IP Case Sounds Warning

Yet another case highlights the need to make the ownership of intellectual property (IP) clear when negotiating contracts where the IP is in point. In the case concerned, a company was retained to develop financial forecasting software. It ran into financial problems and the employees working on the project left. They formed their own company, which subsequently agreed to work as a contractor to their former employer in order to finish the work. When the project was completed, the question arose as to who owned the copyright to the software: the original company or the new company formed by the ex-employees that was commissioned to complete the project.

The situation was not made easier by the lack of formal documentation of the contractual terms. The documentation that did exist made no mention of copyright. The company that commissioned the work claimed that it had been made clear in precise terms and it was expressly agreed, albeit verbally, that it would own the copyright to the software and that, in any event, it was commercially necessary for it to retain copyright for confidentiality reasons. It claimed, therefore, that the validity of its claim should be ‘read into’ the contract. Both these claims were denied.

The case went to the Court of Appeal which refused to read into the agreement something which was not there. There was no necessity for the commissioning company to own the IP in order to make the contract effective and therefore it did not.