15. Copyright – Receiving Less Than You Bargained For?

A Guest Blog by Alex Canham of Herrington & Carmichael.

A number of businesses now look to outsource non-core functions, particularly in creative areas, to third party contractors. This may be in the form of marketing design work (such as a brochure or an article), software development/maintenance work or a musical composition. However, are commissioning businesses really clear as to the rights they have in the finished product?

On a basic level, copyright will attach to original works of art, literature (including software source code), music and drama. Accordingly, a commissioning business is likely to expect that it will take ownership of any copyright in the works produced, particularly where they provided the specification for the work and paid for its creation.

The default legal position in England & Wales provides that the ultimate author of the relevant “work” (in this case the third party contractor) is credited as the copyright holder, with the commissioner being granted an irrevocable licence to use the finished “work”. This problem is compounded by the fact that the third party contractor may be entitled, as copyright holder, to reproduce the “work” for other parties.  This is unlikely to reflect the true intention of the parties, particularly the commissioning business.

Another common situation, particularly relevant in the software industry, is where a “work” is updated or amended by a third party to such a level that a new copyright is created. Again, this new copyright is likely to vest in the third party contractor and not the commissioning business.

Many businesses fail to distinguish between having a right to use a copyrighted item and owning it. This is particularly relevant if they are looking to sell or licence the copyrighted “work” or even prepare the business for sale, where a diligent purchaser will undoubtedly look to trace the true ownership of the “works” it believes it is buying. Moreover, if a business operates in the United States where a copyright is a registerable asset, it’s imperative that ownership can be clearly identified. It’s important that the trading entity holds all the relevant rights if it is to successfully and lawfully exploit these “works” on a commercial basis.

To avoid an unsatisfactory outcome, it is advisable for the parties to provide for a full assignment of copyright to take place on completion of the project or, in the case of regular works (e.g. software maintenance work or coding updates), on a periodic basis. At the very least, the contract between the parties should be in writing and identify the rights to be assigned and when the assignment is to take place. However, it’s recommended that detailed advice is taken on your specific circumstances to ensure the relevant rights are sufficiently captured and that only your business has the ability to exploit the intrinsic value in the “work” you’ve paid for.

For additional information on intellectual property rights, please contact Alex Canham, Solicitor, Herrington & Carmichael LLP, e-mail: alex.canham@herrington-carmichael.com

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