sure if you’re using templates to commission a copyright work that you understand whether the copyright and other IP provisions are appropriate to your plans. If you don’t discuss ownership or appropriate licence terms before you’re committed to using a particular supplier, you are storing up potential problems for yourself later on.
“Going back to someone to renegotiate terms when the rights have a value invariably means people will be reluctant to agree to transfer them over to you without further payment. The time to discuss such details is when they want to win the commission.
“I met an entrepreneur who told me about a software business he had run for two years with two co-founders which folded because it emerged that the company didn’t own the rights to the software. They had used a freelancer who held the rights to the software, and wanted a lot more money than they had available in order to assign ownership to them. So, the company decided to close down.”
Shireen has identified six crucial questions to be asked by IT Directors before commissioning a website or software:
- Who will have copyright over the software once it is developed?
- What rights are there for the use and distribution of the software?
- What documents are in place to confirm this?
- If there is a legal agreement in place, does it address copyright?
- If working with a freelancer, can the business be certain that it will own the rights to any work produced?
- Have documents been checked by a legal expert, who can ensure that it protects the business’s interests?
“These are essential considerations, and going ahead with a commission without addressing these is a risk. By consulting an IP expert, the risks are minimised and a weight is taken off the IT Director’s shoulders.”
Further IP advice can be found in Shireen Smith’s book ‘Intellectual Property Revolution’, which is printed by Rethink Press, available from Amazon and is priced at £12.99. The book contains expert advice for businesses on how to successfully manage IP assets, protect brands and add value to businesses in the digital economy. It is written in plain English and is intended for use by business owners and ‘brand guardians’.